How to Qualify for a Debt Consolidation Loan: A Step-by-Step Guide through the Process

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Drowning in debt and looking for a way out?

A debt consolidation loan can be the lifeboat you need, but are you ready to reach for it?

Designed to consolidate all of your disparate debts into one, low-interest monthly payment, this solution offers a viable way out of the dollar signs swimming in your head.

However, many¬†people believe that their sub-par credit score will hold them back from obtaining this kind of debt resolution. Does that include you? If so, we’re here to dispel that rumor.

Debt consolidation loans with bad credit are possible. You just have to know where to find them and how to qualify, so read on!

Why Pursue a Debt Consolidation Loan?

Are you currently juggling multiple credit cards, along with personal loans, student debts and more? If so, it can be easy to fall behind on your payments with so many bills floating around.

Moreover, no one wants to juggle 10 different interest rates that range from manageable to sky-high!

Thus, debt consolidation was born to help solve these pain points.

This is a type of loan that combines all of your different payments into one monthly payment. In most cases, this plan has a lower interest rate than the ones you’re used to paying. You’ll pay your lender each month, who will then turn around and distribute that money to your various creditors.

The result? You’re able to retire your debts more quickly than if you’d paid each one individually.

Double-Checking Your Credit Score

While the setup can be ideal, many lenders will require an excellent credit score before moving forward with a debt consolidation loan. If your isn’t where it needs to be, verify its accuracy by requesting your credit report from the three main credit reporting agencies.

As you read each report, look for inaccuracies, including:

  • Incorrect accounts
  • Incorrect payment limits
  • Wrongly reported missed payments

If you notice any discrepancies, you’re within your rights to dispute them. 

Everything look OK, just really low? You’re not without recourse. Let’s take a look at how you can still qualify for a debt consolidation loan, regardless of what the numbers say.

How to Obtain Debt Consolidation Loans with Bad Credit

Want to cash in on this opportunity but currently rocking a credit score that’s in the fair-to-poor range (669 or lower)? It can be easier than you think. Let’s take a look at how you can qualify.

1. Start with Debthunch

At Debthunch, we know you’re so much more than a number. We’re dedicated to helping you find the best debt consolidation solutions for your current needs, regardless of your past.

When determining which offers to present, we’ll take multiple factors into account in addition to your credit score, including your amount of unsecured debt and your annual income. Then, we’ll match you to providers who are ready to offer you a great deal customized to fit your situation. 

With our platform, you can compare different offers to find the interest rates and terms that work the best for you. The entire process is quick and easy, eliminating the need for the paperwork and time-consuming meetings that in-person loan requests often entail.

2. Check with Your Credit Union

Without a solid credit score, a traditional bank might not offer you the best terms on a debt consolidation loan.

On the other hand, a credit union is usually a little more flexible. As member-owned non-profit organizations, they’re able to offer terms that your bank cannot. In addition, they’re often more willing to work with you if you’ve already established a positive relationship there.

If you belong to one, speak to a loan officer about pursuing this type of debt resolution. Many will look past your credit score and consider your more comprehensive financial history.

3. Take Out a Home Equity Loan

Do you own your home?

If you have substantial equity built into it, you might be able to take out a home equity loan to consolidate your debt. While this isn’t technically a debt consolidation loan, its purpose is similar.

As the loan will be secured by your home, the interest rate should be more favorable. Just keep in mind that if you default on this loan, the bank will take any step necessary to recoup that amount, including foreclosing on your home. As such, you should only go this route if you’re certain that you can pay back the debt in the required timeframe.

4. Consider a Secured Loan

Unlike a home equity loan, most debt consolidation loans are unsecured. That means you don’t have to put up collateral (e.g. your house or car) to back them.

While unsecured loans are less risky and generally preferred, if you’re having a difficult time obtaining one, you might consider going the secured route.

Secured loans require you to put up some asset as collateral before you can be approved. The collateral has to be at least worth the amount of the loan you’re taking out. This way, if you default on it, the lender can seize that asset to get their money back.

Though this option does carry more inherent risk, it’s easier to be approved for a secured loan. In some cases, it can even lower your interest rate.

5. Add a Co-Signer

Do you have a close friend or relative who has excellent credit? If so, consider asking that person to join your debt consolidation loan as a co-signer.

Some lenders will allow you to do this, which can improve your odds of qualifying and make you eligible for a lower interest rate.

The only caveat? Both your credit score and your co-signer’s will be on the line if you take this step, so only partner with someone who is comfortable assuming that risk and responsibility.

Debt Consolidation Solutions For Everyone

At Debthunch, we know debt consolidation like the back of our hand. For more than 16 years, we’ve helped people just like you find a way out of debt by matching them with lenders uniquely qualified to help them.

Looking for debt consolidation loans with bad credit? We specialize in them, and we’re ready to help.

Contact us today to learn more about what we do and let’s connect!

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