Home FINANCE You Don’t Need Good Credit to Consolidate Your Debt 

You Don’t Need Good Credit to Consolidate Your Debt 

by Shaista

Debt consolidation loans offer a way for people to pay off multiple debts. 

When a consumer is approved for a debt consolidation loan, the lender—a credit union, bank, or finance company—combines the consumer’s multiple debts into one. The consumer then pays off these debts with one monthly loan payment at a set interest rate. 

Debt consolidation loans are a form of debt refinancing, and the purpose of these loans is to streamline the debt repayment process. Rather than paying off multiple loans each month at different interest rates, when a borrower takes out a debt consolidation loan, they only pay off one loan each month at a set interest rate. 

In most cases, debt consolidation loans cover only high-interest, unsecured debts.

To determine whether a debt consolidation loan might help you, it’s important to calculate whether the debt consolidation loan will have a lower interest rate than the average interest rate you’re already paying on your unsecured debts. 

If so, the next step is to figure out how to get a debt consolidation loan

If not, there are other ways to consolidate debt. 

Qualifying for a Debt Consolidation Loan

To qualify for a debt consolidation loan, you typically need to have good credit. 

If you’re not sure whether you have good credit, your bank should be able to tell you. 

If you don’t have good credit and would like to improve it, there are quite a few things you can do. 

You can take little steps like paying your bills on time, and when you can’t, paying at least the minimum monthly payment. It’s also important to never exceed your credit limit, and limit the number of credit checks made by lenders. 

If you don’t have good credit and can’t qualify for a debt consolidation loan, or if your application has been rejected, other debt consolidation plans are available. 

One alternative debt consolidation plan is a debt consolidation program (DCP). 

Debt Consolidation Programs

DCPs also offer debt relief by consolidating a consumer’s debt into one monthly payment, which the consumer pays at a set interest rate. 

However, DCPs don’t offer loans. Instead, when you enroll in a DCP, you work with a certified Credit Counsellor who negotiates with your creditors to stop or significantly reduce the interest that you’re paying on your unsecured debts. They will also combine them into one lower monthly payment you can afford. 

Certified Credit Counsellors

You don’t work with a certified Credit Counsellor when you take out a debt consolidation loan; you only work with one when you enroll in a DCP, typically through a non-profit credit counselling agency.  

In addition to working on your behalf to streamline your debt payment process, certified Credit Counsellors at non-profit credit counselling agencies offer you financial advice, like how to identify your personal financial goals, what steps you may take to achieve them, and how to avoid common mistakes people make when trying to pay off their debt. 

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