Best Debt Consolidation Loans for Bad Credit

Having bad credit can be a disadvantage financially. You may be denied credit or be unable to obtain utility services in your name without putting down a large deposit first. On the FICO scale, which ranges from 300 to 850, bad credit is generally a score that’s below 580. 

Getting a debt consolidation loan is one way to get your score back on track. It’s possible to build a positive credit history as you make on-time payments to the loan while enjoying other benefits. The key is finding a lender that’s willing to work with you. 

Fortunately, you have options if you’re interested in debt consolidation loans for bad credit. Learn which lenders offer them, the pros and cons, and how to qualify for a debt consolidation loan with less-than-perfect credit. 

Best debt consolidation loans for bad credit

Debt consolidation requires careful consideration. Factors such as your credit score, financial situation, and personal needs matter when selecting an option. 

Our roundup reviews debt consolidation companies that offer products suitable for borrowers with less-than-stellar credit. Whether you have fair credit, thin credit, or no specified credit type, we have suggestions for you.

Lender	Min. credit score	Rates (APR)
Upgrade	560	8.49% – 35.99%
Upstart	300	7.80% – 35.99%
Credible	Not disclosed	7.49% – 35.99%1

Upgrade – Best for fair credit 

View Rates

LendEDU rating: 4.9 out of 5

• Accessible to individuals with fair credit
• Low minimum loan amounts for small debts
• Quick funding after approval

Upgrade provides realistic consolidation options for individuals with fair credit (a FICO score of 580 – 669). It allows borrowers to choose a secured personal loan, which can mean a lower rate because it’s secured by collateral—your personal property.

This company offers loan amounts starting at $1,000. Its repayment periods are 24 to 84 months. Its rapid funding feature is beneficial for those eager to pay off their debts soon after approval.

Upstart – Best for thin (little to no) credit 

View Rates

LendEDU rating: 4.8 out of 5

• Non-traditional credit score evaluation
• Considers education and work history
• Offers flexible loans

Upstart understands that not everyone has a robust credit history. This company stands out by considering your education and job history and offering a more holistic review. It provides loans of $1,000 to $50,000 and repayment periods of 36 or 60 months.

You’ll likely pay an origination fee. But if you lack significant credit usage or have a strong work or academic background, Upstart might be your best bet.

Credible – Best marketplace 

View Rates

LendEDU rating: 5.0 out of 5

• Aggregates multiple offers in one place
• Extensive lender network for numerous options
• Single form speeds up the application process

Individuals seeking a one-stop solution should consider the Credible marketplace. With one application, borrowers can compare multiple lenders to find a loan that meets their funding needs.

Pros and cons of a debt consolidation loan for poor credit 

Getting a debt consolidation loan with a poor credit score has advantages and disadvantages. Weighing both sides is essential when deciding whether to apply for a loan. 

Pros

• Making on-time payments to a debt consolidation loan can help you rebuild your credit.

• Consolidating debts with a loan may help to lower your monthly payments, making it easier to budget.

• Combining debts into a single loan gives you just one payment to make each month.

Cons

• Having poor credit typically means paying a higher interest rate for a debt consolidation loan.

• Poor credit may limit your choice of lenders to ones that charge an origination fee, which can make the loan more expensive.

• It might be difficult to qualify for a larger debt consolidation loan with bad credit.

Should you get a poor-credit debt consolidation loan?

Debt consolidation loans can help you better handle what you owe, but they’re not always suitable for every situation. 

Scenario	Consider a consolidation loan?
Your main goal is streamlining debt payments.	✅ A debt consolidation loan could reduce the number of payments you have to make each month.
You don’t have a plan for staying out of debt or lack a firm budget.	❌ Consolidating debts with a loan could make it tempting to charge new balances on your paid-off cards.
The interest rate you qualify for on a loan is the same as what you’re paying on credit cards.	🤔 You’d benefit from fewer or lower payments but may forgo interest savings.
You can get a debt consolidation loan with a lower interest rate.	✅ Replacing high-interest credit cards with a lower-rate debt consolidation loan could save money.
Most of what you owe is medical debt.	❌ You may be able to work out more favorable repayment terms with your providers without having to borrow.
You’re considering a secured loan to get a better rate.	🤔 Offering collateral for a debt consolidation loan could help you get a lower rate, but if you don’t pay it back, you risk losing your security.

