Bad credit may result from financial mismanagement, but it is often due to unfortunate events beyond your control. Perhaps a car accident left you unable to get to work, or an illness prevented you from working.
Once you’re back on your feet, the debt you’ve accumulated generally weighs you down. You may be struggling to pay the minimum payments as the debt piles up or feel overwhelmed by all the bills coming in.
The best solution may be a debt consolidation loan. Know that this is possible, even if recent events have left you with bad credit. Here are five simple tips for obtaining debt consolidation loans with bad credit.
Have a Plan Before You Apply
Create a list of your high-interest loans and/or all the little loans you’re having trouble keeping up with. List the lender and the loan amount. Determine the total amount you owe.
This is how large the debt consolidation loan needs to be, though you may want an additional cushion if you have any other expenses come up. Once you receive the money, pay off these smaller loans and close the accounts so that their balances cannot grow.
Find Lenders Who Will Work with You
Specifically, to simplify the consolidation loan application process, search for lenders who work with clients with bad credit. You don’t want to waste time applying for a loan with lenders who may reject you. Nor do you want to go through the emotional turmoil that comes with unnecessary rejections.
One of the most common mistakes people make with loans is going with the first lender they see to accept their application. This is similar to the mistake of spending weeks shopping for the perfect car but not researching car loans.
Do your research.
What is a reasonable interest rate given your credit score and payment history?
That information allows you to reject lenders who offer an insanely high-interest rate.
What are the standard fees and terms and conditions?
Go Slow with the Application
Suppose you’ve found a lender who won’t reject your application because of your credit. Go slow with the application. Don’t leave required fields blank. Don’t make mistakes typing in or writing down key information.
Review the terms and conditions.
You can’t afford low teaser rates that are followed by sky-high interest rates.
Read the fine print.
If any red flags make it seem like the website is only there to steal your information or vague terms regarding fees, don’t submit your application.
Get on a Plan to Pay Off the Debt
A consolidation loan may reduce the hassle of managing ten little loans, but you need to pay the consolidation loan off.
Get on a plan to pay it off.
Make sure there is enough money in your bank account when the first payment comes due.
Never rely on bank float to cover it, hoping that the deposit due that day clears before the creditor sweeps the bank account for payment.
You may want to sell things, work additional shifts or find other ways to earn money to make sure you can cover your regular expenses as well as the new loan payments.
If the debt consolidation loan comes with a lower monthly payment than your prior debts, don’t spend that extra money.
Save it or use it to pay down the debt.