Credit Score ArticlesTips on Getting a Debt Consolidation Loan With Bad Credit or Low Credit ScoreTip! Because outstanding debt may taint a FICO score, try to pay-off balances on both revolving credit cards as well as other financial accounts. For the sake of appearances and the credit score, target bankcard debt to 60 percent with 30 percent towards installment debt. Are you struggling to pay off 4, 5 or 6 credit cards, student loans, car notes, medical bills, etc at the time? Is your credit card debt $15,000 or over? If you are living pay check to pay check and using all your earned income to pay off bills after bills - a debt consolidation loan may be a good way to start fresh. The Federal Trade Commission (FTC) agrees that a debt consolidation loan can be a powerful tool in helping consumers, who are overwhelmed with debt. What is a debt consolidation loan? A debt consolidation loan allows you to aggregate all your debts into one loan. In essense instead of paying Visa, MasterCard, Home Depot, Sears, Macys, student loans, car loans, etc - you will have only one loan to pay off. The obvious advantage of having one creditor instead of 6 or 7, is peace of mind and less stress. You no longer have to juggle payments and worry about missing payment dates. The most important advantage is that you can now make a real dent in your principal loan amount instead of spreading your cash thin and making no progress in paying off all your creditors. It's a fact that once your debts reach a certain threshold, you are doomed to a principal balance that does not decrease but rather increases with each month's bill. You can barely keep up with the accrual of interest payments and fees. If you have bad credit and need a debt consolidation loan, you will need to shop around for lenders, who can offer you a loan with your credit score. A credit score below 600 or slightly above will be considered "less-than-perfect" credit and will therefore raise a flag, with your potential lender, however you can still get a debt consolidation loan by doing the following: 1. Do your research to find 3 or 4 possible bad credit debt consolidation loan lenders. 2. Get debt consolidation loan quotes from these lenders. Be honest on your loan application with your credit score and other aspects of financial history (bankruptcy, chargeoffs, etc), if the application requests that information. 3. Compare the debt consolidation loan programs that each lender can offer. If you have a very poor, low credit score like 450, 480 or 500 - your loan will be a subprime debt consolidation loan. This means that your loan will carry a higher interest rate than a loan offered to someone with a credit score of 700 or above. This is to be expected and it should not deter you for getting the loan. Your overall monthly loan payment will still be lower than, if you were paying 5 or 6 creditors. Depending on your loan program, your monthly loan payments can be reduced by 50% to 75%. Tip! My credit score will drop if multiple lenders check my credit- If you contact multiple mortgage lenders shopping for the best interest rate within a couple of week period they are grouped together into a less damaging inquiry. In essence, they will look like one inquiry.
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