Yes, the short answer is probably. But it all depends on exactly what you mean by getting your debt consolidated. If you mean a debt consolidation loan, that might be possible but your options will be more limited as your score is lower.
What Is Considered Bad Credit?
If you’re using a FICO score then generally scores below 580 are considered poor, scores between 581 to 670 are fair, and then 670 to 740 are good. So if your credit score is fair you may be able to get a debt consolidation loan.
What Are Your Debt Consolidation Loan Options?
There are a few options and each comes with their own drawbacks and vary from a straightforward debt consolidation program.
Local Credit Unions
You could start with a local credit union, which may be the best chance since they’re smaller and they try to take care of members more so than a traditional bank. Traditional banks have to often meet Wall Street type demands for lending standards so they are more strict than a local credit union. But if you aren’t able to get credit from a bank or a credit union then the next place that you want to go to is an online lender.
Online lenders oftentimes don’t have Wall Street type demands as well and can lend out money to lower credit score consumers and actually are in the business of personal lending primarily. However, they may have different criteria for considering the range of FICO scores for poor to good credit rating.
So if you are looking for a debt consolidation loan from an online lender and your credit score drops below into the 640-650 range they may classify this as poor credit and then your options really start to get limited. Then for below 600 credit scores typically your only option is what is referred and known as a payday lender.
Payday lenders have very high interest rates and typically it’s not recommended at all because you make the problem much worse due to getting stuck in a cycle of paying higher interest and never reaching the point of paying your initial balance down.
Through payday lenders typically they will charge interest rates above 36% and oftentimes they can be actually be 100-300% while demanding to be repaid paid in a short period of time. So it makes a problem a lot worse for you.
Most people that choose the payday loan route never get out of debt. It really is intended for a very small sector of people that know they are about to have a big guaranteed paycheck that’s going to basically be able to repay that payday loan off right away. It’s not meant to totally consolidate a large debt amount.
What Is The Best Debt Consolidation Option?
The lending options above are all in contrast to a debt consolidation loan where the goal is to get your higher interest credit card rates (which according to the Federal Reserve in 2018 is at about 15-20%) set to a lower interest rate and combined all into one lower loan.
So if you’re aren’t able to consolidate your debt via a loan as outlined above then you can try debt consolidation alternatives.
Debt Management Plan and Debt Settlement Plan
These debt consolidation alternatives are programs such as a debt management plan or a debt settlement plan where we negotiate with your creditors.
These programs can consolidate your debt because they typically have one monthly program payment and usually the payments are lower than the debt consolidation loan or the credit card payments, so you get payment relief. You also get debt relief because with a debt settlement plan you’re going to be negotiating on the balance itself. This is key to getting out of the high interest debt cycle.