You might have bad credit and/or you’re unemployed but you see the advantages of a debt consolidation loan. The question is: Would you even qualify?
For most of us, keeping up with bills and repayments for debts is hard. Throw in something unplanned like losing your job, maintaining a household budget then becomes very much challenging.
We’re going to share some reasons why you might actually get approved for a debt consolidation loan when you’re unemployed or have bad credit.
Let’s have a look now.
Debt consolidation when unemployed
Waiting for a job offer to come available is frustrating because you’ve got bills overdue. It’s often a good idea to use debt consolidation to reduce monthly repayments, but can you get one when you’re unemployed?
In most cases, you can get approved for a debt consolidation loan if your credit history is bad and you don’t have a job. Here’s how:
- People who own a house and have equity generally have a good chance of getting approved. This is because the bank can take the house away if you don’t meet your repayments.
- You can use someone else as a guarantor. Do you know someone who has a high income? They might be able to take over responsibility for you, but you’ll still have to pay the debt.
- Some banks like when you demonstrate your employment history. Some banks would be willing to give you a loan when you can show that in the past, you’ve earned a great income with a solid job. Maybe you’re in an industry that’s seasonal and you’re waiting for the next gig to become available.
- Look at your existing assets. Maybe your house already has equity and if that’s the case, a bank might be happy to use that as collateral to merge your existing personal and credit card debts into a consolidation loan despite your lack of employment.
These 3 options are very much viable, despite most people thinking that they didn’t have options. Of course, you will have significantly more options if you have a well-paying job and financial stability, often with access to better interest rates.
Getting approved despite the bad credit
Some lenders really do like it when they see regular income and some assets. Let’s look at how you can improve your chances of a successful debt consolidation loan approval while not being employed right now, or perhaps having a less than ideal credit history.
- Demonstrate where you’ve resolved issues. Banks like it when you can say “Hey look! This credit card was a silly mistake and I’m committed to paying it down”.
- Show them your savings plan. You should have a plan that shows your plan to tackle the existing problems.
- Remember that bad credit history is only part of the problem. They look at your income and work history, plus your assets and liabilities.
Going from unemployed to employed
Not having regular income is a frustrating feeling. Those bills just keep mounting up every month and you’re struggling to make it through.
It doesn’t have to be this way. Some tips include:
- Send out your application to every job recruiting agency within 30km of your house. They often have employers looking for people just like you.
- Sell off some of your unwanted stuff online to raise some sort of deposit. Banks like it when you can give them a small deposit as it shows that you at least have something to your name.
- Get rid of unnecessary expenses. This includes movie tickets, expensive dinners and trips to the pub. We preach the debt-free lifestyle here and you can do without these liabilities.
You can even get people to give you personal references, especially your employer.
It’s always wise to speak to a professional in these cases since debt consolidation loans work best for those with clean credit histories and have a proven employment history. But as we’ve said, you definitely can get approved even if your credit file isn’t so clean.
Debt consolidation loans do have their advantages. Often if you’re unemployed, you will be given a higher interest rate than compared to a person who isn’t working. But even so, that interest rate can be lower than what you’re already paying, especially if you have assets like a house backing you up.
You might want to reach out to us to discuss potential options too.