Scenario #1: You want lower/fewer payments. 

Getting a debt consolidation loan with bad credit could make sense if you’re tired of juggling multiple monthly debt payments. Assuming you qualify for a large enough loan to consolidate all of your debts, you’d just make one payment to the loan monthly. 

When on-time payments are reported to the credit bureaus, that can help your credit score. You can also get some breathing room in your budget if your loan payment is less than what you previously paid to your debts. 

Scenario #2: You’re still using credit cards.

Consolidating debts with a loan assumes that you won’t create any new debt. A consolidation loan could be trouble if you’re using it to pay off credit card balances, then turning around and making new purchases with your cards. 

You could also run into trouble if you don’t have a solid budget. You run the risk of leaning on credit to cover expenses or worse, not being able to keep up with your loan payments. 

Scenario #3: Consolidating doesn’t change your rate.

The best loan rates are usually out of reach when you have bad credit. So it’s possible that if you qualify for a debt consolidation loan you might not see any difference in the interest rate. 

You have to decide whether the other benefits you might gain, such as lower/fewer payments, are worth it. If so, then you could move ahead with the loan. If not, you may want to look into another method for managing debt. 

Scenario #4: You qualify for a lower rate.

Getting a better rate with a debt consolidation loan for poor credit isn’t easy. You may qualify for a loan with more favorable terms than what you’re paying now. 

In that case, going through with the loan could be a good choice. What you’d have to consider is how much total interest you’ll pay based on the chosen loan term. A longer loan term can lower your monthly payment and pay more in interest over time. 

Scenario #5: You mostly owe medical debt. 

Using a consolidation loan to pay medical bills may not make sense if your health providers offer in-house payment options. For example, you might be able to pay a little toward your balance each month interest-free. 

If your doctors or providers are willing to work with you, that could be a less expensive option for managing medical debt. Your monthly payments may also be lower if you qualify for financial assistance through the provider or another organization. 

Scenario #6: You’re considering a secured loan.

Secured loans may offer better rates since you’re giving the lender something of value to hold as collateral. For instance, you might use your car title as security for a loan. 

The upside is that it might be easier to qualify. The downside is that if you don’t repay what you borrow, the lender can keep your collateral. So you have to decide if it’s worth the risk. 

Ask the expert

Eric Kirste

CFP®

If you have family or someone who will cosign with you, it can help you qualify when you otherwise might not be eligible. This will also help you build up your credit score faster if you pay on time and the correct amounts owed. You could also consider a secured loan, which requires some form of collateral, such as a vehicle, home, or another asset, which can be taken away if you don’t make your payments.

Alternatives to bad-credit debt consolidation loans

You might also want to consider other financial products. These alternatives could offer a more suitable solution based on your financial situation. Each option has its own advantages and disadvantages compared to a debt consolidation loan.

401(k)

401(k) loans tap into your retirement funds, allowing you to borrow against your future. This can offer a quick solution, but you must be certain you can pay it back in time to avoid hefty penalties and tax implications. 

Unlike bad-credit debt consolidation loans, a 401(k) loan does not rely on your credit score, making it a viable option for those with less-than-perfect credit.

Home equity loan or HELOC

A home equity loan or home equity line of credit (HELOC) is secured against the equity in your home. This often allows for lower interest rates than a bad-credit debt consolidation loan. However, your home could be at risk if you fail to keep up with repayments.

Balance transfer credit cards

A balance transfer credit card could be an appropriate alternative for smaller amounts of debt. These cards often come with a promotional 0% interest rate. However, the revert rate can sky-high once the promotional period ends. Unlike bad-credit debt consolidation loans, you or the main user on the car often need a decent credit score to qualify for this option.

Debt management plans 

A debt management plan with a credit counseling agency involves restructuring your debt repayment. This can lead to lower interest rates and waived fees. Unlike a bad-credit debt consolidation loan, entering a debt management plan doesn’t require a loan. 

