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Is it Possible to Consolidate My Debts with Fair Credit?

Having fair credit doesn't exclude you from debt consolidation loans. Consolidation Expert explains debt consolidation options tailored to those with fair credit scores.

Debt can weigh heavily on anyone. When juggling multiple debts and struggling to keep up with repayments, it’s easy to feel overwhelmed. Debt consolidation loans allow you to combine multiple debts into one loan with a manageable monthly payment, potentially at a lower interest rate. But what if your credit score isn’t perfect? Do consolidation loans for ‘fair’ credit exist?

The good news is that consolidation loans are often still attainable for those with only fair credit. While the interest rates offered may be higher and maximum borrowing amounts lower compared to those with ‘good’ or ‘excellent’ credit, consolidating debts remains a potentially effective strategy to simplify repayments and possibly save money over the long run.

The key is to explore specialist lenders that work with a range of credit scores, and carefully compare your options to ensure consolidation is the right fit for your financial situation.

Key Takeaways:

  • Having fair credit typically means an average credit score: not good, but not poor. Exact scores may vary depending on which credit reference agency is used.
  • Consolidation loans are often available to those with fair credit but may come with higher interest rates or lower loan amounts compared to excellent credit.
  • Your income, existing debts, and credit history will all be assessed when applying for a consolidation loan, not just your credit score.
  • Research lenders that specialise in fair credit consolidation loans to find the best rate. Always compare rates, features, and fees from multiple lenders.
  • Pre-qualify online with soft credit checks to view offers without impacting your score. This allows you to directly compare your options and improve your chances of approval before applying.
  • If you can't get approved for a fair credit consolidation loan, focus on building a positive credit history, or explore alternative debt solutions such as debt management plans.

What Does It Mean to Have Fair Credit?

Your credit score gives lenders an overview of your borrowing and repayment history, allowing them to assess the level of risk you pose. In the UK, there are three main credit reference agencies – Experian, Equifax, and TransUnion – all of whom use their own metrics to calculate credit scores.

A ‘fair’ credit score is 580-669 with Equifax, 721-880 with Experian, or 566-603 with TransUnion. Those with fair credit are in the middle ground, between ‘good’ and ‘poor’ – meaning your credit isn’t perfect, but it’s not bad either.

You likely have a mixed credit history with both positives and negatives. For example:

  • You may have a few late repayments on record or some historic missed payments that damaged your score, but not many.
  • You haven't defaulted on any credit agreements or had accounts go into collections.
  • You haven’t had any CCJs in the past six years.
  • You have a reasonable credit mix, such as some secured loans, some unsecured loans and some credit cards.
  • Your credit utilisation ratio may be high if you carry large balances.
  • You have active credit accounts open but haven't applied for excessive new credit recently.
  • Alternatively, you may also have a fair score if you have no or very limited credit history.

Overall, lenders will see fair credit borrowers as ‘medium risk’. This means there are some potential concerns, but also factors that demonstrate responsibility.

Are Consolidation Loans Available for Fair Credit?

The good news is consolidation loans are often attainable for fair credit borrowers. These loans allow you to combine multiple debts like credit cards, overdrafts, payday loans, and personal loans into one manageable payment. This can make juggling repayments easier.

Lenders will assess your credit report and score to check your eligibility for a consolidation loan. They’ll also consider other factors, such as your income, total debt, and credit utilisation.

If these factors are all reasonably healthy, you still have a strong chance of approval despite fair credit. However, those with fair credit shouldn’t expect to be offered the same loan terms as someone with excellent credit, as they may be considered a bigger financial risk. Be prepared for the possibility of:

  • Higher interest rates
  • Lower maximum loan amounts
  • Shorter repayment terms

This means shopping around for the fairest deal is especially important with fair credit. Never take the first offer – comparing quotes could save you a lot of money.

Secured vs Unsecured Consolidation Loans

Consolidation loans are usually unsecured, meaning no asset is used as collateral. However, borrowers with poorer credit sometimes opt for a secured debt consolidation loan. This involves using your home or car as security for the loan.

While secured loans may offer better rates as the lender can seize your asset if you default, this also comes with substantial risk. You could lose your home, for example, if unable to keep up with payments. Secured loans may also have higher arrangement fees added on top of the interest.

For fair credit borrowers, unsecured loans may be a preferable choice if approved, despite the higher interest rates. Defaulting has less severe consequences than repossession of an asset. Always consider secured loans cautiously.

How Do Consolidation Loan Providers Assess Fair Credit Applications?

Lenders will assess several factors when deciding whether to approve your fair credit consolidation loan application. While your credit score gives a general overview, they will delve deeper by examining several factors to assess your risk as a borrower. The specific eligibility criteria will vary, but may include:

01. Credit Report Review

Lenders will thoroughly check your credit report for any negative marks like payment problems, defaults, CCJs, arrears etc. One or two instances of being 30 days late may not be a major concern, but frequent late payments demonstrate higher risk.

Defaults that are now settled can still negatively impact your score. Any administration orders, debt management programs, or other interventions will also appear here.

02. Assessment of Existing Debts

The amounts you currently owe across all credit commitments and whether you keep up with payments indicates your ability to handle more credit. Lenders will want to see your existing debts are manageable and affordable based on your income. If you are utilising close to 100% of your limits or frequently missing payments this suggests taking on more credit could be unsustainable.

