Are you struggling with mounting debts and a steadily dwindling credit score? You’re not alone. In 2021-2022, Australian household debt grew by over 7%, and it’s showing no signs of slowing down. The good news is that there are solutions, the bad news is that some of them require a good credit score, leaving you in somewhat of a catch-22.
Debt consolidation is a prime example. It swaps multiple unmanageable debts for a single loan, putting you back in the driving seat. Many lenders require a good credit score before they’ll give you a debt consolidation loan, but there are alternatives, including bad credit personal loans. In this guide, we’ll look at the best of them and discuss your other options.
A debt consolidation loan is so named because it “consolidates” multiple obligations into a single manageable loan. It provides several benefits:
There are two main types of consolidation loans in Australia: secured and unsecured. The former is secured against an asset while the latter is not. Bad credit personal loans can also be used for debt consolidation if you have a poor credit score.
Your credit score is a measurement of your credit reliability. It considers your payment history, recent credit applications, credit utilisation, and other aspects and creates a score that lenders can view to check eligibility.
If you have several loans and a poor credit score, many lenders won’t give you a bad credit personal loan. In such cases, you can either spend some time repairing your credit score or look for a bad credit loan.
The following tips will help you to improve your credit score and reduce your debt, giving you a better chance of securing a debt consolidation loan:
Some companies charge you for a process known as credit repair, which entails fixing credit report errors and negotiating with consumers. It can be a useful service, but it comes at a cost and if you have the time and will, you can do the work yourself.
Bad credit personal loans are loans targeted toward borrowers with suboptimal credit scores. They can be used for vehicle purchases, home renovations, and even debt consolidation. As long as you choose a reputable and competitive lender, the amount should be high enough and the rates low enough for consolidation purposes.
At Ume Loans, for instance, you can get a bad credit loan worth up to $25,000 following a quick online application process. We’ll ask you some basic questions, check your eligibility, and provide you with an answer. We don’t judge as harshly as other lenders as we believe that everyone deserves a second chance, especially when they’re actively seeking to improve their financial situation.
When looking for bad credit personal loans elsewhere, keep the following in mind:
Debt consolidation isn’t the only way to manage your debts when they are getting out of hand:
Debt consolidation loans are a simple and effective way to get your finances in check. They can be tricky if your credit score is low, but there are still options available, including bad credit personal loans.
These loans will clear your debts, relieve your financial stress, and give you a single loan—one repayment, one interest rate, and one set of terms. It could be all that you need to turn your financial situation around and get you back on track.
Dan, a former Australian jetski champion is passionate about helping various organisations and has held various volunteer and executive positions with several non profit organisations in Australia.