How to Get a Loan for Credit Card Bill Payment?

Dealing with credit card debts could seem tough and as a result it could also have an impact on your credit score negatively. In such a scenario, you might be looking for a way out. There are not options available to manage your credit card bill payment by taking another loan. This could also be called credit card consolidation loan for bad credit.

The debt consolidation loan unifies all the debts of the borrower that one owes to various lenders and pays all of them with a lump sum payment. Now the borrower has only one loan to repay which is the debt consolidation loan.

What Is a Bad Credit?

A bad credit history or credit score is a resultant of poor management of your credit. It could be due to any of the following reasons

• Late payments on your loans and credit cards
• If you have missed your payments on your loans and credit cards
• Foreclosure
• Written-off or settled account
• Too many hard enquiries

A bad credit puts you in the bad book of the creditors and any future loan application is turned down due to the above reasons.

Debt Consolidation Loan for Credit Card Payment

When you are overwhelmed with your credit card debt, taking another to pay off your bill payment can help you manage your financial trouble. This is known as debt consolidation. The idea is to pay off existing debts using a single loan thereby leaving you with just one monthly payment rather than several. If you have credit card debt, then most probably you are paying thousands in the form of interest.  The goal is to lower the interest rate and the monthly outgo while paying off your debt in a hassle-free manner.

Options to get loans to consolidate credit card bill payments

Following are some of the options that you can use to pay off your credit card debts.

Debt Consolidation Loans

There are lenders who offer credit products in the name of debt consolidation loans. The idea of the introducing this kind of loan is to manage all your debts under one loan. The bank offers a certain amount of loan and the rest will be contributed by you to pay off the entire credit card debts. Now you will be repaying the debt consolidation loan alone with interest rate charged. This is an effective method to manage your credit card bill payment if you have not paid for a long time.

Personal Loan

A person loan could be a best consolidation tool as it is an unsecured loan and could be taken from any lender. With a bad credit, you might have to be open for unattractive interest rates. However, in general, credit card interest rates are higher than the persona loan interest rates. Hence a personal loan could be a viable option to reduce your credit card debts.

Short-term loans

This is another one of the best option if your credit card debt is low. Short-term loans can be obtained with minimal documentation from NBFCs and online lenders. The loans are disbursed quickly, and the process is quick and simple. Most lenders do not use credit score as the criterion to grant short-term loans and you can use this as advantage to clear your credit card debts.

Features of debt consolidation for bad credit

You can get a debt consolidation loan with instant approval. The loan is processed quickly, and you require only minimum documents to get the loan. Most of the debt consolidation loans do not require any collateral and you get it for attractive interest rates.

How to Improve Your Bad Credit?

One cannot improve their bad credit overnight. Having bad credit is not the end. One can improve the credit score by following the steps given below.

1. Paying of your old debt

In case you have a “settled” account – where you have only paid partial amount of your debt or “written off” account – you did not pay your debt at all and the bank has considered it as a bad debt and conveyed the same to the credit bureau, you need to settle those accounts. If you do this, it will boost your credit score.

2. Keep your credit balances low

Make sure that you don’t exceed more than 50 % of your credit limit. This helps you to keep your credit utilization ratio (the proportion between your actual spending and your credit limit) at a lower rate and has a positive impact on your score. For example, if your credit limit is Rs. 1 lakh, make sure that you do not exceed a monthly bill of more than Rs. 50,000. A bigger credit utilisation ratio implies lack of spending discipline.

Remember to pay your dues in full rather than paying the minimum amount for your credit cards.

3. Apply for new accounts only when needed

Make sure that you don’t open too many new credit accounts. Every time you apply for credit (whether a loan or credit card) it results in an enquiry by lenders. Multiple enquiries in your credit report reflect that you are ‘hungry’ for credit and may not be able to fulfil your debt obligations.