03. Income and Affordability Assessment

Lenders will want to see sufficient stable income to demonstrate you can realistically afford the monthly consolidation loan repayment. Gross annual income is important, but so is your net monthly income after tax/NI and existing debt payments.

Any income fluctuations, seasonal or bonus payments may also be considered. Employment status also matters – long term permanent employment indicates less risk than fluctuating or seasonal work.

04. Credit Utilisation Ratio Calculation

Lenders calculate your credit utilisation ratio by dividing your current credit card and loan balances by your total limits. Using more than 30% of your available credit can negatively impact your score. High utilisation may suggest you are overly reliant on credit and carrying too much debt already.

05. Homeowner Status

Being a homeowner can indicate financial stability and security, improving your chances of consolidation loan approval. Mortgage payments also demonstrate responsibility, while renting may suggest transience. However, mortgaged homeowners may also have less disposable income.

The lender will compile all of this information to build a complete picture of your financial situation. Be prepared to explain any potential negatives. Taking steps to improve your credit health can boost your chances of consolidation loan approval with fair credit.

How Do I Find the Best Consolidation Loan for Fair Credit?

Finding the lowest interest rate will ensure your consolidation loan saves you the most money. Here are some tips for finding the best lenders for fair credit:

  • Use pre-qualification tools to view personalised quotes without hard credit checks. This can protect your credit score in case of rejection.
  • Research lenders specialising in offering consolidation loans for a wide range of credit scores. These companies may be more likely to offer favourable terms for those with fair credit.
  • Compare APRs, loan amounts, fees, early repayment options and lending criteria before deciding on the right consolidation loan for you.
  • Look for fixed rates so your payments and interest don’t fluctuate.
  • Avoid payday lenders offering easy approvals on short-term loans. Interest rates are often high, and repayment terms are very short. This could create the risk of a debt spiral.

Consolidating with fair credit may mean accepting a higher rate than you would otherwise be eligible for. However, it’s important to carefully consider whether the interest rate offered would save you money compared to the rates you’re currently paying on your debts.

How Can I Check If I’m Eligible Before Applying?

Applying for a consolidation loan involves a hard credit check. Multiple credit applications can further impact your fair credit score. To avoid this, it’s important to seek pre-approval to reduce your chances of being denied a loan.

Many lenders and consolidation loan brokers, such as Consolidation Expert, offer online pre-qualification checks. A soft credit check gives you an indication of eligibility without affecting your score. Eligibility checks are zero-obligation: you aren’t committed to accept the consolidation loan offered.

Once you’ve identified the lender and loan suitable for you, you can proceed with the full application. The hard credit check at this stage can temporarily impact your score, but if you’ve been pre-approved, there’s a lower chance that your application will be rejected.

What Are the Alternatives to Debt Consolidation Loans for Fair Credit?

Paying off individual debts early, clearing errors on your credit file, and showing a commitment to making payments on time can all help to gradually improve your credit rating, opening better consolidation loan options in the future.

In the meantime, if your fair credit rating means you struggle to get approved for a consolidation loan, there are some alternative debt solutions to consider. Each option has potential benefits as well as drawbacks to weigh up.

01. Payment Breaks

For short-term financial difficulty, you may be able to negotiate payment breaks or freezes on further interest or charges from lenders. This provides temporary relief, but interest continues growing during breaks extending the repayment term. Taking this option can also negatively impact your credit rating, as your payments may still be marked as missed or late on your credit report.

02. Debt Management Plans

A debt management plan (DMP) involves negotiating reduced interest rates on your debts and consolidating repayments into one lower monthly payment. Payments are distributed to creditors and plans often aim to be debt-free within 5 years, though can be longer.

While fees may sometimes apply, interest savings can be substantial. However, as they are not legally binding, not all creditors participate in DMPs. It may not include all of your debts, and it requires you to close your credit accounts, which can further damage your credit score.

03. Debt Relief Orders and Bankruptcy

Legal protection like a debt relief order or bankruptcy removes lenders’ abilities to pursue you for debts you cannot repay, with the remaining debt being written off in full after discharge. However, these options can severely damage your credit rating for several years. Bankruptcy can affect job prospects in some circumstances and will restrict your ability to obtain credit.

Overall, each option has merits and drawbacks. Speaking to a debt specialist can help you identify the most suitable path forward based on your unique situation.

Explore Your Debt Consolidation Options Today

At Consolidation Expert, we understand that having fair credit doesn’t make you a bad borrower or mean you should be prevented from accessing consolidation loans. We specialise in matching individuals across the UK with the best consolidation loan deals for their unique situation, helping them manage their debts through one simple monthly payment.

We are partnered with reputable lenders that specialise in providing consolidation loans to fair credit applicants with competitive rates. To check your eligibility and see how much you could save, apply online today with Consolidation Expert.

Representative 14.8% APR

We are a broker, not a lender.

Representative Example: Borrowing £15,000 over 60 months, repaying £355.28 per month, total repayable £21,316.57.

Total cost of credit £6,316.57.

Interest rate 14.8% (variable).

The lenders on our panel offer loans for 12-360 months, with rates from 4.7% APR to 42.6% APR.

The Representative Example is based on all loans paid out by lenders between 1st Jan 2022 and 31st Dec 2022.

Further reading

Read Is it Possible to Consolidate Short-Term Same Day Loans?
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Read Can I Consolidate Holiday Loans with Other Debts?
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Read How Can I Pay Off My Debts Faster?
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