Can I Get A Debt Consolidation Loan With Bad Credit?

Getting A Debt Consolidation Loan With Bad Credit

The harsh reality of life is that there will be times when you can’t afford to pay your bills.

For example, this might be due to loss of earnings or other personal circumstances.

When repayments don’t get met as agreed, you’re likely to end up with bad credit.

That means you’ll likely find it hard to apply for mainstream credit if there’s evidence of missed debt repayments.

If you’re finding it hard to stick to your repayment terms, a debt consolidation loan could be the answer to your problems.

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How a debt consolidation loan could help you

Debt consolidation loans convert several forms of borrowing from different lenders into one large loan.

The reason why many people opt for debt consolidation loans is that form of borrowing makes paying back existing debts more affordable.

A debt consolidation loan is effectively a large loan taken out for the sole purpose of settling existing debts.

The money doesn’t get used for other reasons such as going on a vacation or buying a new car.

The most significant advantage of debt consolidation loans is they can significantly decrease a person’s monthly outgoings.

For example, if your combined loan and credit card debt repayments are $800, you could end up paying half that with a debt consolidation loan.

If you’re unable to earn any more money to meet your existing repayments, a debt consolidation loan could be the perfect way to help you solve your debt problems.

How easy is it to get a debt consolidation loan?

If you have a bad credit score, you’ll likely find out that most mainstream lenders won’t entertain the idea of lending you any money.

In those cases, you can only approach subprime lenders.

In a nutshell, subprime lenders are financial institutions that have a more relaxed policy of lending.

They usually only lend to people with a bad credit score and have had trouble obtaining finance elsewhere.

Of course, the major disadvantage of getting a debt consolidation loan from a subprime lender is you’ll have to pay high interest rates on your borrowing.

So, while your monthly repayments are lower, your overall debt is higher than before.

Another downside to subprime debt consolidation loans is it’ll take you significantly longer to pay off the entire debt.

If you are somehow able to pay off your debt earlier than expected, you may need to pay a loan settlement fee.

Aside from subprime borrowing, your options are somewhat limited when you have bad credit.

A debt consolidation loan might seem a great idea at first, but it could potentially be worse for you in the long-term than your current financial situation.

Have I got any other options?

You could always ask a relative or friend to lend you the money to consolidate your debts.

But, as you can appreciate, most individuals will feel somewhat hesitant about agreeing to such lending, especially when you have a significant amount of debts and a poor track record of paying the money back.

The good news is there are two other options you can consider apart from a debt consolidation loan or borrowing the money from relatives or friends to clear your debt.

They are as follows:

Option 1: Consumer Proposal

A consumer proposal is a legally-binding proposal that gets administered by a licensed insolvency trustee (LIT).

In short, it’s an agreement whereby your creditors receive reduced monthly payments for your debts.

After a period of no longer than five years, your debts are legally settled – even if the original balance hasn’t been paid in full.

Consumer proposals are ideal for people that owe $250,000 or less and don’t wish to become bankrupt.

Option 2: Bankruptcy

Filing for bankruptcy is the second option open to you and is usually considered a “last resort” to ending overwhelming debt problems.

Bankruptcy can make sense if you owe a lot of money and don’t have the means to pay it all back, either now or in the future.

You can be eligible for bankruptcy if you owe more than $1,000.

A disadvantage of bankruptcy is you could end up losing some valuable assets to help pay towards your debts.

Which option is right for me?

It makes sense to discuss your financial situation with someone that can offer professional debt advice and support.

Contact Bankruptcy Canada today on (877) 879-4770 for a confidential and no-risk (or obligation) conversation to learn which option is best for you.

Our friendly team is available to take your call 24 hours a day, seven days a week.

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