Guaranteed Debt Consolidation Loans Despite Bad Credit?

Debt consolidation can be a promising solution for many different bad credit situations. Debt consolidation can help if you are juggling multiple debts, want to streamline repayments, and potentially reduce interest rates. All the above!

However, for those with bad credit -- and if you had good credit, you probably wouldn't be asking this question in the first place, right? -- accessing guaranteed debt consolidation loans may seem like an elusive solution. 

So let's jump into the landscape of guaranteed debt consolidation loans for individuals with bad credit and understand the options and risks associated with them.

Navigating Guaranteed Debt Consolidation Loans with Bad Credit: Understanding Options and Risks - Table of Contents

Looking for Guaranteed Debt Consolidation Loans with Bad Credit?

You may be in a similar situation to the Reddit user, u/wr3nno, below:

I am wondering if anyone here has had experience with debt consolidation loans? I have really bad credit (low 500s) because when I was younger I made some poor decisions. I feel that I am running out of options. I’ve thought about debt relief programs but those take so long to go into effect, if my creditors even agree to settle. It would make me feel better if I am able to make the payments right away and just pay off the loan. For someone with horrible credit, are there any companies I can go through to actually get a consolidation loan?

Or you may have heard some horror stories about bad credit debt consolidation loans, like the Reddit user below:

I am in the US. In my state (Georgia) there is a high-risk lender called OneMain financial. They offered me a consolidation loan at 35.99%. Though the interest rate seems usuriously high, it’s only about 6 % higher than my credit cards were, and paying it back over the term of 84 months gives me a payment I don’t have to sweat, and it’s raising my scores appropriately. I’m also retiring the credit card debt and a much faster rate than I would had i paid the minimum.

So how do you avoid these bad options when you have bad credit?

The Promise of Guaranteed Debt Consolidation Loans

Watch out for all the desperation marketing! For individuals with bad credit scores, guaranteed debt consolidation loans are often marketed as a lifeline—a chance to consolidate various debts into a single, manageable payment with the assurance of approval regardless of credit history. 

These loans aim to combine multiple debts, such as credit card bills, medical expenses, or personal loans, into one loan with a fixed interest rate and structured repayment plan. That's great! 

... IF that's what you need. If not, you may be accepting unnecessary disadvantages because your loan is tailored to your situation. 

Alternatives to Loans - What to do if you have been denied a Debt Consolidation Loan? 

Don't worry! There are resources below for Guaranteed Debt Consolidation Loans even with bad credit, but I thought you might like some, potentially far better, alternatives, too ...

Debt consolidation loans are an OPTION, a legitimate option, but thankfully, not the only option. Many of those loans have super high interest rates. That's assuming you even get approved for one. I got denied by ONE Main financial and others.

You have other options. They may not be sexy, but they WORK. Here is a whole article I have written on alternatives to debt consolidation loans:

Bonus! The following all cost significantly less $$$ and will help you get out of the hole of debt. 

Alternative Option #1: Start Saving Money & Negotiate with Your Creditors Yourself

Once you save a few grand, you can call each individual creditor and offer a settlement. The amount they accept is based on many factors including how persuasive you are, how long they have been trying to collect the debt, etc. 

For example, if you have owed the debt for a while, a collection agency may settle for a smaller percentage. That's just one example but there are many others. 

If one collection agency declines your offer, you can try the next creditor and the next until one accepts. 

If they do accept, request proof in writing that they will stop reporting the debt to the credit bureaus upon receipt of your payment. This is a Settlement Agreement. An email acknowledgement from a legitimate representative of the company is fine. 

You should also request written confirmation from them showing that the debt is paid. 

Make sure to KEEP the written confirmation in case someone tries to collect on that debt again.

Over time, your credit scores will increase. You can use those higher scores to get a better rate on a personal loan/debt consolidation loan, qualify for better credit cards, etc.

Alternative Option #2: SELF Lender

Another option is SELF lender. They will help you build your credit and qualify for a credit card as well. There are many reviews of SELF online. Some people report seeing an improvement to their credit score after just 2 months.

