Debt Consolidation Loans for Bad Credit and Unemployed

Debt consolidation loans can work magic if you have several creditors, multiple repayments a month, and out-of-hand due dates. While it’s a solution from lenders to help you organise your financial situation and get back on your feet, lenders are lenders; they need to make sure you can repay them after all.

So, what if your credit score is below their minimum requirements, and on top of that, you lost your job recently and have no proof of income? Don’t worry! You haven’t hit the end of the road yet. You can still qualify for a loan, but you’ll need to be patient and compromise to work your way around the rules and get the money. 

We understand that you’re already on the hunt for a new job and don’t have all the time in the world, so here is all you need to know about debt consolidation loans for bad credit and unemployed, all gathered in one place. 

Debt Consolidation Loans with Poor Credit and No Job – Are They Feasible?

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Generally, if you knock on the doors of consolidation lenders with bad credit, they’ll avert their eyes from your credit report and focus on your employment status, annual salary, and bank statement. On the contrary, if you seek a loan while being unemployed, they’ll set your job situation aside and judge you by your credit score. 

Combining both situations puts you in a tight position, so finding a lender who tolerates these conditions will be a hassle, but not impossible! In all cases, you’ll have to prepare a solid plan and diligent application to assure the lender you’re serious about covering your repayments.

Your best option will be to find a lender who accepts collateral. The standard case is that debt consolidation loans for centrelink customers are unsecured, meaning you can take them out without bringing a guarantor or offering a valuable asset in return. However, in such a challenging situation, the lender won’t be convinced enough of your ability to repay to give you a loan without security. 

So, pledging a valuable belonging or property to your loan provider can improve your chances of getting approved since they’ll have something in their hands to compensate for their loss in case you default. Not to mention, putting your assets on the line will help ensure them that you’re going to pay back. 

Unsecured loans are still a viable option, provided that your spouse or one of your household members can cover your debt if you can’t repay. 

A personal reference can also help. If you can provide the names, addresses, and home telephone numbers of 5-8 people of your relatives and friends, the provider will use them to verify your ability to repay and grant you your loan. Another option is to offer an upfront payment as a sign of goodwill. 

Bear in mind that whether you opt for a secured or unsecured loan, you won’t be eligible for convenient terms. The interest rates will be higher than the standard, yet not as high as the sum of your separate debts’ rates. 

What If You Don’t Get Approved for a Consolidation Loan?

As we said before, even if you plead your case in the best way, you may still be rejected. Suppose you’ve already been down this road. In that case, there are other ways to convince a lender of your eligibility for a consolidation loan for bad credit or put your hands on some cash to manage your financial situation. 

Find a Co-Signer

Try reapplying with a co-signer this time. If you can get a friend, a family member, or a co-worker with good credit to co-sign the contract with you, the lender may agree to consolidate your loan. 

In this case, the co-signer will be held responsible for your actions, meaning that if you fail to repay on time, they’ll be obligated to cover the repayment for you. Additionally, any late repayments or defaults will not only leave nasty marks on your report but will also damage the credit score of your co-signer.

Prove That You Have an Alternative Income

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Proof of employment isn’t everything. If you have other income streams that flow into your home, you may be qualified for a consolidation loan. However, you need to match three conditions prior to applying.

The first is to be able to bring documented proof of this secondary income. No verbal talk is taken for granted, so unless you can provide the required papers, you won’t be approved. 

Second, your total monthly debts should be less than 43% of your total secondary income. And finally, you have to give evidence that you’re receiving the payment on a regular basis and that it won’t be cut any time soon after taking out the loan. 

The forms of alternative income that debt consolidation lenders accept include:

  • Monthly alimony or child support payments 
  • Investment income
  • Social security payments and pensions
  • Disability payment
  • Rental income
  • Part-time job salary
  • Retirement benefits
  • Money from public assistance
  • Spouse’s or partner’s income
  • Government annuity wages
  • Beneficiary income from a trust
  • Recurring interest or dividend payments
  • Veterans Affairs benefits

Show That You Have an Upcoming Source of Income

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Another way is to reinforce your case with a documented promise that you’re going to have an income source after a certain period of time. This document can be a contract for a freelance job, a pending sale for a property, or an imminent inheritance. 

Settle for Debt Agreement

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Finally, if all the doors shut, you still have the option of a debt agreement to avoid bankruptcy. A debt agreement is a legal contract between you and your creditors, in which you negotiate to repay an amount of your debt over some time. The period can be up to 5 years, and the amount of debt you should repay will be based on what you can afford.

Before You Take the Jump

Regardless of your job situation, you should know that a consolidation loan is a responsibility that you must take seriously. Failing to keep up with your debts will be like falling down a whirlpool of ever-increasing debts and budget deficits. 

For this reason, don’t take this step unless you’re pretty sure you’ll be able to repay to avoid adding to the stress of losing a job. Also, take this consolidation loan as a chance to improve your score and make your credit report look more appealing so that if you ever fall in the same situation again, you would be able to take out a loan more smoothly this time.

About the Author

Lucy has over a decade of experience in finance. She is currently the content curator here at Perfect Payday.

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