Are you drowning in multiple debts and worried about your bad credit score? If so, you’re not alone, and there’s a solution that might just be what you need: unsecured debt consolidation loans for bad credit.
This approach can simplify your financial life by combining all your debts into one manageable payment, even if your credit score is less than perfect. In this article, we’ll explore how unsecured debt consolidation works, the benefits it offers, and how you can get started on one.
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Can I Consolidate My Debt With Bad Credit?
Consolidating debt with bad credit may seem challenging, but it’s not impossible. Many online lenders provide unsecured loans for debt consolidation, especially for people with bad credit.
However, these loans have high APR representative rates and it’s difficult to secure one. You might be able to get debt consolidation loans designed for people with good credit, but you’ll have to pay high interest rates.
Below are some specific steps and strategies you can follow to get an unsecured loan for debt consolidation.
- Improve your credit score
Before applying for an unsecured debt consolidation loan, try improving your credit score. Check your credit report for errors and get them corrected. Register on the electoral roll as it can give a slight boost to your credit score. These steps can increase your chances of approval and help you secure better loan terms.
- Ensure you check all the options available
Check out the traditional banks and online lenders. Traditional banks have stricter eligibility criteria, still, they are worth checking out. Many online loan providers specialise in unsecured debt consolidation loans with bad credit. They also have minimum eligibility criteria and are more flexible than traditional banks.
- Check with credit unions and local banks
If you are a credit union member or a customer in the local bank, talk to a loan officer there and see if you’re eligible for an unsecured debt consolidation loan. Credit unions and local banks may consider your income, financial history, circumstances, and your personal relationship with them to approve the loan even if you have a low credit score.
- Using Comparison Websites
Comparison websites can help you find the best unsecured loan for debt consolidation. These websites allow you to compare interest rates, terms, and conditions of different lenders quickly.
If you’re unsure which lender to choose and what are the reasonable interest rates, contact us. One of our debt advisors will guide you.
Are you struggling with unaffordable debt?
- Affordable repayments
- Reduce Pressure from people you owe
- One simple monthly payment
What are the steps to get an unsecured consolidation loan and what’s the best place to get it? Keep reading the article to find out.
Steps To Get Unsecured Debt Consolidation Loans
As I told you earlier you can get an unsecured consolidation loan even with a low credit score. Below are the steps to follow:
- Check your credit score. There are online tools available to check your credit report.
- Research and compare the lenders. Don’t settle for the first lender you see. Consider the charges, interest rates, and minimum eligibility requirements and settle for the most beneficial lender.
- Fill out your application truthfully, and provide all required documentation. The approval process can be quick, but you’ll have to provide documents that will prove your ability to repay debt such as pay returns and tax stubs.
When getting the loan try to negotiate better terms with lenders or improve your credit score before applying. Every bit of improvement in your credit score can lead to better loan offers.
Debt Consolidation Loan With Collateral
Lenders provide debt consolidation secured and unsecured loans. If you’re unable to get an unsecured loan you will have to consider getting a secured loan.
Here you need to submit some form of collateral such as your house, vehicle, or any other assets to the lender. Hence, secured loans are easy to obtain.
However, you are putting your assets at risk with a secured loan. So you don’t have to take this step. Follow the steps given in the last section and you are most likely to get an unsecured debt consolidation loan.
If you’re unable to secure a loan with any of the above-given tips, consider a debt consolidation guarantor loan. What is it? Let’s explore.
Debt Consolidation Guarantor Loan
If your credit history hinders you from getting an unsecured debt consolidation loan, you can get a guarantor loan. This involves someone with good credit vouching for your repayments.
Guarantor loans can be a great alternative, but they require trust and commitment from your guarantor.
To obtain a guarantor loan, first, you must find a suitable guarantor. It can be your friend, family member, or partner. This person should trust you to make repayments and should have a good credit score.
The main benefit of guarantor loans is that they can offer better interest rates and terms than loans you might qualify for on your own. However, you’ll get into personal disputes with your closed ones, if you’re unable to pay the debt.
Types Of Unsecured Consolidation Loans For Bad Credit
Source: MoneySavingExpert
There are various types of unsecured consolidation loans for bad credit. Here are some notable options:
Everyday Loans is an award-winning loan provider, giving unsecured loans that can be used for debt consolidation. Their representative rate is 99.9% APR.
Despite the high rate, they have positive online reviews and a good TrustPilot score. Additionally, they offer flexible payment plans based on status and affordability.
Finio Loans, formerly known as Likely Loans, has a representative rate of 39.9% APR. It offers loans up to £5,000 and it must be repaid within 12 months to 3 years based on your financial situation. You can go Finio Loans website, check your eligibility, and apply.
Pegasus offers loans between £2,000 and £15,000 with a representative rate of 14.9%. They promise quick disbursement, often within an hour of approval. This makes them a viable option for those in urgent need of debt consolidation. Additionally, the online application process is easy.
118 118 Money provides loans between £1,000 and £5,000, repayable within 12 months to 5 years. Their representative rate is 34.0% APR and the process is straightforward with low rates.
