A debt consolidation loan is a personal loan that is used to consolidate 2 or more debts into one loan, meaning that you only have one larger loan to repay and keep track of. The benefits of consolidating debt, be it from credit cards, or existing loans are that
- Your monthly repayment amount can be reduced
- You are less likely to miss payments given you only have one loan to focus on
Virtually all lenders have debt consolidation loans. If, however, you have bad credit, many prime lenders (such as banks) will not consider your application. Don’t worry. There are other lenders in Australia who can lend to people with bad credit. Here are 3 important steps on how to get a debt consolidation loan with bad credit.
1. Know what your bad credit is
Firstly, you should obtain a copy of your credit report to know exactly what is listed. You can do this for free, but be prepared for it to take up to 10 days. You can obtain a free copy from Equifax. Determine if you have any of the following:
- Credit defaults
- Excessive enquiries
- Multiple credit files
With this information, you can now search for bad credit lenders and see which ones are willing to lend to your particular level of bad credit. Do not just randomly apply to many lenders, as this will create further enquiries on your credit report, which most lenders see negatively.
2. Understand your exact debt position
You need to write down all of your debts and determine which loans/credit cards etc. you want to consolidate into one loan. Make sure you understand which ones are unsecured and which are secured. You also need to make sure if they have any penalty fees for paying them out early. It’s best you call the lender to confirm this, and if possible, get it in writing.
3. Speak to the lender first
You are far better off speaking to a lending consultant about your situation before you apply. They will be able to give you valuable information about your situation and will either provide assistance with your application or advise you are better to try another lender.
Debt consolidation loans for people with bad credit are available; in fact at Fair Go Finance we regularly assist clients in this situation. Find out more about our debt consolidation loans or alternatively, contact us.