With a lot of loan and having bad credit, you may find it difficult to manage your loans. There are many reasons of over burdened by debt, the high interest rates of loans, credit cards, mortgage and auto loans and even utility bills.
You may consult your lenders to find solution and gain control of your finances in a better way. A debt consolidation of your multiple loans is the best solution to get out of debt with bad credit score. Debt consolidation means taking one loan and use it to payback all of your unsecured loans. Debt consolidation make paying off loan quite simple and save you money with low interest rates and lower monthly payments. Pay back debt on time help you build credit too.
With bad credit it is hard to qualify for debt consolidation loan with your choice of interest rate. Your goal is to find loan terms and interest rates which will be more manageable for you. You must shop around to compare for better options.
Here are some ways to consolidate debt by taking:
Apply for a personal loan
Taking a personal loan to pay off your multiple loans in one go is a better idea. This loan does not require collateral and can be purchased from banks, credit card companies and online lenders in fixed installments on low interest rates.
Purchase a transfer balance card
Credit card issuers offer balance transfer with zero APR for a certain period which is called grace period. Work with a nonprofit credit-counseling organization. Nonprofit counseling agencies assess your debt situation and advise you the best solution for it.
Home equity loan
This loan can be used to consolidate your debt with low interest but risky as it involves your home as collateral.
Borrow from a retirement saving plan like (40 k)
You may borrow money from your retirement plan to payoff multiple debts. You may get help from your family and friends to borrow money to pay off loans and refrain from damaging your credit. You must keep in mind to go through these factors to consolidate your debts.
Check your credit report
Keep track of your credit score and check for any errors such as missing payments, incorrect report, inaccurate credit limits or wrong accounts. You can check your credit score free from Annual Credit Report, once a year. Even a small mistake can make bad impact on your credit report and lose chance of getting qualify for loan.
Add a co-signer
Some lenders allow adding co-signer which can help you qualify for loan on better terms. The credit score of co-signer must meet the lender’s requirement. The co-signer and you are responsible for the loan.
Work on your debt-to-income ratio
If you do not want to take debt consolidation loan, must work on increasing your debt-to-income ratio and pay off small debts. You can take small jobs or work part-time and improving your income will develop your ability to repay the loan.
If you want favorable term rates and best repayments that fit your budget, must shop around and compare various offers of lenders to apply for loan. You may pre-qualify with most of the online lenders requirement even with your not-so-good credit score and get estimated rates. Explore all of your options before you commit to any loan. They just do a soft credit check which does not hurt your credit report.
Plan your budget
Plan a budget and monitor your expenditures to check where you can save money and set aside it to pay off your small loans.