A debt consolidation is the process of getting a loan to pay off multiple all other debts such as credit cards, medical expenses, other unsecured loans for example. Typically the loan of this kind has more favorable interest rates, and also allows the borrower to make only one payment per month instead of many.
There are benefits of opting for debt consolidation loan. It reduces the number of payments that you have to make each month and consolidate them into one single payment. And more importantly, the finance and late charges, along with compounding interest will stop adding up. This means a considerable long-term savings.
But here’s the commonly asked question: “I have got bad credit and I own no house. Can I get an unsecured debt consolidation loan?” The answer is yes, it is possible.
However, in most cases, debt consolidation loans are secured with a lien against an asset like a residence. This type of unsecured personal loans may be harder to get and the maximum loan available hovers around $5,000-$15,000 depending on your employment situation.
Most lenders will not grant a debt consolidation loan if you don’t have regular employment. Part-time employment is often not good enough. They need to know that you have some sort of regular income that you can use to pay back the loan to them. If you have bad credit and no job, it is very unlikely that you will get a debt consolidation loan.
Can you get an unsecured debt consolidation loan if you have a low credit score?
Most debt consolidation loans are secured with a lien against an asset like a residence. Unsecured loans can be a little harder to find when you have a low credit score, since they are actually unsecured personal loans. Some lenders automatically exclude applications with credit scores below a specific number.
If you have extremely bad credit, but you have a steady job that is full-time, a bank account and direct deposit, the company might be willing to work with you as long as you’re able to prove some kind of action on your part to try to deal with any of your debts in good faith.
Don’t be discouraged. First get a copy of your credit report. Know what the report says about you. In this way, you will be able to upfront with a lender at the start of the application process. There are several companies online who will “shop” your application for a loan with several different banks and lenders.
If you do decide to seek out an unsecured loan online, though, read and understand the terms of any loan offered you. Deal with a reputable firm. While a loan offer may be appealing and eliminate financial pain on your part, there may be hidden hooks or gimmicks. Ask questions if there’s something you don’t understand. Do not deal with a company that wants advance fees or payments in order to even take your application.