Debt Consolidation Loan With a 520 Credit Score: Is It Possible?

Getting a debt consolidation loan with a credit score of 520 is possible: all you need to do is find an alternative lender that does not have strict credit score requirements. While obtaining such a loan can be the first step toward repaying your debt, remember that bad-credit debt consolidation loans often have high APRs, so careful research and consideration are a must.

Highlights/ Key Takeaways

• Many times, you will be able to get a debt consolidation loan with a 520 credit score from an alternative lender that does not have strict credit score requirements.
• While you may be able to negotiate taking out a bad-credit debt consolidation loan with your regular bank or credit union, online lenders often have more lenient qualification criteria.
• When applying for a bad-credit loan, be prepared for high interest rates and additional fees. You may also be required to post collateral.
• Make sure to conduct thorough research and shop around to find a debt consolidation loan that will improve your financial situation and not drive you into more debt. 

Can I Get a Debt Consolidation Loan with a 520 Credit Score?

You can get a debt consolidation loan with a 520 credit score if you apply with a lender that does not have strict credit score requirements. While a credit score of 520 is considered “bad credit,” don’t despair: many alternative lenders extend loans to borrowers without looking at their credit scores. Instead, they may require collateral or offer higher interest rates to compensate for their risk.

How Debt Consolidation Loans for Bad Credit Work

Debt consolidation involves taking out a single loan to pay off several existing debts, such as credit card bills or other types of loans. As with any other type of loan, borrowers with good credit history have better chances of being approved for a debt consolidation loan and receiving more favorable terms.

That being said, certain lenders do offer debt consolidation loans to applicants with less-than-ideal credit scores. However, it is crucial to keep your eyes open for interest rates and additional costs, which can quickly skyrocket the overall APR of your loan. 

Where to Get a Debt Consolidation Loan with a Low Credit Score

While your current credit union or bank may be willing to overlook your poor credit score and extend a debt consolidation loan, most low-credit applicants turn to online lenders instead. Such lenders often have easier application processes and more flexible eligibility criteria as compared to traditional banks, making them an attractive option for those in a difficult financial situation. 

However, keep in mind that guaranteed debt consolidation loans are often offered by predator debt consolidation companies, - so make sure to read customer reviews before applying.

Certain lenders do offer debt consolidation loans to applicants with less-than-ideal credit scores. However, it is crucial to keep your eyes open for interest rates and additional costs, which can quickly skyrocket the overall APR of your loan. 

Pros and Cons of Getting a Debt Consolidation Loan with a 520 Credit Score

Having multiple loans and credit card balances to pay off can often feel overwhelming, causing you to be late on your payments and sink even further into debt. Getting a debt consolidation loan with bad credit may require some extra research, but it can prove useful in getting you started on your journey toward financial freedom. Let us take a closer look at the pros and cons of debt consolidation with a 520 credit score.

Pros of a Bad-Credit Debt Consolidation Loan

If you find yourself struggling financially, debt consolidation can be a good idea to get you started on the journey toward your debt-free life. Some major benefits of debt consolidation include:

• Can help you achieve financial freedom. Many debt consolidation companies or credit counselors can lead you to financial freedom through debt consolidation programs. You would receive a debt consolidation loan and enter the program for a set number of years. Over the course of the program, you would pay off your loan and develop healthy financial habits to keep you out of debt in the future.
• Makes it easier to track payments. By combining all of your debt into a single loan, you will be able to track all your regular payments with ease. This means that you will be less likely to miss or delay payments, thus avoiding late fees and other penalties.

Cons of a Bad-Credit Debt Consolidation Loan

While it may provide great financial relief, debt consolidation does have some drawbacks. Let us take a closer look at its disadvantages:

• Comes with origination fees. Most personal debt or credit card consolidation loans come with considerable origination fees. However, paying the fees may still be less expensive than juggling multiple individual debts and credit cards, - just make sure to run the numbers beforehand.
• Comes with high interest rates. If a lender is willing to overlook a low credit score, they will likely compensate for their risk by offering higher interest rates. This means that some bad-credit debt consolidation loans won’t improve your financial situation at all.
• Negatively affects the credit score. When you apply for a personal debt consolidation loan, the potential lender will run a credit score check and review your income and employment details. While this may negatively affect your credit score, you should be able to recover it over time.
• Often requires collateral. Larger debt consolidation loans often require posting collateral, such as home equity. This means that your home could be lost to foreclosure if you can no longer afford regular loan payments.
• Has a relatively complex qualification process. The application process for most personal debt consolidation loans is relatively involved and often requires some time to process. Most of the time, you would need a credit score of at least 670 to even qualify for the loan, - but there are several debt consolidation loans for bad credit available if your credit score is only 520.

Best Debt Consolidation Loans with a 520 Credit Score

Some of the best debt consolidation loans with a 520 credit score are offered by the following online lenders:

• Upstart. With a minimum credit score requirement of only 300, Upstart is an excellent option for applicants in search of instant debt consolidation loans for bad credit. The company offers personal loans of up to $50,000, issuing the funds as quickly as within one business day of approval.
• Discover. Discover offers several debt consolidation loans with flexible repayment terms and low fees: with this lender, you won’t have to pay application fees or prepayment penalties.
• OneMain Financial. With a maximum loan amount of $20,000, OneMain Financial is an excellent option for those looking for smaller loans with flexible repayment terms. Keep in mind that OneMain Financial charges relatively high interest rates, with APR ranging from 18.00% to 35.99%.

How to Get a Debt Consolidation Loan with a 520 Credit Score

If you are struggling to get out of debt, learning how to get a debt consolidation loan with bad credit could be a great place to start. Follow these simple steps to find the right financing option for your situation:

• Check your credit score. Most lenders consider applicants’ credit scores when deciding whether to extend a loan and what rates to offer. As a rule of thumb, lower credit scores are associated with higher interest rates, so make sure to check your credit score to get an idea of where you are standing.
• Do your research. You should never accept the first loan you stumble upon. Instead, do your research, shop around, and compare rates and terms from multiple lenders to find the best option for you.
• Consider a secured loan. If you aren’t able to qualify for an unsecured debt consolidation loan, consider applying for a secured one instead. Such loans require some form of collateral, such as your home, a vehicle, or another asset.
• Work on your credit score. If you still can’t find a loan with acceptable terms, you may want to hold off and take a few months to improve your credit score to achieve fair credit or higher. With a higher score, you will instantly have more options to choose from!

Final Word

With enough research, almost anyone can find an alternative lender and get a debt consolidation loan with a credit score of 520. That being said, be careful: such loans often come with high APRs, additional fees, and less-than-ideal terms and conditions. In some situations, it may be more beneficial to spend several months repairing your credit score to open up more opportunities instead.