Self is an example of a credit-builder loan. Options like Self offer consumers a chance to build credit — or rebuild credit — without requiring money upfront. You could try a secured credit card, but you typically have to have money for the deposit. 

With a credit-builder loan, the amount you borrow doesn't come to you right away. Instead, your payments are held in a certificate of deposit, which is insured by the Federal Deposit Insurance Corp. Once you've made all the payments, the money is released to you.

Basically, what they do is they will give you a loan (you choose the amount of I believe $100, $500 or $1000). The loan is paid back over a 6, 12, or 24 month period depending on the size of the loan. The proceeds of the loan are placed into a CD account EARNING you interest. The CD rate is low because interest rates are low. Some as low as 0.10%. The loan rate is 12%

Here is one user's experience:

I'm making payments of $49 per month for a year. At that time, my loan will be paid in full AND the CD will unlock so the funds will be returned to me. I will then have improved credit history which will allow me to get a lower rate personal loan to consolidate my debts.

After 3 months of consecutive on time payments, SELF will offer you a secured credit card as well.

Options Available for Bad Credit Individuals

While "guaranteed" loans are rare, there are options to explore:

• The "Take out a Second Mortgage on the House" Option ... Secured Loans: Some lenders may offer secured debt consolidation loans, requiring collateral (such as a car or home equity) to mitigate the risk of lending to someone with bad credit. These loans might offer better terms but carry the risk of losing the asset if payments are missed.
• Cosigned Loans: Make use of your personal network! It may *seem* really embarrassing, but your humility could really pay off. Having a cosigner with good credit can increase the likelihood of loan approval. The cosigner acts as a guarantor, sharing the responsibility for repayment and providing reassurance to the lender.
• Debt Management Programs: Nonprofit credit counseling agencies offer debt management programs that consolidate debts without a loan. They negotiate with creditors for lower interest rates or payments, aiding in debt repayment without taking on new loans.
• SELF and other Credit-Builder Loans: See above ... these can be really good options.  

Risks and Fine Print to Consider

While the prospect of guaranteed debt consolidation loans may seem appealing, several risks and caveats demand attention:

• High Interest Rates: Watch out that you don't make matters far worse! Lenders may charge exorbitant interest rates for individuals with bad credit, potentially leading to higher overall costs and making repayment more challenging.
• Predatory Lending Practices: Just because there's a logo on some stationary, doesn't mean the loan company is operating legally. Some lenders exploit individuals with bad credit, trapping them in debt cycles with hidden fees, excessive rates, or unfavorable terms. Vigilance is crucial when considering such offers.
• Negative Impact on Credit Score: Taking out a new loan or applying for multiple loans can temporarily lower credit scores due to hard inquiries. Additionally, missed payments on a consolidation loan can further damage credit.

Just, please, tread carefully with high-interest rate debt consolidation loans. Ask your family and friends for help first. 

Making Informed Decisions

Before pursuing a guaranteed debt consolidation loan with bad credit, consider the following steps:

• Thorough Research: Make yourself an Excel spreadsheet, including all the options you have looked at, plus any communication you have made with the company, including the name and ID number of anybody you speak with. Explore various lenders, their terms, and reviews to identify reputable options. Avoid lenders with predatory practices or excessive fees.
• What to Watch for in the Fine Print: Scrutinize the loan terms, including interest rates (what is the actual interest rate?), repayment periods and penalties, and, of course, any hidden charges. Ensure the terms align with your financial situation and goals.
• Seeking Professional Advice: Consult financial advisors or credit counselors or this article to explore alternatives, understand implications, and assess the viability of debt consolidation.

My Final Thoughts on So-Called "Guaranteed Debt Consolidation Loans"

Guaranteed debt consolidation loans for individuals with bad credit are a mixed bag. In my experience, they present both opportunities and risks. 

They may truly offer debt consolidation and simplified payments, but you still need careful consideration, research, and an understanding of the associated risks before committing to such loans.

Exploring alternative options and seeking professional guidance can aid in making informed financial decisions tailored to your unique circumstances.