There are options available for you, it might just take a little time and patience to get yourself back on track and get your credit rating looking better.
Get out of Debt, even with a Bad Credit Rating
It may come as a surprise, but it shouldn’t. You can get out of debt and improve your credit rating, even if your starting point is a bad credit rating. In order to get on track, you’ll need to be serious about making a change to your bank balance and financial behaviour. Depending on the type and level of debt you have, a great debt relief solution is often Debt Consolidation.
With Debt Consolidation, all your unsecured debts (debts that aren’t tied to your house or assets) such as utilities, tax debts, credit card debts and loans can be combined under a single loan which you pay off at an affordable rate. It is rare to have a consolidation loan refused, even with a seriously bad credit rating. Your bad credit rating will, however, have an impact on the terms and conditions available for your Debt Consolidation Loan.
The following conditions will be impacted by your credit rating:
- The type of loan
There are two types of loans available, a secured loan and an unsecured loan. In a secured loan, the loan is secured against an asset such as a house or a car. In this instance, the house or car can be repossessed if you cannot make your repayments, making the loan less risky for lenders. An unsecured loan, however, has no security attached to it. If you fail to pay the loan it will be harder for a lender to recoup their money. For this reason, an unsecured consolidation loan will be harder to apply for. - The interest rate
When considering you for a debt consolidation loan, lenders will take your credit rating into account and will supply an interest rate based on the level of risk involved. In the case of a bad credit rating, the interest rate will be higher to negate the risk if you fail to meet your repayments. - The amount loaned
Your bad credit rating may have an impact on the amount of money lenders are willing to offer you. - The loan period
Your bad credit may have an impact on the how long you have to repay the loan.
See the pros and cons of Debt Consolidation >
Improve your Credit Rating
The best course of action is to put a plan in place to start improving your credit rating. Frequent payment defaults and requests for credit will all be recorded on your credit file and will negatively impact your credit rating. These records will stay on your credit file for up to five years.
It will take time, planning and determination to find your way back to a positive credit rating, but it’s doable, even if you have a seriously bad credit rating.
By consolidating your debts into a consolidation loan for bad credit, you are taking the first step. In effect, with a bad debt consolidation loan, all your debts are paid off and you have a single new debt, with a single repayment. This makes life much simpler and impacts your credit rating positively because the debts that have been paid off are recorded in your credit history. As stated before, default records can stay on your credit file for up to five years, so to continue working towards a better score, you’ll need to make sure you don’t default on your new loan.
Your next steps would be to plan how you will manage your current debt, and your debt situation moving forward. You’ll need to consider changing your spending behaviour, especially while you have bad credit, and even after your consolidation loan has been paid off. You don’t want to repeat the actions that got you here in the first place.
For a detailed guide, see our page on How to Get out of Debt.
Can you get a debt consolidation loan with bad credit?
Yes, you can, however, the terms of your loan will be impacted by your credit rating, for example, the type of loan you qualify for, the interest rates available, the amount you are able to loan and the period of time in which you have to pay the loan off. As your bad credit rating indicates a risk to lenders, you will be charged a higher interest rate, and the lender may favour a secured loan over an unsecured loan. Contact us to discuss your options.
Will I be approved for debt consolidation with bad credit?
It is entirely up to the lender whether your debt consolidation will be approved. Your credit rating will impact the terms of the loan such as the interest rates, the amount available, and the time in which you have to pay the loan off.
Debt negotiators are experienced in helping people with bad credit find their way back to financial freedom. Our team are equipped to help you find tailored solutions to your bad debt situation and can help you learn how to better manage your finances so you can get out of debt and stay out. We start by offering you a free, impartial debt assessment in which we get to know and understand your personal circumstances so we can come up with a debt management plan perfectly suited to your needs.
