bad credit debt consolidation loans

Have a low or bad credit score alongside additional debts? The solution may be to take out a debt consolidation loan. However, a consolidation loan may be challenging to acquire with low or bad credit, as you may need a respectable credit score to apply. We look for alternative means to attain a loan despite bad credit regarding consolidation loans.

How a debt consolidation loan can improve your credit score

A debt consolidation loan covers and settles any existing loans on different accounts. Once these loans are settled you will only have one, which will need to be settled. You may have had to pay additional fees and different rates on multiple loans. 

improve credit rating debt consolidation loans

With a low credit score, using a debt consolidation loan will simplify the management of your finances and potentially reduce costs, which will save you money. If you qualify for a debt consolidation loan with a low-interest rate, this will consequentially lower the monthly instalments of your loan. With lower and more affordable monthly instalments each month, you free up funds to potentially save and free yourself of debt sooner. Notably, with only one loan to repay, it will be easier to review your finances and make payments timely; this subsequentially will boost your credit score.

Disadvantages of a low credit rating on your potential loan

With a low credit score, an application for a debt consolidation loan may be complex or subject to higher rates. However, you may attain a debt consolidation loan with a more affordable payment plan. Consequentially, this may entice you to take out additional loans. Acquiring more debt will consequentially keep you in debt for longer and worsen your financial situation.

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Debt consolidation loans for low credit score

Despite a low credit score, it is not impossible to attain a debt consolidation loan in SA. Below are options to consider upon consolidating your debt.

Debt consolidation loans from alternative credit providers

With a low credit score, certain alternative lenders offer loans despite the bad credit. Credit providers, as such, are alternative options as opposed to traditional credit providers such as a bank. In contrast, conventional credit providers tend only to qualify lenders with a respectable credit score. These alternative credit providers will usually be more lenient toward your loan application. To verify your loan, they will evaluate your income and financial situation before approving your loan.

The benefit of applying through alternative credit providers is that you don’t have to offer collateral for such a  loan. However, you may be subjected to higher interest rates and fees with an unsecured loan. This is especially the case regarding smaller loans. Namely, credit providers need to balance the potential lender’s ability to repay the loan. Ideally, your best choice for a loan is through a registered credit provider. Several lenders may not follow or are not regulated through the (NCR) National Credit Regulator. These lenders may very well be loan sharks. It is wise to exercise caution when attaining a loan from predatory lenders due to the high-interest rates.

personal loans and bad credit

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By using potential collateral such as a car or some form of a valued asset. You may secure a loan more quickly. This improves your chances of approval as your credit provider has the assurance of your ability to repay the loan. Should you fail to repay your loan, the asset is repossessed to settle the loan. Such a loan will offer a lower interest rate. However, the risk involved is the potential loss of such an asset.

How much do you need?
*Representative example: Estimated repayments of a loan of R30,000 over 36 months at a maximum interest rate including fees of 27,5% APR would be R1,232.82 per month. Arcadia Finance is an online loan broker and not a lender. Our service is free, and we work with NCR licensed lenders in South Africa. Interest rates charged by lenders can start as low as 20% APR, including an initiation and service fee determined by the lender. The interest rate offered depends on the applicants' credit score and other factors at the lender's discretion.

Loan amount R100 - R250,000. Repayment terms can range from 3 - 72 months. Minimum APR is 5% and maximum APR is 60%.