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Can I consolidate debt using a bank if I have a bad credit rating?
It is highly unlikely that you will be able to consolidate debt using a bank if you have a bad credit rating. However, there may be better options out there for you, so it is important that you look around at several lending institutions before making your decision.
If you have found yourself in a financial tight spot; when your payments do not seem to be making a dent on the balance; when you have so many people to pay each month that you can’t seem to keep track of them all; or when you feel completely overwhelmed by your debts, then debt consolidation may be the perfect option for you.
A lender may deny you for the loan or give you a very high interest rate, even though the loan is designed to assist you get out of debt and hopefully put you on the path to raising your credit score. You may be deemed too risky to take a chance on.
An alternative that is potentially available is that if you have a considerable amount of equity in your home, you may be able to organize a refinancing loan to pay out your high interest debts by using the equity in your home as security.
Alternatively if the reason that you are looking for a debt consolidation loan is that you are unable to pay your debts as they fall due (i.e. you are insolvent), your best option may be to contact a debt relief organisation.
These organizations specialize in debt agreements, financial restructuring and debt consolidation. However if you have bad credit and do not have a significant amount of equity in your home ( > 30%) you may have to consider a debt agreement – which is a legally binding agreement between you and your creditors that allows you to repay only what you can afford.
This usually means that the overall amount of your debt will decrease. However your will be unable to borrow money during the debt agreement period (3-5) years, the debt agreement will appear on your credit file for 7 years and you will have a permanent listing in the NPII – National Personal Insolvency Index.
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