Jessica Rodz August 5, 2023

Are you curious to know if the combination of debt consolidation loans and bad credit will work or not? Multiple resources unveiling diverse information about these loans make this task difficult for you.

A thin line defines the difference between misconception and truth. Acquire knowledge on how these loans can help you being a poor creditor. Soon, your confusion will fade away.

To know the truth, you must collect facts relevant to getting debt consolidation loans for bad credit in the UK and from a direct lender. They are loan providers who maintain a lenient approach when it comes to offering financial help regarding debts to poor credit borrowers like you.

Consolidation is a method you must consider if you are dealing with multiple debts. Here, different pending issues combine to form a single unit payable in the form of a loan. Having a number of debts at a single point already makes you vulnerable.

In this situation, you must validate if the influence of the credit scores is significant for you or not. Borrowers like you come across this confusion oftentimes. There is no sure-shot way to clear this dilemma.

Dive into this blog to find out the reality behind getting loan help to consolidate debts despite having low credit scores.

Evaluate the working procedure of debt consolidation loans

Are these loans obtainable with poor credit? This query has led you to this blog. You will be surprised to know this is the most popular question people have about these loans.

Explore deeper to understand how you can make it to approval despite red flags.

Consider the price perspective

Some lenders agree to offer help to poor creditors. However, you might have some confusion about the interest rate they would charge. Usually, interest rates go up because of low credit scores.

The increased interest rate compensates for the risk factor involved in lending money to someone with a history of pending payments. With online lenders, you do not have to worry too much about rates.

They follow a practical pricing structure which relies on the ongoing financing condition of the borrower. The best thing about choosing these loans is that they help reduce the monthly interest rate you must pay.

To get an idea about the rate of interest you have to bear, refer to this example.

You want to borrow £ 5000. After getting a free quote from the lender, you found out that the total amount of interest you will have to pay is £ 489.4. It means that the overall amount that you will have to pay back is £ 5489.4.

Significance of affordability

Getting bad credit loans on guaranteed approval from direct lenders in the UK is not hard as it might seem. They are not banks or credit unions with stringent lending rules.

With them, even poor scores are not a big concern. Instead of emphasising credit history, they pay attention to your present financial potential. This aspect defines your affordability.

Your current transactions will prove how good you are at handling finances now. If you pay bills on time, this can be a good sign. The lender is likely to make sure about loan repayment.

There will be no confusion regarding loan payments when your affordability is convincing. The lender will expect to get the loan amount with interest within the duration mentioned at the time of approval.

This single factor can help you get through approval without any exertion. You can get access to debt consolidation loans even when your credit scores are not perfect. On the other hand, with average affordability, you cannot convince the lender of loans.

Involvement of a guarantor

You might assume that producing a guarantor becomes compulsory when your credit scores are not stellar. On top of this, you are looking for loans that can help you eliminate the huge pile of debts from your life.

You can win this borrowing game by convincing the lender of your affordability. They will not need any other form of assurance when this side of your financial stature is so strong.

The guarantor factor needs to be involved when your credit scores are beyond bad. In such cases, getting a guarantor or collateral becomes mandatory. Otherwise, you will only have to take a little stress about getting approval when you have none to support loan payments on your behalf.

Pros and cons of debt consolidation loans

The best way to get clarity on how these loans are a helpful resource in your situation is by evaluating their advantages and disadvantages.

Here are the benefits:

  • Managing debts become easy
  • You have to take care of a single payment
  • Interest rates are clubbed together
  • A clear understanding of how much debt is left
  • Mapping out payments is easy
  • Keep track of the payments
  • The process of downsizing debts becomes faster
  • Obtainable at comparatively economical rates
  • Enjoy the liberal approach of online lenders

The advantages can convince you about getting these loans without any second thought. The biggest reason for your interest would be the lender’s acceptance of your application regardless of your credit stature.

Now, you are aware of the good things about these loans. Looking at the downsides makes sense as it helps you in making a rational decision.

  • Late repayments can become unbearable for you
  • Late charges and penalties will accompany
  • Delayed payments will further blemish your poor credit history
  • Future opportunities will fade away for you
  • Losing an asset becomes inevitable if you opt for secured loans

Although the list of disadvantages is not so long, ignoring them would be foolish. Strategise for how you can pay back loans before the term ends. Keep the consequences in mind.

The bottom line

As a borrower, you must acknowledge whether getting a loan to bid adieu to debts, even when your credit scores are not great, is legitimate. This blog must have been able to help you ideate how these loans are beneficial for your situation. Negotiating with lenders is a good practice ahead of applying for loans.