However, it requires a commitment to a structured repayment plan and could prolong your debt repayment period.

How to get a debt consolidation loan for poor credit 

Getting a debt consolidation loan with bad credit isn’t that different from getting a consolidation loan with good credit. If you’ve never applied for this type of loan before, here’s what you can expect. 

1. Decide which debts to consolidate. Before approaching a lender you’ll first need to know which debts you want to consolidate. That might include credit cards, medical bills, installment debts, or other loans. Block off 30 minutes to an hour to write your list of debts, including the creditor’s name, account number, balance, and interest rate. 
2. Get prequalified/preapproved. Getting prequalified or preapproved for a debt consolidation loan means a lender takes a cursory look at your finances and gives you an estimated quote for loan terms. It’s helpful to get preapproval quotes from at least three lenders and you can usually get quotes in minutes.  
3. Choose a lender. Choosing a lender is next if you’ve done some preliminary shopping around. As you compare lenders, consider the interest rates, loan terms, and fees. You may want to spend 30 minutes to an hour using a loan payment calculator to estimate what you might pay with different terms. 
4. Apply for a loan. Once you’ve chosen a lender, you’re ready to apply. It may take just a few minutes to apply online. You’ll need to share your name, date of birth, Social Security number, address, phone number, and information about the debts you want to consolidate. 
5. Wait for approval. Depending on the lender, you may get approval near-instantly. If the lender requires more time to review your application they’ll let you know when you can expect a decision. 
6. Sign the loan paperwork. Assuming you’re approved, you must review and sign the loan paperwork. While it takes just a few minutes to sign, you may want to read through the document carefully. You can check the final rates and terms to ensure they work for you. 
7. Get funded. The final step is receiving the funds. Your lender may use the loan proceeds to pay your creditors for you, which is one less thing you must worry about. If the lender doesn’t do that, you’ll need to share your bank account details to have the funds deposited so that you can then pay off your creditors. 

It’s possible to shop for lenders, get quotes, apply, and be approved on the same day. Some lenders fund loans the same or the next business day, while others may take two to three business days to release the proceeds. 

Pro tip: Applying for a debt consolidation loan can add a new credit inquiry to your report, which may cause your score to drop a few points. But it’s possible to get those points back and then some by making on-time payments to the loan. 

FAQ

What is a “bad” credit score for debt consolidation loans?

A credit score below 580 in finance is often classified as “bad.” Lenders might hesitate to approve loans to individuals with such scores because they indicate a history of missed payments or defaults. 

Applicants with a bad credit score seeking the assistance of debt consolidation loans may face higher interest rates or stricter loan terms than those with a more positive credit history.

Are there any upfront fees associated with debt consolidation loans?

Yes, many debt consolidation loans come with upfront fees, often referred to as origination fees. This charge is typically a percentage of the loan amount deducted from the loan proceeds. 

Always factor in these additional costs when considering a debt consolidation loan. Not all lenders charge this fee.

How long does it take to get approved for a debt consolidation loan?

The approval time for a debt consolidation loan varies based on the lender. Some online lenders offer near-instant approval, but traditional banks may take a few business days to a week. Loan disbursement can also take anywhere from a few hours to several days.

Can I consolidate all types of debt with a bad credit consolidation loan?

Generally, with a bad credit consolidation loan, you can consolidate most unsecured debts, such as credit card bills, medical debts, utility bills, and personal loans. However, secured debts, including mortgages and car loans, typically can’t be consolidated with this type of loan.

What happens if I can’t keep up with payments on my debt consolidation loan?

If you miss payments on your debt consolidation loan, it could lower your credit score. Extended non-payment may lead to the lender initiating debt collection actions. The lender might take legal action to recover their funds in severe cases.

Recap of the best bad-credit debt consolidation loans 

Lender	Min. credit score	Rates (APR)
Upgrade	560	8.49% – 35.99%
Upstart	300	7.80% – 35.99%
Credible	Not disclosed	7.49% – 35.99%