Online lenders may be a viable option for you if you have bad credit. But before you sign an agreement to consolidate your debt, here’s what you need to know.
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Benefits of consolidated loans
You’re considering an online debt consolidation loan for bad credit. Taking out a consolidation loan can be a smart move if you can get a better interest rate than what you’re paying on current debt.
For one thing, since your debts would all be rolled into one, you’ll only be responsible for a single monthly payment. Also, because most debt consolidation loans have fixed interest rates and established repayment terms, your payment will be the same monthly. On the flip side, monthly payments on credit cards vary.
Strategies to get a debt consolidation loan
Keep in mind that if you’re trying to relieve yourself of debt and think a debt consolidation loan could help, most lenders require a credit score in the mid-600s, a good payment history, and sufficient income.
Every lender has its own requirements, though. That’s why it’s a good idea to check and monitor your credit score and shop around for the best terms and fees.
You may have a leg up seeking an online debt consolidation loan for bad credit. These creditors generally are more apt to approve you than a conventional bank.
Even better, an online lender allows you to compare rates without affecting your credit score. Unlike credit unions or banks, which pull your credit to check eligibility, online lenders only conduct “soft” credit inquiries, which don’t impact your score. That also means that you can submit multiple pre-qualification applications to home in on potential lenders.
Another advantage to online lenders is you can apply for a debt consolidation loan speedily and easily, without tons of documents or the need for an in-person visit.
Know how such lenders operate
You should note that online lenders often charge lofty annual percentage rates (APR) to borrowers with bad credit. There could also be origination fees that could add to financing costs and subtract from loan proceeds. Such fees, which are typically set, are for services associated with loan processing.
When you’re shopping around, it’s also important to determine whether the company in consideration is a direct or third-party lender. If it’s the latter, you could wind up paying additional costs and fees.
Many online lenders require a minimum credit score of between 580 and 600. You can check their websites to see the exact requirements. One lender, OneMain, doesn’t list a specific figure, but it does have a history of dealing with people who have bad and fair credit.
Other online lenders to consider include LendingPoint, Avant, OneMain and Upgrade. In addition to their credit scores requirements, their websites will specify APR ranges and maximum loan amounts offered.
Be wary of lenders that zero in on borrowers with bad credit. They tend to exploit trying financial situations with high fees and interest rates. Before seeking pre-qualification or submitting an application, check online for consumer reviews. It’s also a good idea to check for complaints with the Better Business Bureau.
Finding an online debt consolidation loan for bad credit will take some doing, but you do have options. When shopping, consider fees, interest rates, monthly payments, loan amounts, and borrower requirements. Try to pre-qualify, if you are able, then compare offers with those of other companies to get the ideal rate and terms for your situation.
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