Debt Consolidation: What Is It?
Debt consolidation is the process of combining multiple existing debts, including credit card debt, loans and other types of borrowing, into a single, new loan product. It streamlines your multiple bills into a single monthly payment, lowers the interest rate on your debt, and reduces your monthly payments, in some cases.
While consolidating debt may sound like a good idea, it may not be for everyone. Since everyone's financial situation is different, it's best to understand the advantages and risks associated with debt consolidation before taking action. Also, make sure you consolidate your debt with a trusted and licensed financial institution.
Is It Possible to Get Debt Consolidation Loans with Bad Credit in Australia?
Yes, it is possible to get a debt consolidation loan in Australia, even if you have a bad credit score. While traditional lenders such as banks may be reluctant to grant you a loan to consolidate your debt when you have bad credit, there are lenders in Australia that specialise in debt consolidation loans for bad credit.
These lenders usually consider more than just your credit score. If you meet other requirements and can provide proof of a steady income, they will likely be willing to provide you with a debt consolidation loan for bad credit. However, the interest rates on these loans are usually higher than those for borrowers with good credit.
Do I Qualify for Debt Consolidation Loans with Bad Credit?
You may qualify for debt consolidation loans with bad credit if you meet the necessary eligibility criteria. Most lenders will expect the following:
- You should be at least 18 years old.
- You must be an Australian citizen or have proof of permanent residency.
- You should have proof of stable income.
Remember that the actual requirements and procedure differ depending on the approached lender.
What Are the Benefits of Getting Bad Credit Debt Consolidation Loans in Australia?
Getting debt consolidation loans for bad credit provides the following benefits:
Simplify Finances
Borrowers end up paying a single instalment over a certain period rather than several monthly repayments. Eventually, this reduces stress, saves time, lowers fees and interest, and simplifies debt management.
Fixed Repayment
Debt consolidation loans have predictable repayments with a fixed term and interest rate, which facilitates planning and budgeting for borrowers. They just need to focus on committing to a payback amount they can afford to repay.
Improve Credit
This is because consolidating your debts into a new loan makes it easier for you to make payments on time, and payment history is the most important factor in calculating your credit score. Over time, your credit score may improve.
What to Consider Before Applying for Bad Credit Debt Consolidation Loans in Australia?
These things need to be considered before applying for bad credit debt consolidation loans in Australia:
1. Don't approach lenders making unrealistic promises. You should avoid companies that:
- aren't licensed
- rushes through the deal
- say nothing about repayments
- ask you to sign on blank documents
- offer a business loan when you require a basic consumer loan
- won't provide written confirmation of the interest rate and fees until you sign
2. Compare the interest rates, fees and other charges of a debt consolidation loan with your existing loan. Make sure the new loan is cheaper than your current loan and that the new repayments are within your budget.
3. Avoid putting assets, such as a car or a home, as collateral. This is because you run the risk of losing them if you can't fully repay the money you borrow. If you want to use your property as collateral, try to change your new loan to one with better terms and cheaper fees as well as interest.
How to Take out Bad Credit Consolidation Loans with Guaranteed Approval
When it comes to getting bad credit consolidation loans with guaranteed approval, keep in mind that there's no 100% guaranteed approval. Nowadays, most lenders use the term "guaranteed approval" to attract borrowers. And some reliable lenders do offer bad credit loans to consolidate your debts with high approval rates.
As a reputable broker, WeLoans partners with plenty of these reliable lenders. You can follow these steps to apply for bad credit consolidation loans with high approval rates through WeLoans:
- Fill out the online application form.
- Receive several offers from various reliable lenders.
- Choose a quote meeting your requirements and sign the agreement.
- Receive money as soon as one business day.
FAQs
How Does Having Debt Lead to a Bad Credit Score?
Your credit score will depend on how well you have done in the past in paying off your debts. If you have defaulted on loans in the past, or have a mountain of debt, your credit score may be low.
How Much Will I Save by Getting Loans to Pay off Loans?
You may save a lot of money on interest and admin expenses by consolidating all your debt into a single, manageable loan. Depending on the terms of your existing loan, you may even be able to save hundreds or even thousands of dollars over the term of your loan.
Will Getting Bad Credit Debt Consolidation Loans Hurt My Credit?
Obtaining a consolidation loan for bad credit might lower your credit score in the short term. However, your credit score may rise if you repay the loan on time over a period of time without accruing any more debt or missing repayments elsewhere.