How to Consolidate Debt with Bad Credit: 6 Steps
Wondering how to consolidate debt with bad credit? Finding a suitable loan can be challenging when your credit score has taken a hit and you have multiple debts to pay off. Debt consolidation loans can simplify repayments by rolling several debts into a single, manageable payment. Some lenders even offer bad credit loans for debt consolidation.
Whether you need to consolidate credit card debt or small loans, follow these six steps to find a lender that works for you.
Overview:
- Review your current debts and financial situation
- Check your credit score
- Research and compare debt consolidation lenders
- Check eligibility requirements before applying
- Apply online or in person
- Finalise the loan and begin repayments
6 steps for consolidating debt with bad credit
1. Review your current debts and financial situation
Start by assessing your outstanding debts, including balances, interest rates, and monthly payments. Understanding your total debt will help you determine how much you need to borrow and whether consolidation is the best option for you.
2. Check your credit score
Your credit score influences your loan eligibility and depending on the lender it can also impact the interest rates you’ll be offered. In Australia, you can check your credit score for free through agencies like Equifax, Experian, and Illion. If your score is low, you might need to look at bad credit lenders, secured loans, or lenders with alternative assessment processes.
3. Research and compare debt consolidation lenders
Not all lenders offer debt consolidation loans, especially for borrowers with bad credit. Some lenders specialise in bad credit loans, and others offer secured loans where you provide collateral (such as a car) to improve approval chances.
Types of lenders to consider:
- Alternative lenders who assess applications based on broader financial factors, not just credit scores.
- Lenders offering secured loans, where you use an asset as security.
- Small amount loan providers, who may be able to approve higher risk borrowers.
4. Check eligibility requirements before applying
To protect your credit score, always review a lender’s eligibility criteria before applying. Applying for multiple loans in a short period can result in hard credit enquiries, further lowering your score.
If you are unsure which loan suits you, you could consult a personal loan broker who can assess your financial situation and recommend suitable options.
5. Apply online or in person
Once you’ve selected a lender, complete the application process online or in person. The lender will review your application, verify your income, and check that the loan amount will cover your existing debts. Approval depends on whether you can reasonably afford the repayments as well as the lender’s specific eligibility and lending requirements.
6. Finalise the loan and begin repayments
Once approved for a bad credit debt consolidation loan:
- Carefully review the loan agreement before signing. Ensure you understand the interest rate, fees, repayment terms, and conditions.
- The lender will pay off your existing debts, consolidating them into one loan.
- You will then start making repayments on your new consolidated loan, focusing on a single, structured payment instead of managing multiple due dates.
Make sure you understand how much you will be paying before you sign any loan agreement. Debt consolidation loans can make it easier to manage payments but they could result in you paying more interest or take longer to pay off. Comparison rates can be a helpful tool for understanding the true cost of a loan.
Who offers bad credit loans for debt consolidation in Australia?
If you have bad credit, here are some lenders that may offer debt consolidation loans:
- Red Tree Finance
- Rapid Finance
- Fox Finance Group
- Fundo
- Money3
- Fair Go Finance
- Nimble
- Swoosh Finance
Each lender has different approval criteria, loan amounts, and interest rates. Always compare your options and read the terms carefully before applying.
Top 5 tips for getting approved with bad credit
- Check eligibility before applying to avoid unnecessary hard credit enquiries.
- Consider a secured loan to increase your chances of approval.
- Improve your credit score by paying existing bills on time and reducing outstanding debts.
- Limit new credit applications to show lenders you are not financially overextended.
- Work with a loan broker to identify the best options for your situation.
For more information: How to Get a Loan With Bad Credit
Is debt consolidation right for you?
Debt consolidation can be beneficial in simplifying repayments and potentially lowering interest rates, but it’s not the right solution for everyone. For example, in some cases, you may end up paying more in interest over time. Always consider your personal and financial situation carefully before applying.
For personalised guidance, you can access free financial advice from the National Debt Helpline or seek assistance from a financial expert or loan broker.
Consolidate your debts into one simple payment with Swoosh Finance
Swoosh Finance offers small loans up to $5,000, even for borrowers with bad credit. If you’re struggling with multiple repayments, consolidating your debts into one fixed payment can make budgeting easier.
Apply Now for a debt consolidation loan with Swoosh Finance and simplify your repayments today.
