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Over the past few years, inflation has driven up the cost of everything from housing to groceries, leading credit card usage to become an even more integral part of many Americans’ financial lives. With the higher costs of consumer goods stretching people’s budgets thin, many have turned to their credit cards as a way to cover the costs of essentials that they couldn’t otherwise afford.
That type of financial strategy may buy you some wiggle room in your budget, but it comes at a steep price, especially in today’s high-rate environment. Right now, the average credit card rate is sitting at a record high of nearly 23% and many cardholders have even heftier rates tied to their cards. In turn, it’s easy to accumulate substantial credit card debt if you aren’t paying off what you owe each month.
When you’re dealing with a serious financial issue like mounting credit card debt, it’s important to be proactive about the situation. One way to do that is to pursue debt consolidation, which involves combining multiple debts into a single loan, ideally with a lower interest rate. But for those with less-than-stellar credit scores, such as those with a 620 FICO score, a common question arises: Is debt consolidation still a viable option?
Find out what credit card debt relief options are available to you here.
Can you get a debt consolidation loan with a 620 credit score?
The short answer is yes, it is possible to obtain a debt consolidation loan with a credit score of 620. However, it’s important to understand that this score falls within the “fair” credit range, which may impact the terms and conditions of the loan you’re offered — and could limit the options available to you.
One issue is that a 620 credit score is generally considered to be on the lower end of what many lenders will accept for a debt consolidation loan. While you may be approved, you’re unlikely to qualify for the best interest rates or most favorable terms. That’s because lenders view applicants with lower credit scores as higher-risk borrowers and they tend to offset this perceived risk by charging higher interest rates or imposing stricter repayment terms.
That said, even if the interest rate on a debt consolidation loan is higher than what you might hope for, it could still be significantly lower than the rates on your existing credit card debt. Remember, with credit card interest rates averaging 23%, even a consolidation loan with a 15% APR could represent substantial savings.
Don’t wait any longer to tackle your credit card debt. Compare the debt relief options available to you now.
Other debt consolidation options with a low credit score
While it might be challenging to obtain a traditional debt consolidation loan with a credit score of 620, there are alternative options to consider, including:
Debt consolidation programs
Debt consolidation programs are generally offered by debt relief companies. Like traditional debt consolidation, these programs allow you to roll all of your credit card debts into one lump-sum loan, but the loan is typically issued by a partner lender of the debt relief service you’re working with. The primary advantage of this option is that these companies often have relationships with lenders who are more willing to work with borrowers with lower credit scores.
The rate you get through this type of consolidation program likely wouldn’t be as low as you would get if your credit score was higher or you were to be approved for a debt consolidation loan through other means. However, the loans offered by these programs will typically still have a lower interest rate than your credit cards, saving you money over time.
It’s important to note, though, that while these programs can be helpful, they may also have fees attached that make them more expensive than a traditional debt consolidation loan. However, for many people struggling with high-interest credit card debt, the long-term benefits often outweigh these considerations.
Balance transfer credit cards
Some credit card companies offer balance transfer cards with promotional 0% APR periods and this option could be available to those with fair credit. After all, there’s a wide range of card options to choose from, and each lender sets its requirements for approval. That said, the promotional period may be shorter and the transfer fee could be higher than what’s offered to those with excellent credit. However, this route could still provide substantial savings to the right type of borrower.
Debt management plans
Many credit counseling agencies offer debt management plans, which can benefit you by negotiating with your creditors to lower the interest rates and fees attached to your cards. These plans can also consolidate your payments into one monthly payment made to the agency, which then disburses the money to your creditors. Your credit score is typically less of a factor in qualifying for these plans, but you likely won’t get the same types of savings, either, as you’re not using a loan or credit card to lower your rate across the board.
The bottom line
While a 620 credit score may limit your options somewhat, it doesn’t necessarily preclude you from taking advantage of what debt consolidation can offer. The goal is to find a solution that lowers your overall interest rate, simplifies your payments and puts you on a clear path to becoming debt-free. So, by exploring your traditional consolidation options and the alternatives, you may be able to find a way to manage your credit card debt more effectively.