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Debt Consolidation Loans for Bad Credit [2020 Options]

Dan Steadman

Financial Advisor, MoneyBeagle

Debt Consolidation Loans for Bad Credit

Feeling stressed out and overwhelmed? People who have trouble paying their monthly bills are often confused when it comes to finding a viable solution. Without a sense of direction, getting behind on your financial obligations is easy, and finding a resolution will become that much harder. People who face this situation know that they can turn to debt consolidation loans for answers. Although it’s an excellent way to get your budget under control, not everyone has a good credit score.

Debt consolidation is a growing industry in the United States. Since 2007, millions of Americans have refinanced debt in order to help escape the clasps of high interest credit. Credit card culture has taken over America, which has resulted in large amounts of high interest debt – the average American has thousands of dollars in credit card debt. It’s always important to practice responsible money management, but sometimes things get out of hand and it’s too late.

Companies That Offer Debt Consolidation Loans for Bad Credit

If your credit rating is less than perfect, you probably believe that you have no options, but you can find a way to get a debt consolidation loan if you know where to look. The following information will help you find a loan that works for you, and you won’t need to worry about your credit rating getting in the way. This page is in place to give you a full overview of the debt consolidation process, as well as help those with bad credit in positioning themselves to benefit from this awesome way to help alleviate debt.

What is Debt Consolidation?

So, you may be wondering what does debt consolidation mean? Traditionally, the word debt consolidation has a few different meanings. Many people refer to it as a term that means you combine multiple loans or credit cards into one single payment. But others also infer that you refinance this debt at a different rate to save money – this is also known as refinancing. You can refinance a loan without consolidating it and you can consolidate a loan without refinancing it, but many people mean refinance and consolidate when they say debt consolidation. For the purpose of this page we will be assuming that debt consolidation means refinancing and consolidating.

You may be wondering: what is a debt consolidation loan? There are actually a few different forms of debt consolidation loans. The most common form is a traditional debt consolidation loan, which is effectively the same as getting personal loans for debt consolidation. You apply for this loan and then use the current capital to pay off all of your debt. After this, you pay back the additional loan at the interest rate agreed upon. The aim is to have that interest rate at a much lower price than your current loan, this way you don’t have to pay back as much.

If you’re a homeowner you have a few more options when it comes to consolidating debt. You can take out a home equity line of credit against your house – this means that you’re borrowing against the value of the equity in your home. In addition, you can refinance your home and use the excess amount of money from the mortgage to cover your existing debt. Both of these alternatives only work for those who have a decent amount of equity tied up in their homes.

If you’re wondering what is the best way to consolidate debt, the answer will be dependent on your exact situation. If you’re still wondering more about what does debt consolidation do, check out some of the other informational pages on our site.

What Forms of Debt Do People Consolidate?

In the world of modern finance, there is a range of different lending products that help consumers get the items they need to live their lives. Chances are you have a bunch of different financial products, but you may be wondering if all of them are eligible for consolidation? Almost any lending product can be consolidated or refinanced, but some of them will have to be done differently than others. One of the most common forms of refinancing occurs with credit cards – many credit card users rack up too much credit card debt to pay off. In addition, the high interest rates attached to the cards make it almost impossible to escape. Refinancing your credit card debt can save you thousands of dollars.

But it doesn’t stop with credit cards: personal loans, mortgages, auto-loans, and even business loans are all consolidated and refinanced by debt consolidation companies. So, what do debt consolidation companies do? They’re the ones that offer you the capital upfront to pay off your loans and restructure your debt.

Consolidating Student Loans with Bad Credit

In recent years, student loans have become increasingly popular with consolidators. Your eligibility to consolidate and refinance your current debt will depend on the type of student loan that you have. If you have a government student loan, you won’t be able to refinance your debt as the government doesn’t allow it. But, if you have multiple student loans through the government, you can consolidate them into a single payment to make your payment structure easier. You can do this directly through their website and your credit score will have no impact on your eligibility. In terms of interest rates, you will be issued a new interest rate that is weighted according to the amount of debt that you have under each interest rate. One thing to keep in mind is that some of your student loans will lose their associated benefits if you consolidate them – make sure to double check that it won’t impact your current situation.

In terms of private student loan refinancing, there is a lot more flexibility. Thousands of students consolidate and refinance their loans every year to try and save some money. Student loans can be extremely expensive, especially because many are unsecured. That’s why it’s important to consolidate them if you feel they are getting out of control. You can use traditional refinance companies, but there are also many student specific consolidation companies that accept lower credit scores. You can also use some of the techniques or sources that we mention later on in this page.

