In this article, we will consider the debt consolidation loan options for very bad credit. Having serious debt is a night mare, finding debt consolidations are even more painful. This is because you need to have a good credit to borrow money to consolidate a debt. In a situation where your credit is bad, you will only get very exorbitant pricing and terms. What can you do? Carefully search and review the best terms you can qualify for. Do not take an option that will make you incur more debt. Avoid choosing a bad loan out of desperation––it could end up costing you more in the long run.
Debt Consolidation Loan Options for Very Bad Credit ; Use Peer-to-Peer Lending
Peer-to-peer lending permits you borrow from individual investors. The investors usually review your profile and application and choose whether or not to lend to you. LendingClub.com, Prosper.com, and Upstart are a few peer-to-peer lending platforms that can help you. You just have to choose what you are sure you can afford to pay.
Debt Consolidation Loan Options for Very Bad Credit ; Use Your Home Equity Or Home Equity Line of Credit
You can use a certain percentage of your home’s equity to consolidate your debt. A home equity line of credit is a line of credit that’s secured by your home. At the early years of your HELOC, you only pay monthly interest on the credit line. After the “draw” period, set amount of time to pay your outstanding balance in full. The lender will consider your debt, income, and credit when you apply for the HELOC.
Debt Consolidation Loan Options for Very Bad Credit ; Make a Comparison of Debt Consolidation Loans
You may use LendingTree.com to search for lenders that give loans to consumers with your credit score. It will give you a variety of options to choose from. Just choose what you can afford. A loan comparison service will show you options from multiple lenders and allow you to compare the terms.
A lot of the options will have higher interest rates. APRs on debt consolidation loans for bad credit can be as high as 36% sometimes, this make it very expensive. Loan terms may vary from 24 to 60 months. The longer your repayment period, the lower your payments will be, but the more interest you’ll pay.
Cash Out Refinance
In this method, you refinance your mortgage into a new one and collect the equity you’ve earned as cash. Use the cash to pay off your debts. Additionally, you only have to continue paying on just one loan and no other debt. Before this happens, the lender will review your credit score, debt, and income during your application for the cash out refinance.
However, do not forget that consolidating your debt with your home equity, puts your home on the line. If you’re unable to make payments on any of your home-based loan products, you risk foreclosure. Carefully weigh this option to see whether it’s worth it.
Transfer Balances to a New Credit Card
If you have enough available credit, transfer the balances to an existing credit card. This is because consolidating credit card balances makes it easier to pay off your bills. If you are able to combine your balances, you will have less payments and focus on paying off fewer debts.
This is completely a new loan, It is different from your primary mortgage. It is usually based on the equity you have in your home. Second mortgages have increased interest rates than primary mortgages. Take note.
Shine Your Eyes and Avoid Debt Consolidation Scams
Research properly, avoid any loan that demands payment before the application. Majority are scammers. They only want to steal from you.