If you have multiple loans that you need to eliminate, I feel that paying them off one by one can be exceedingly difficult to keep track of. In such cases, loan consolidation is generally recommended as a feasible strategy. Through this, you can roll all your existing debts into a single account, which makes it easier to pay off. According to me, the biggest advantage of this is that you get a lower annual percentage rate of interest.
This makes the process of eliminating your dues far more manageable. However, a major barrier to this method is that you need a good credit score to access a debt consolidation account. Is there a way around it?
Through this article, I will provide some useful ways in which you can better your chances of getting a debt consolidation with a bad credit score.
Regularly check your credit score
Most lenders base their decisions on approving loans based on your credit score. The score and interest rates are inversely correlated to one another. If your score is low, the lender may charge a higher rate of interest. I feel that you can prevent this by keeping track of your scores. Staying in the dark about your credit score can be incredibly damaging to your financial health. Once you know what you’re working with, you can develop a strategy to improve the points. Further, there are several lenders that specialise in working with clients who have lower credit scores. Working with such lenders can help you get a consolidated debt.
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Browse for loan offers
As a rule of thumb, you should shop around several options when you’re taking a loan consolidation. Always do your due diligence when considering lenders and creditors, and never settle on the first offer you see. You should check for repayment amounts, terms, and any organisational fees that are payable. While this process can be lengthy, it can help you land a consolidated loan that works out for you in the long run.
Get a joint or co-signed or secure loan consolidation
In my experience, one way to get a consolidated loan is to either opt for a secure loan or get a friend or family to co-sign your loan as a co-applicant. There are a few ways in which this operates:
- A co-signed loan means that whoever you get to sign along with you is legally responsible for the loan but is not the owner. This method is useful for increasing your chances of getting approved and getting a lower interest rate.
- A secured loan implies that you put up some sort of collateral, mostly an asset such as a house, vehicle, jewellery, etc. If you cannot pay or end up defaulting, the lender can seize the collateral to make up for the funds. As a result, a secured consolidation loan is far easier to gain than an unsecured one.
- A joint loan means that you and the co-borrower are responsible for and own the balance.
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Approach a bank or credit union where you’ve been a member for longer.
One way to manoeuvre through lower scores is to approach a local lender or bank that might be willing to overlook your lower credit scores. Instead, they might look at your overall financial history and consider your relationship and circumstances when approving your loan.
Conclusion
With this post, you must have learnt some superb ways to get a rolled-over debt in case you don’t have a high enough credit score. Creditworthiness is one of the remaining factors when it comes to loan consolidation. However, there can be instances beyond our control where the score drops. As such, you can implement the above strategies to come out of a dire situation.