How to Consolidate Bills With a Very Low Credit Score

Health issues, job loss and other financial struggles can leave consumers with very low credit scores. A low credit score makes the cost of financing expensive. Consumers who have large amounts of debt may reduce monthly payments through debt consolidation loans. However, with a low credit score, these consumers need to know where to find these loans.

Instructions

1

Assemble all current bills. Make a list of each debt obligation balance and interest rate. As scary as it may seem, tally up the total debt obligations. Lenders will need this number when applying for loans.

2

Apply for a secured loan. Lenders are more likely to approve a secured loan because its less risky. For example, lets say a borrower owes $2,000 on a vehicle and the market value of the vehicle is $10,000. Apply for a loan for the equity in the vehicle (which is $8,000).

3

Apply for a personal loan. Personal loans are available at banks, savings and loans and credit unions. People with poor credit should check out credit unions. Credit unions usually make local lending decisions. This means the branch manager reviews the applicants entire situation (instead of just the numbers). For example, lets say a borrower suffered from serious medical illness, preventing her from working. However, she recovered and has been paying bills consistently for the past 12 months. A credit union is more likely to consider these details.

4

Consider refinancing once the credit score has improved. Most lenders offer risk based lending. With a low credit score, consumers get stuck with high interest rates. However, after making timely payments and paying down debt, the credit score will rise. Talk with the existing lender about lowering the interest rate or refinancing to secure a better interest rate.