Your Guide to Bad Credit Debt Consolidation Loans
Debt consolidation can be a very valuable tool for managing your finances. In this article, we’ll discuss bad credit debt consolidation loans and how Alpine Credits can help you find one at a reasonable interest rate.
How Bad Credit Debt Consolidation Loans Work
A debt consolidation loan for bad credit allows you to combine smaller debts and make just one monthly payment towards all of them. Many people find this makes their debt much more manageable, reducing the likelihood of missed payments and additional charges. Let’s take a closer look at this and the other benefits of debt consolidation loans.
Benefits of Debt Consolidation Loans for Bad Credit
You’ll Have Fewer Debts to Keep Track Of
When you have multiple loans, it can be very difficult to keep track of what’s due throughout the month. Even being a day late can incur penalties and additional fees (i.e. insufficient funds fees, which can be as high as $50 at many Canadian banks), not to mention they will likely cause a hit to your already-low credit score.
You’ll Have a Chance to Organize Your Payments
If the payment due dates on your existing loans are difficult to manage (i.e. they fall awkwardly relative to your pay schedule at work), a debt consolidation loan offers a chance to rectify that.
You can choose a start date that will make the loan easy for you to keep up with.
Your Credit Score Should Increase in the Long Run
Because a debt consolidation loan can help you manage debt more efficiently, your credit score should improve over the long run. It won’t happen overnight but slowly, you’ll see positive results.
This is especially true if you’re consolidating revolving debt using an installment loan (like a home equity loan, which we’ll discuss shortly). This will improve a metric known as your credit utilization ratio, which is one of many factors credit bureaus look at when determining your rating.
You’ll Be Less Stressed
The financial benefits of a debt consolidation loan can be tremendous. The mental health benefits are no different. By becoming more organized with your debt, you’ll likely find it much less stressful to think about and manage.
You’ll Likely Pay Off Your Debt Much Faster
Avoiding missed payments and increasing your financial organization should make your debt easier to pay off, helping you focus on building wealth sooner rather than later.
The Major Challenge with Debt Consolidation Loans for Bad Credit
Loans that are specifically geared towards those with bad credit often come with exorbitant interest rates. After all, those with lower credit scores are more likely to miss payments and default on their debt. In exchange for taking on these greater risks, bad credit debt consolidation lenders charge higher interest rates.
While this makes sense logically, it can also be frustrating in that it limits a bad credit debt consolidation loan’s usefulness from the perspective of eliminating your balance faster. If your credit score has gotten worse in recent months, you may even end up with a higher interest rate on your debt consolidation loan than your original debt, which defeats the purpose.
How to Avoid High-Interest Bad Credit Debt Consolidation Loans
The solution? Apply for a secured debt consolidation loan. Even if you have a rock-bottom credit score, you can qualify for a competitive interest rate by putting up collateral.
One easy way to do this is by securing a home equity loan. As long as your home is worth more than the balance on your mortgage, you can use a home equity loan to temporarily extract funds from your home without ever selling it.
Read more about how home equity loans work for debt consolidation here.
Benefits of Using a Home Equity Loan for Debt Consolidation When You Have Bad Credit
There are many more advantages to consolidating debt with a home equity loan. Let’s take a look.
Easy Application Process
Applying for a home equity loan is remarkably easy. At Alpine Credits, we aim to approve applications within 24 hours. As long as you have equity in your home, we can help you use it to consolidate debt.
It’s really that simple. We don’t pry into your credit history either. The outcome of your application depends primarily on how much equity you have in your home.
This contrasts starkly with traditional financial institutions, which can take weeks to process applications, even from consumers with good credit scores.
If you have a low credit score, the application process at a major financial institution can be even more stressful. You’ll likely need to verify your income and provide other demonstrations of your ability to make payments. If you happen to be unemployed in addition to having poor credit, your chances of approval are even more slim
Reasonable Interest Rates
While unsecured lenders often charge interest rates exceeding 20% for those with poor credit, we’re much more competitive and reasonable at Alpine Credits. Visit this page to learn more about how our interest rates compare to those of other lenders.
Home Equity Loans Are Easier to Manage Than Many Other Types of Debt
It’s very easy to be responsible with a home equity loan. Unlike with revolving credit, you can’t continue to make withdrawals on the home equity loan as you pay it off. This prevents you from trapping yourself in a cycle of debt.
Alternatives for Bad Credit Debt Consolidation Loans
A home equity loan is generally the best option for homeowners. However, if you don’t own your home, there are some additional options to consider.
While it’s difficult to get approved for an unsecured loan at a bank if you have bad credit, some institutions are willing to be flexible if you put up some collateral. Collateral can include financial accounts (i.e. your investment portfolio) and vehicles.
Negotiating with Your Lenders
You might be surprised at how flexible lenders can be when it comes to helping you create a payment plan, especially if you’ve been a reliable customer for years. Give them a call and inquire about potential solutions.
Credit Card Balance Transfers
If the debt you’re looking to consolidate consists of other credit card balances, look into a balance transfer. This will allow you to consolidate debt from multiple cards onto a single one.
The interest rate will still be quite high (credit cards charge average rates of approximately 19% according to 4Pillars), which is why you should only consider this if you don’t have a home to borrow against at a much lower rate.
Own Your Home? Contact Alpine Credits Today for a Debt Consolidation Loan
At Alpine Credits, we’ve been helping Canadians consolidate debt using their home equity for more than 50 years. Visit this page to get started with your application. Don’t let your debt pile up any longer!
Frequently Asked Questions
There are many lenders offering consolidation loans for people with bad credit. The problem with these lenders is that they typically charge very high interest rates. If you own your home, you can receive a much more reasonable rate by applying for a home equity loan.
You’ll generally need a credit score of at least 585 to qualify for a consolidation loan from traditional lenders. However, if you consolidate debt using a home equity loan, your credit score isn’t a major concern.
The smartest way to consolidate debt is by taking out a secured non-revolving loan. In addition to offering a lower interest rate, this type of loan reduces your likelihood of spending recklessly.
While the application process for a traditional loan can take weeks, you can receive approval for a home equity loan much faster. At Alpine Credits, we strive to approve homeowners within 24 hours.