Debt Consolidation Bad Credit Loans Can Help You Reduce Clutter and Stress
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Debt Consolidation Bad Credit Loans Can Help You Reduce Clutter and Stress

Toni Petto

Toni Petto

26/03/2021 • 12 minute read

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Debt consolidation bad credit loans – what are they and how do they work? More importantly, who can get them and are they even a good idea? Let’s dive in. 

If you’ve found yourself with a bit more debt than you planned on, debt consolidation loans can be a way of saving yourself some money and getting your finances back on track. If you’re interested in getting all your debt consolidated into one loan but you have bad credit it can feel pretty hopeless looking for lenders as many will require you to have good credit before they’ll take a look at your application. 

Breathe. Don’t fret.

There are lenders out there who may be able to offer debt consolidation bad credit loans for those people who need a hand with unexpected expenses or the consolidation of multiple little loans to get their finances back on track. So, how does it all work?

What is a debt consolidation bad credit loan?

Debt consolidation bad credit loans are simply debt consolidation loans that are designed for people who don’t necessarily have the best credit history and would have trouble getting approved for a traditional debt consolidation loan. 

What is a consolidation loan?

Debt consolidation loans can be used to consolidate a number of different debts such as car loans, personal loans or credit cards into one, easier to manage repayment. Sometimes, a lender may be able to offer a secured loan, meaning you tie an asset such as a car, bike or boat to a loan as security. This means that you may be able to combine your loans into one payment and get a better rate on your loan.

Debt consolidation bad credit loans are no different. The new loan is used to pay out old debts and consolidate them all into the one loan. This is a great way to get all those repayments organised into one easy payment as well as saving yourself some money by only paying one interest rate as opposed to paying high-interest rates on multiple different debts.

What are the benefits of consolidating bad debt?

There are many benefits to consolidating debt, especially if you’re looking at debt consolidation loans for bad credit. Despite them, it has been suggested that approximately 82% of people with personal or household debt have never committed to taking out a debt consolidation loan. Given that debt consolidation bad credit loans could help consumers get back on track, this is an astoundingly high statistic. 

Here’s what you need to remember about consolidation loans:

One easy repayment

One of the main benefits of consolidating your debt is the fact that your finances become that much easier to track and handle after you have it all consolidated. Rather than trying to keep track of multiple repayments dates, amounts and balances, by consolidating your debt, you would instead only need to keep track of the one repayment. This can make life – and your finances – much easier to handle. Multiple repayments and interest rates can be overwhelming, but you may not be stuck with them. 

Save money on interest charges

By consolidating your debt – especially if your consolidation loan is secured – you may be able to save yourself money. If you’re paying multiple high-interest rates on your different debts, then you are losing money. Consolidate your debts into one easy to manage amount with bad credit debt consolidation loans and you will only pay interest on that amount. A consolidation loan may also have a lower interest rate applied to it than, say, a credit card. 

Consolidating various little loans may help you save money in interest charges as well as helping you pay the debt down faster too.

Start repairing your credit score

Debt consolidation bad credit loans can have a positive effect on your credit score

Having bad credit and unpaid debts can have a negative effect on your credit score, which can have a big impact in the future if you ever want to take out a big loan for a purchase such as a car or home loan

The sooner you can get rid of debt and start working on repairing your score, the better. If you’re able to consolidate your bad debt into one loan and repay it successfully, not only will you get rid of the bad debt on your file but you will also build up some good repayment history which is a great way to start repairing your credit score. 

If you already have a home loan and you have a bit of spare equity that has been paid down, perhaps you’ll be able to consider consolidating your other debt into your home loan. It could be a way of getting rid of bad debt and you likely wouldn’t have to undergo a credit check which would be great for your credit score. The more applications you have on your credit score the more of a negative hit it will take, so this is a great option for those who have the ability to do so.

Can I get a debt consolidation loan if I have bad credit?

While there are still some traditional lenders who may not approve you for a debt consolidation loan if you have bad credit, there are many lenders out there who will be able to give you a chance, even if you have a poor credit history in your past. 

Generally, if your credit history isn’t the best, you may need to go to a specialist lender who can offer you either a secured or unsecured personal loan for the purposes of bad credit debt consolidation loans. You also have the option of considering applying for a Part 9 Debt Agreement, but this should only be considered if you have no other choice. Let’s take a look at the difference:

Applying with a specialist lender

As mentioned, there are many specialist lenders in Australia who may be able to offer you debt consolidation bad credit loans, it’s just a matter of knowing what you’re looking for and how they may be able to help you out. 

Some lenders will take a look at your credit score in conjunction with other factors in your application to help them make their decision. They’ll take a look at things such as your income and expenditure, your recent repayment history and your banking habits. If they can see that you’ve had some good recent history they may still be able to help you out with a debt consolidation bad credit loan, despite the bad credit history. 

Part IX Debt Agreement

A Part IX Debt Agreement is a form of bankruptcy and is an option for people who have no other way of paying the debts that they owe. This is an option where your financial advisor or debt counsellor will negotiate with your lenders on your behalf in a bid to get your debts to a manageable repayment amount to pay off the balance over a 3-5 year period.  