Credit Score: The Importance

If you’re on this page you’re probably reading because you have a less than average credit score and you want to consolidate your debt. Credit scores are very important in the world of finance – they’re the only way that lenders can know about what type of borrower you are. Unfortunately, for those who have made mistakes with their lending histories, their credit score may come back to haunt them often.

In terms of refinancing, your credit score will dictate how easy accessing credit will be. The better your credit score is, the lower your interest rates will be – it literally pays to have good credit. In addition, if your credit is bad enough, it may exclude you from being able to use certain consolidation routes altogether. That’s why it’s important to be aware of alternative options.

Credit Score: Preparing for Consolidation

One thing you should do when you start considering applying for consolidation is to prepare your credit score. You may feel that your credit score is too low to be able to refinance with, but often people can improve their scores quickly in just a few simple steps. This can put you in a position where you are able to get better interest rates and access to consolidation loans that are easier to attain. If you’re planning on applying soon, use these three steps before you make a decision:

Pay Down Debt

This is especially true for credit card debt. Many people don’t realize that the amount of your credit limit that you use has a direct impact on your credit score. The higher your credit card balances, the lower your credit score will be. That’s why paying off your balances, or at least part of your balances, can have a positive impact on your score almost instantly. You should give yourself a month to do this as it can sometimes take up to four weeks for your credit report to be updated.

Check for Mistakes

This is another common way to fix your credit score that many people don’t know about. Misreporting on credit reports is way more common than you would think and it can have a seriously bad impact on your score. That’s why it’s important to always be vigilant with your credit report. If you haven’t checked your credit report recently, you should make sure to do so before you apply for consolidation. The three major credit reporting bodies are required to give you at least one free credit report each – head to their website and ask for your free copy so you can have a look.

If you do find a mistake, get documentation to prove that it is not correct. This may be something such as a late payment that didn’t happen or a loan that you didn’t take out. You can send your documentation directly to the credit reporting body. If they refuse to change your record, you should contact a debt repair specialist. There are debt repair companies that can use their muscle to get unwanted issues off of your credit report – thousands of Americans use them every year to give their credit scores a quick boost.

Give it Time

If you think that you can wait a bit, another way to improve your score is to give it time. This is especially true if you have a few older issues that are driving down your credit score. For example, if you have a default on your record from six years ago. Most credit blemishes are automatically erased by law after seven years, which means that you’ll be able to see an instant boost in your score after seven years passes.

If you happen to be just a short way away from having some of your credit blemishes expire, it could be worth the wait if you’re not in a dire financial position. If these reports on your credit report don’t disappear when they’re supposed to after seven years, then you should contact the credit reporting company and inform them of why it should be removed.

Companies That Offer Debt Consolidation Loans for Bad Credit

PersonalLoans.com

PersonalLoans.com is a network of lenders that offer loans for people with all different types of credit. They generally give fast approval and funding. Most people get their loan as quickly as one business day. You can get a loan that ranges from $500 to $35,000 through PersonalLoans.com. Additionally, the service is available in all 50 states, so you can access them no matter where you live. Rates run from 5.99% to 25.99% and loan terms go from 3 to 72 months.

OneMain Financial

OneMain Financial offers the best debt consolidation loans for bad credit. They’ve been operating for more than 100 years. OneMain offers loans up to $25,000 and their interest rates run from 16.05% to 35.99%. The terms of their loans go from 24-60 months. Sadly, OneMain doesn’t offer online applications. However, 5 out of 6 Americans live within 25 miles of a branch.

BadCreditLoans.com

BadCreditLoans.com is another network for bad credit lenders. They connect borrowers to lenders who are willing to work with people with bad credit. Their loan amounts go from $500 to $5,000. Also, they’ve been in business since 1998, so you can trust they aren’t some fly-by-night operation. Their interest rates range from 5.99% to 35.99% and their loan terms run from 3 to 60 months.

Avant

Avant is a great lender for people that have a credit score of at least 580. They offer a maximum loan of $35,000. The terms run from 24 to 60 months. They do have higher fees than many other lenders, but they’re willing to work with people with less than perfect credit. Expect to pay between 1.5% and 4.75% in fees.

SignatureLoan.com

SignatureLoan.com is another lender network. You can get from $1,000 to $35,000 from them to consolidate your debt. Their interest rates go from 5.99% to 35.99% with loan terms from 3 to 72 months. They offer fast approval and the application only takes 5 minutes to fill out.