Solution Loans cater to both short-term and long-term credit needs. They offer loans up to £25,000 with a representative APR of 14.3% (variable).
They also provide a repayment term of 10 years which is longer compared to other lenders. The availability of short-term and long-term plans makes Solution Loans a good option for various financial situations.
A common question everyone has is what type of debts can I pay off with an unsecured debt consolidation loan. Read the next section for the answer.
Debts That Can Be Resolved With An Unsecured Consolidation Loan
An unsecured loan for debt consolidation can be used to pay off various types of debt, including:
- Store cards.
- Credit cards.
- Personal loans.
Note: Balance transfer credit cards can be used to resolve other credit card debts specifically. These cards often come with lower interest rates for a limited period, making them a good option for consolidating high-interest credit card debt.
The amount of unsecured consolidation loan you can borrow varies by lender. Even with poor credit, you can find loans up to £25,000, repayable over five years. You must consider the loan amount and the repayment terms before settling for a consolidation loan.
Each lender has different loan limits on how much you can borrow. Some may offer smaller amounts, while others can provide larger loans. Choose a loan amount that covers your debts but is also manageable to repay.
Repayment terms can range from one to five years. Longer terms mean lower monthly payments but higher overall interest costs. Shorter terms mean higher monthly payments but less interest paid in total. Consider which repayment term works best for your budget.
If you need more guidance on choosing an unsecured debt consolidation loan with bad credit, consult a professional debt advisor or a debt charity. Below are some debt charities in the UK where you can get debt guidance for free:
- StepChange.
- National Debtline.
- Citizens Advice.
If you were not able to get an unsecured debt consolidation loan with bad credit, don’t worry. There are alternatives which we’ll be discussing next.
Alternatives For Unsecured Debt Consolidation Loans With Bad Credit
An alternative to unsecured debt consolidation loans is a Debt Management Plan (DMP). A DMP is an agreement between you and your creditor to pay off all your debts.
Here, you can pay the debts in small monthly instalments or you agree to make the repayment after a few months. A DMP doesn’t consolidate your debt but simplifies payments and can sometimes reduce interest rates.
You can arrange a DMP by yourself or hire a licensed debt management company to do it for you for a fee.
DMPs are beneficial for those with poor credit because they do not require a new loan application. Instead, they rely on negotiating with creditors to accept a consolidated payment plan.
If you’re wondering which is the best solution to get debt-free, don’t overstress. Fill out this online form and one of our debt advisors will contact you.
What’s The Best Option To Become Debt-Free With Bad Credit?
It’s difficult to get an unsecured debt consolidation loan if you have bad credit, but it’s not impossible. Many online lenders specialise in providing unsecured debt consolidation loans for bad credit.
Research all the online lenders, credit unions, and local banks. Check for their eligibility criteria, loan amount, and repayment terms and choose the best option for you. If you’re unable to get an unsecured debt consolidation loan, you can try a secured loan or a guarantor loan.
However, they have their own pros and cons. DMP is an alternative to an unsecured debt consolidation loan. Consult a professional debt advisor or a debt charity to make the best decision.
Key Points
- Unsecured Debt Consolidation Loans help combine multiple debts into one without requiring collateral.
- Getting an unsecured debt consolidation loan is difficult with a bad credit score and working on improving your credit score will make the process easy.
- Online lenders, banks, and credit unions may provide you with a consolidation loan considering your income and financial situation even with bad credit.
- Online lenders specialising in unsecured debt consolidation for bad credit have flexible options and minimum eligibility criteria.
- Research the loan amount and repayment terms of each lender thoroughly and use comparison websites to choose the best lender.
- Pegasus, Everyday Loans, Finio Loans, Solution Loans, and 118 118 Money are some lenders who offer unsecured debt consolidation loans for bad credit with different terms and rates.
- If standard loans are unattainable, consider a guarantor loan where someone with good credit vouches for your repayments.
- Debt Management Plans (DMPs) are an alternative to loans, DMPs involve negotiating with creditors to make single, consolidated payments.
- Unsecured loans can pay off store cards, credit cards, and personal loans and you can borrow loans up to £25,000 are available, repayable over various terms.
- Consult UK debt charities like National Debtline or StepChange for personalised debt solution advice.
FAQs
An unsecured debt consolidation loan is a type of loan that combines multiple debts into one single loan without requiring any collateral. This can simplify your payments and reduce your overall interest rate.
The credit score required to qualify for an unsecured debt consolidation loan varies with the lender. However, some online lenders specialise in offering unsecured consolidation loans for people with bad credit.
Approval times can vary, but many online lenders can approve loans within a few hours to a few days. Traditional banks may take longer due to more extensive verification processes.
Interest rates for unsecured debt consolidation loans can range widely, especially for those with bad credit. Rates can be as low as 14.3% APR or as high as 99.9% APR, depending on the lender and your credit profile.
Yes, an unsecured debt consolidation loan can be used to pay off various types of debts, including credit cards, store cards, and personal loans. It can help you manage your debts more efficiently by consolidating them into a single payment.
