You may think that because you have bad credit student loan consolidation isn’t an option for you. But you can get a loan consolidation that lowers your interest rate and your payments even if you have less than perfect credit or downright bad credit.
Federal Bad Credit Student Loan Consolidation
Tip #1: By law, lenders offering you federal student loan consolidation cannot check your credit.
They can’t turn you down based on credit, because they’re not even allowed to check your credit rating. Federal student loans follow different rules than other types of loans, so you can get federal student consolidation no matter how bad your credit may be.
Bad Credit Student Loan Consolidation is Possible
Tip #2: If you have bad credit because you’ve defaulted on a loan, weigh your options before getting bad credit student loan consolidation.
If you fail to pay on a student loan for 270 days, it’s considered a defaulted loan. This alone can make your credit bad even if you’ve never had another problem. The good news is that this damage to your credit doesn’t have to be permanent. In fact, you can repair most of it within one year. If you being paying on the defaulted loan and make every monthly payment on time for 9 to 12 months, depending on your lender, you can rehabilitate the loan.
At this point, the lender will remove the default from your credit rating. Your credit will still be damaged because of the late payments and missed payments that will remain for 7 years. But the default, which can be as damaging to your ability to get credit as a bankruptcy, is removed.
However, you can get a bad credit student loan consolidation after making on-time payments for only 3 months. This is an option if you desperately need lower monthly payments and that’s more important than the long-term damage to your credit.
When you make 3 payments on time you qualify for consolidation just as if you’d never defaulted, but the default will remain on your credit report, so it will affect your rating for 7 years. Unless a smaller payment is the only option you have, you should wait until the default is removed before getting consolidation.
Tip #3: If you have bad credit, consolidating private loans might not improve your terms.
If you can even get a private loan consolidation, your interest rate will likely be as high as or higher than the original rate. Wait until your credit improves instead of getting bad credit student loan consolidation for private loans.