The ideal scenario for people who want to use debt consolidation loans is to have a good credit score. However, if you have been defaulting on your payments and your debt amount is quite high, that means you have a bad credit. Especially if you have been defaulting on your credit cards, your score may be in a very bad shape already. While that is an ugly scenario, it is still possible for you to opt for this debt solution.
If you have a collateral that is significant enough to cover your debts, you can get a secured loan and still get a low interest rate despite your credit score conditions. The collateral will help make you a low risk borrower because the lender will have a lien on it in case you default on your payments. For instance, you can use your home to get a home equity loan. But if you do not have a collateral, there are other options.
Peer to peer or P2P lending is a fast rising option for debt consolidation loans. Instead of a bank or a similar financial institution funding your loan for debt payments, it is your peers or the community helping you out. There are websites serving as the platform by which borrowers can connect to individual and private lenders. You only have to submit your information, post the amount you want to loan and wait for lender to answer your call for help. The third party company hosting the site will check your credit score and will give you a risk rating. This will dictate the interest rate that will be placed unto your loan. While it is higher compared to those who have a good credit standing, it is still lower than the rates imposed by banks.
Payday loans can also be an option but most experts will advise against it. This is marked by a high interest and short payment term. It is not a good idea unless you are sure that you have a big amount coming in the next few weeks.
You can also get a cash advance in your work but of course, this is subject to your employer’s approval. Also, this may not be enough if your debt is already too big. But the thing about this is you will not be imposed with interest. Although, you will receive smaller income in the next few months – or depending on the terms of your cash advance.
If all of these are not appealing to you, there is another way to consolidate your debts without worrying about your credit score. Debt management is a great way to enjoy the benefits of debt consolidation loans without actually having to get a loan! You still get a single payment scheme, lower monthly dues and you can even avail of a low interest rate while you are enrolled in a debt management program. You will be assigned a debt counselor who will not only help with your debt payments, they will also educate you on proper financial management and budgeting. These are essential lessons that you need to learn to help keep you out of another debt crisis in the future.