Are There Good Bad Credit Debt Consolidation Loans?

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The average credit score in America was 711 from 2020 – a figure that falls into the “good” category on the FICO scale. However, examining this average score does not tell the whole story for many Americans. For example, older consumers tend to have much higher credit scores, while younger consumers tend to have poorer ones. The average FICO rating for millennials over the same time period was 680, while the average rating for Gen Z members was 674. Average ratings also vary widely by location.

Take-out? Many Americans fall below this average number for a wide variety of reasons. If your credit score is in the “fair” or “poor” categories, you may even be wondering if it is possible for you to do something like get a competitive consolidation loan.

Are There Good Debt Consolidation Loans For Borrowers With Bad Credit? Let’s investigate further.

Can You Get a Consolidation Loan With Bad Credit?

It can be a relief to hear that it is very often possible to get a consolidation loan even with a less than optimal credit score. While some lenders reserve loan approval for borrowers with high scores, other lenders are more flexible – some even now specializing in credit loans.

However, consumers with poor credit can expect to encounter offers with higher interest rates if they are approved. As one expert notes for American News and World Report, a person with good credit may be able to get a loan with an annual percentage rate (APR) of six percent or less; it is possible for a borrower with bad credit to meet an APR of 30% or more.

Ultimately, your approval for a given loan and the APR it carries depends on your credit profile, income, etc. The good news is that having bad credit is not an automatic disqualification. However, it is important to keep in mind that the APR for which you are eligible may be high enough to negate the positive effects of the consolidation.

Tips for Finding Competitive Bad Credit Consolidation Loans

What should borrowers look for when trying to find the best personal loans for bad credit? Right off the bat, check to see if a lender has a minimum credit score. This will prevent you from starting a loan application for a product for which you are not eligible.

As noted by Councilor Forbes, traditional banks tend to have strict criteria for personal loans if they offer them. However, online-only lenders have emerged as a possible alternative and are known to sometimes have “faster approval and funding”.

Getting pre-approved for a loan doesn’t lower your credit score, as it initiates a soft investigation rather than a hard one. But, to save yourself the time and effort of applying for loans that don’t meet your needs, be sure to note each lender’s requirements when shopping.

Here are some important factors to compare:

  • Minimum credit score required to be eligible
  • APR offered
  • Maximum loan amount offered
  • Duration of loans
  • Costs
  • Penalty for early repayment

There are consolidation loans available for borrowers with bad credit, especially online. However, if these loans are really a good idea to follow, it will depend on how much you will save if you take out the loan rather than come up with a strategy to pay off your debts on your own. Knowing that credit loans tend to carry higher interest, you will need to assess whether you will actually be able to save on consolidation, also adding fees.


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