How to Get a Debt Consolidation Loan With Bad Credit

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If you have been struggling to manage your personal finances for sometime now, mainly in terms of managing your credit utilization, a debt consolidation loan might be an option worth trying out. However, getting a debt consolidation loan with a low credit score is tougher than it appears on the surface, and thus, in today’s article, we will discuss everything you need to know about debt consolidation loans in India and how you can get one even with a bad credit score.

What Is a Debt Consolidation Loan?

One of the first and most important aspects we need to understand is the meaning of a debt consolidation loan.

In simple terms, a debt consolidation loan can be understood as a new loan best debt relief company or line of credit you avail to meet your ongoing credit obligations. For example, if you have been paying 5 separate EMIs every month of varying amounts, then a debt consolidation loan in this regard will help you pay off all these 5 EMIs at once and then continue with just one payment every month.

While the long term impact of a debt consolidation loan on the credit score of a borrower is yet to be completely understood, many have reported that the proper debt consolidation tool can not only help in better management of personal finances but also ensure that you establish a discipline of regularly meeting your credit obligations on time.

Why Choose a Debt Consolidation Loan?

Now that you have a clear understanding of the basics of a debt consolidation loan, the obvious question remains as to why borrowers will choose a debt consolidation option over other traditional options available in the market.

Well, the simple answer in this context will be to seamlessly streamline their monthly payment process. When you are managing five separate EMIs every month, keeping track of them consistently and ensuring that accurate and timely payments are made to each creditor is a mammoth task in itself, and thus borrowers often choose a debt consolidation option to save time over money in the long run.

In India, borrowers typically rely on personal loans, credit cards, and conventional debt management plans to avail this opportunity; however, typically, these are reserved for those with high credit scores. Read more: best debt relief company.

How Can You Consolidate Your Debt With a Bad Credit Score?

No matter which lender you approach in India, the central pillar of their assessment criteria will always be to check your credit score. A numerical value assigned to you by the credit rating agency, your credit score takes into account four main factors to accurately calculate your credit score and, in the long run, help lenders understand your creditworthiness.

In India, the two main credit rating agencies CIBIL and Experian, take into account the following four factors:

The number of loans you have taken in the past
The total amount of credit you have used in the past
The total number of timely payments you have made
The total number of payments you have missed

To calculate your credit score on a scale of 900. However, most traditional lenders, especially established financial institutions, require the borrower to have a minimum credit score of 750 to apply for the debt consolidation package, and thus in most cases, it becomes difficult for borrowers to avail of this service.

On the other hand, top NBFCs or non-banking financial institutions such as Money View often extend debt consolidation loans to even borrowers who have a low credit rating (CIBIL 600 and Experian 650).

How to Avail a Debt Consolidation Loan?

The process of availing a debt consolidation loan from an NBFC like Money View is fairly straightforward and simple. Mentioned below are the most significant steps you will need to follow:

Go on to your browser, either on your laptop or smartphone, and search for the key phrase “debt consolidation with the bad credit.”
You will be presented with a list of options. Go through each of them and make sure to note down both the total amount of consolidation as well as the interest rate applicable.
Choose a lender who meets your needs and requirements.
Visit their official website or download their smartphone application to get the process started.
Initiate the application process by first creating an account with the lender via your mobile number and email address.
Once done, share your eKYC information, such as Aadhar Card, PAN Card, etc., with the lender.
Proceed to the next step and share your income information. Please note that if you are a salaried individual, you will need to share your latest bank statements (upto 6 months) along with your salary slip. On the other hand, if you are a self-employed professional, you will need to present your income certificate or latest ITR filing along with the last 6 months bank statements for the loan.
Once all the documents are uploaded, the lender will assess your application, and if approved, you will receive the money in your bank account within the next 48 business hours.

Loan Eligibility Criteria

Although the eligibility criteria for debt consolidation loans tend to vary between lenders, some of the most significant constituents remain constant.

You need to be above the legal age of 18 or 23.
You need to be a permanent resident of India for two or more years.
You need to be a salaried employee with a consistent employment history for at least one year.
You need to be a self-employed professional with a consistent income history of at least two years.
You need to have your KYC documentation present and properly linked with one another.
You need to have a credit score of a minimum of 650 and 750 on the scale of 900, consecutively on the CIBIL and Experian ratings.

Conclusion:

Taking a personal loan for debt consolidation might be a good option for you if you are trying to keep track of multiple payments in a month and are looking for an option, which will consolidate all of them into a single payment.

However, you need to ensure that you carefully weigh your options before proceeding on this track, as here, too, you need to maintain a discipline of timely payments to keep improving your credit score.