A Part IX Debt Agreement is usually for those people who are under serious debt stress. This is usually one of the last resorts, as a Part IX will stay on your credit file for 5 years and can have serious ramifications for anyone who is thinking of applying for credit or buying a house anytime in the future. It can also affect your future employment so be sure this is the best option for you before entering into one. 

What should I look out for in debt consolidation bad credit loans?

Not all debt consolidation bad credit loans – and lenders for that matter – are created equal. In order to ensure that you put yourself into a better financial situation and not a worse one, it’s important to do a bit of research on your potential lenders and your debt consolidation loans Australia first:

Look for a reputable lender

Unfortunately, not all lenders operate in the same way. They’ll have differing lending strategies, different appetites for risk and different compliance procedures. Some may not necessarily have the best intentions, despite what they may tell you. It’s important to avoid these lenders if at all possible. A great way to get a feel for a lender is to check out their websites and also have a look at online reviews from other customers. Reviews, and the way a company responds to them, can tell you a lot about who you’re dealing with. Pay attention to them.

What kind of interest rates and fees do they offer?

The whole point of a debt consolidation loan is to save money. Aim to find a lender who is able to offer you reasonable interest rates and is upfront with their possible fees. These fees can include establishment fees, late repayment fees, monthly interest charges or set fees and potentially additional repayment fees. Any reasonable lender will be upfront about these fees and charges.

What are their loan terms?

Loan terms are the terms of your contract with the lender. These will detail your repayment amounts and due dates, how long the repayments will continue for, any fees or interest charges you will be charged and how much you will pay over the life of the loan. Loan terms should be tailored to your personal financial situation, meaning that your repayments should be reasonably affordable, and should meet your needs. If they don’t, it’s probably a good idea to continue searching for the right lender or look at whether a loan is the most suitable option for your financial needs.

How to make debt consolidation bad credit loans work for you

Debt consolidation for bad credit is a great way to start turning your bad credit and credit score around to get yourself into a better financial position if you do it correctly. However, there is always the possibility of putting yourself into a worse financial position if you don’t do it correctly. Here are a few ways to make your loan work for you:

Stay on top of your repayments

It’s important to stay on top of your loan repayments if you do decide to take out a debt consolidation loan. Having your bad debt consolidated into one easy repayment will not benefit your finances or credit score if you fail to keep up with your repayments and fall behind on your consolidation loan. A great way to make sure you’re up to date on your consolidation loan is to set up an automatic repayment on your debt consolidation bad credit loan. You can do this via direct debit in line with your income schedule so that you do not have to worry about forgetting it or having enough cash in your bank account. 

Get the right interest rate

One of the main benefits of a consolidation loan is saving yourself money in interest charges. With this in mind, it’s always a good idea to shop around before you commit to a lender to see what interest rates are being offered by different lenders. It’s important that the lender you choose is lower overall than what you were previously paying on your loans as the goal is to save you money. However, it is important to note that ‘shopping around’ can affect your credit score so, if possible, aim to use a lender-finder or comparison tool before submitting multiple applications.

Looking at a secured loan? Make sure you take a look at the terms and conditions. You will likely not be able to sell the asset you’ve used as security for the duration of your loan. 

Compare your options and lenders

Try to avoid jumping into the first debt consolidation bad credit loan that you find and instead do a bit of research first. You want to find a loan that is right for you, so take some time to do some comparisons. Have a look at the interest rates they offer, what fees they might have and how the repayments work. You want to make sure you get the best deal you possibly can, so it really does pay to spend a bit of time looking.

Ask the experts

One of the best things you can do when you find yourself in a bit of a financial pickle is to seek the help of experts. Asking for a bit of financial advice could do wonders and get you on the road to improving your situation. 

If you’re looking at applying for debt consolidation loans bad credit, but you’re not too sure if it’s the right move for you, get the advice of the experts. They’ll be best equipped to help you get rid of unwanted debts and may have strategies for improving your financial health and your credit score.

The takeaways on debt consolidation bad credit loans

If you’ve decided that enough is enough and that it’s time to take control of your finances, a debt consolidation bad credit loan might be a good place to start. If you take the time to find the right lender and loan, it’s a great way to get your finances back on track and start really chipping away at some of that bad debt that’s been sitting there. 

As long as you’re able to stay on top of your repayments, a debt consolidation loan is a fantastic way to save yourself some money in interest charges and start repairing your credit score with good repayment history.

Have loans? We may be able to help you find a better rate. Apply today and let us see if we can help you refinance or consolidate your loans.

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Toni Petto

Written by Toni Petto

Toni Petto is a contributing Writer at Oiyo, specialising in finance, history and culture. She has a Bachelor of Arts in Anthropology and a Masters in Antiquities Trafficking and Art Crime Prevention from Glasgow University. She is currently a Freelance Writer and has previously worked within the finance sector.

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