A debt is an obligation of one person or party known as a debtor to pay someone else or party known as a creditor the agreed-upon money or equivalent value within a given time. Sometimes you can have many debts that you find difficult to repay as agreed. Governments can also find themselves in numerous debts from different creditors, thus affecting the economic status of the concerned country. In such a scenario, you need a debt consolidation loan from a bad credit direct lender.
Debt consolidation is a kind of loan refinancing whereby an individual, a company, or country takes out one loan to pay other pending loans then starts repaying one loan. The overall loan has a low-interest rate and is easily manageable. Furthermore, it becomes convenient to service only one loan and thus able to fund other necessary projects. It is good to consolidate debts as early as possible to prevent the accumulation of huge debts due to interests that accompany loans as well as late payment penalties.
When applying for loan consolidation, you need a long term loan that will enable low monthly payments. You have heard of a one month loan that requires you to return the money within one month; thus you end up paying a huge amount at once of which it proves very strenuous. Some banking institutions such as banks, credit unions, and Microfinance can give credit long term loans guaranteed approval. Some may require you to have good credit while others can accept to provide you with a loan even when you have bad credit.
How does loan consolidation work?
Combining different loans into one single loan can happen in two main ways. However, the overall loan amount remains the same. You can consolidate a loan by home equity whereby you use your home as collateral to the loan you want to borrow from your bank. In case you are unable to pay the loan, then the bank can foreclose the home, and thus you end up being homeless.
When using your home as collateral, you should have a reliable source of income that will guarantee the monthly payments. Another form of debt consolidation is hiring a debt consolidation company. However, the debts remain separate although you have to make one monthly payment to the company instead of the scattered payments. In a real sense, the loans remain unconsolidated but the payments are. The company divides your monthly payments to the respective creditors.
Does debt consolidation reduce your debts?
Debt consolidation does not reduce your debt. It happens the debt consolidator helps you to bring separate loans into one, thus easing the pressure of servicing different loans. Furthermore, paying one single loan is easy instead of paying separate debtors. When having many loans to service, you may be overwhelmed by the debts, thus finding yourself having negative accounts.
The accounts may make you start applying for second chance checking accounts after your bank closes your account mainly due to overdrawing or any other reason related to debts. Although you can get a second chance checking with no opening deposit, there usually too many restrictions that accompany such accounts.
Are there alternatives to debt consolidation?
Debt consolidation is not the only way out as there are other ways you can do it. First, you can decide to pay all the debts on your own. In this way, you can choose to focus on one loan at a time whereby you allocate as much money as possible to a particular loan and pay the minimum amount to the others. Once you finish repaying for one, you focus on the other until you finish your debts.
Also, you can use a Consumer Credit Counseling Service whereby the body negotiates for lower interest rates, and you have to pay the company on a monthly basis so that it pays the debts on your behalf. It is a good option although you should be careful so that you do not end up in the hands of cons.
Alternatively, you can opt for a debt settlement strategy whereby you pay a certain fraction of your debt to reduce the amount owed by the financial institutions. You can do it yourself or rely on companies that settle debts on behalf of the debtor. The only disadvantage of using debt settlement companies is that they take longer to pay the money as they amass it for a one-time payment, and your credit report will be worsening. Your creditors will be on your toes, demanding that you pay the debts.
What are the types of Debt Consolidation Loans?
Various loan types can help you to consolidate your debts. These include the following.
1) Home Equity Loan
The home equity loan is a kind of loan you take while using your home as collateral. We define equity as the value of the house minus the outstanding mortgage loan. Home equity loans mostly require you to have a fair credit score and above to benefit although bad credit may qualify. Fortunately, the loans charge small interest rates that are manageable. This type of loan is risky since you may encounter foreclosure of your home if you are unable to pay the loan.
2) Personal loans for consolidation
Personal loans can be useful when consolidating several debts into one. However, you might at times get personal loans for bad credit, the personal loans for fair credit or excellent are better since they charge lower interest rates. Personal loans for bad credit may not help you save in the debt consolidation process since the interest rates are incredibly high. Again, some institutions may deny your personal loans if you have bad credit.
3) Credit card balance transfers
You can transfer balances from other credit cards into one credit card with a low-interest rate. It saves you from paying separate credit card debts that may cost you a lot. Before consolidation, you should be sure that the current credit card will accommodate all the balances from the other cards. Also, check that the low-interest card rate will last for an extended period.
You may be a business person with various credit cards. If you want to combine your businesses into one entity, you can consider transferring all the balances into one card. You may bring multiple small business credit cards for bad credit together to enable shooting up your credit scores when you pay your balance.
4) Debt consolidation loans
You can get loan consolidation from banks and credit unions. The loan helps you to bring many loans together to have a comfortable repayment time. Debt consolidation loans have low-interest rates and low monthly payments. They take a long time to be fully repaid. Generally, you will end up paying more money than what you could have on the separate loans.
Again, consolidating your debts opens up other accounts where you can even qualify for several credit cards for bad credit with no deposit. However, it is vital to first settle your consolidated debts before indulging yourself into other obligations.
Can students consolidate student loans?
Most students qualify for private student loans no cosigner no credit check when joining higher learning institutions. As a student, you may get education loans from various sources to have enough money for fees and upkeep. During the repayment time, you may find it challenging to pay the loans separately so that the best option remains combining all loans into one entity.
When you pay your loans on time as a student, you can easily qualify for a first-time personal loan with no credit history upon landing your first employment. It is always good to start building your financial reputation from the word go to have a quiet time ahead.
Which are the 9 best debt consolidation loan bad credit direct lenders?
Now that you have known what loan consolidation is let me take you through the nine best lenders for loan consolidation with bad credit.
The company accepts loan applications from all credit types. You can get a loan of between $500 and $10,000. The application is easy and quick, and the response comes within a few minutes. You do not have to wait for several hours or days to get approved.
Also, the company allows the loan usage for any purpose and thus an excellent option to consolidate your loans. The interest rate is 5.99% – 35.99%. You can repay the loan within 3-72 months. See more
PersonalLoans.com accepts credit types of all nature. The company gives loans from $500 to $35,000. Interestingly, the company is available in over 50 states. It has a large network of lenders, and you can quickly get one.
PersonalLoans.com is an excellent option to consolidate loans since the company allows you to use the loan the way you wish. The interest rates ate 5.99% – 35.99% and the loan is payable between 3-72 months. The decision is only within one business day. See more
Since 1998, the company has been issuing loans to those with bad credit. The company can give you loans of between $500 and $5,000. Also, the company does quick qualification checks, and you can get the loan within the next business day.
BadcreditLoans.com connects you to lenders as the company does not offer loans. The interest rates for the loans range from 5.99% – 35.99%. The loan is payable within 3-60 months. See more
The company targets those with low credit scores and those with medium ones. Payments are through WebBank, and the loan amount ranges from $2,000 up to $35,000. The APRs range from 9.95% up to 35.99%. To qualify for this loan, you must have an income of at least $20,000.
Note that, you will pay an administration fee of 4.5% during the issuing of the loan. The cost gets automatically deducted from the loan. See more
5) OneMain Financial
OneMain Financial does not have any minimal credit requirements; it is a direct lender company, unlike others who connect you to lenders. The company requires you to have a monthly income, although it has not set the minimum. You can get loan amounts from $1,500 up to $30,000.
Moreover, the APRs range from 16.05% up to 35.99%. The company considers your monthly income, location, and your credit profile to determine how much loan to give you. See more
Upstart has partnered with various stakeholders to offer loans to those in need. It requires a minimum credit score of 620. With Upstart, you can get loan amounts from $1,000 up to $50,000. The APRs range from 7.74% up to 35.99% of which it is variable.
Also, you need a minimum income of $12,000 to qualify for a loan. The repayment period is between two and five years, and there are no prepayment charges. See more
LendingPoint requires a minimum credit score of 600. Moreover, you need to have a minimum annual income of $20,000 which is verifiable. You should also have a debt-to-income ratio of 35% or less. The company gives loan amounts from $2,000 up to $25,000.
The APRs range from 15.49% up to 35.99%. The company charges no prepayment fee. Some borrowers may pay an origination fee of up to 6% upon qualifying for the loan. See more
The company is an online peer-to-peer lending network that allows consumers to invest in and fund loans to be issued to other consumers. As a borrower, you can later turn out to be a lender. You can get loan amounts from $1,500 up to $40,000 and the APRs range from 6.95% up to 35.99%.
You need a minimum credit history of 3 years and a credit score of at least 600. You also need to have a minimum annual income of $20,000. See more
The company does not need perfect credit to issue you with loans. Moreover, you can get good loan offers. Signature loans range from $1,000 to $35,000. The company has a large network of lenders, and you can get approved within five minutes.
You can use the loan in any manner you would wish. The interest rates range from 5.99% – 35.99%. The repayment period is 3-72 months. See more
Debt consolidation is a good idea to ease the pressure of repaying various loans at the same time. However, it is not always the best decision since you may end up paying more on consolidated long term loans. Moreover, when using loan consolidation companies, you should be careful to pick only the eligible ones. Loan consolidation can help you improve your credit scores.