Alternative Sources

If you’ve improved your credit score as much as possible, but you still have bad credit, you may be wondering: what is the best debt consolidation company? The truth is that you might not be eligible for some of the better consolidation companies – those who offer the lowest interest rate tend to be risk averse when they’re lending to new clients. That’s why you need to be aware of alternative sources of consolidation – if you want to get refinancing you’ll need to try a few different options. Below are some example of lenders and techniques that you can use to try and refinance your debt:

Credit Union

When your goal is to get a debt consolidation loan with bad credit, going to a local credit union is a good place to start. Unlike a bank, a credit union is owned by its members, so getting the funds needed to manage your budget will be a lot easier. The only setback is that most credit unions have requirements that you must meet if you want to enjoy the services. Some credit unions only allow employees of certain companies to join, but others will allow anyone who lives in a specific town to sign up.

The key to finding the right credit union is doing the right research. As mentioned previously, many credit unions have requirements for membership – but this can be a good thing if you understand the process correctly. Search for credit unions that you may qualify for. Often there may be a credit union that caters to people at your job, neighborhood, or school – do your research to determine if you qualify for any of them.

Refinance Your Home

If you can’t find a solution at a local credit union, you might want to consider refinancing your home. Even when you have bad credit, you can still get a loan by using the value of your home to secure it. The amount of money that you can borrow with this method will depend on your home’s equity, and most people are happy to learn that they can even refinance their homes if their mortgage is not yet paid off.

Using your home as leverage can be quite risky though, as this means that the bank will be able to seize it should you stop paying back your loan. This is especially true if your current debt is tied to other collateral or unsecured. For example, if you’re finding it hard to pay your credit card bills, refinancing your home may be a risky option. This is because credit cards are traditionally unsecured, which means they impact your credit score but can’t be used to reclaim property or other assets. If you refinance your home to pay off your credit cards, you may end up not being able to pay your new home loan and lose your house. Be careful!

Online Lenders

No matter your credit rating, you will find lenders online who are willing to extend a loan to you. You must keep in mind that people with poor credit ratings will likely be charged a higher interest rate. Before you decide to move forward with the process, always check with several online lenders so that you can find the best debt consolidation loan for your situation. When applying for a loan, some consumers want to get their money as soon as possible, and if you can relate to them, you will be happy to discover that many online lenders will deposit the funds into your account within 24 hours of accepting your application.

The strange thing about online lenders is that it can actually be the better option despite the fact that it is often a second resort. People like to think of large consumer banks as the first port of call. While these consumer banks have awesome interest rates for those with good credit, they also have lengthy application processes that can make the entire journey extremely painful.

Speak Directly to Your Lender

If none of these options seem to be working, you can also speak directly to your lender and try and see if they will consolidate or refinance your debt. This is especially true for those who have multiple financial products with a single lender. For example, say you have a personal loan and card loan with your bank, but you want to consolidate the two and save some money. Head to your bank and ask if they may be able refinance and consolidate the loans. Explain that you’ve been a long-term customer but you’re struggling to meet the financial requirements of the high interest rates. They may be able to help you refinance your current debt – as your lender, they don’t want you to default on your loan as it may result in them losing a large amount of money.

Private Loan

A private loan is another unique alternative that you can use to consolidate your debt. Private loans aren’t traditional consumer loans, which are provided by consumer banks or online lending companies. Private loans are loans that are issued by an individual or an investor. For example, if you wanted your brother to give you a loan he could draw up a contract and issue you capital – your debt agreement would be binding, meaning that you would be legally responsible to pay him back the money if you’ve signed the contract.

People use these forms of loans all the time and not just between family. There are online websites that connect private investors with borrowers. Many of these private investors have very minimal credit score requirements – some don’t even require credit checks! The only issue is that some of these lenders have very high interest rates, but this isn’t to say that their interest rates won’t be lower than what you’re currently paying – especially if you have a lot of credit card debt.

Final Thoughts

After reading this page you probably have a better idea of what is consolidated debt and what is the best debt consolidation program for you. Getting a debt consolidation loan with bad credit can seem like a challenge, but it doesn’t need to be. If you have bad credit, you’re going to have to creative if you want to consolidate your debt. You should never accept defeat at the first hurdle – it may take time to get the right consolidation plan for you. Credit unions, online lenders and refinance companies are fantastic solutions for those who need help with their budgets. When you get a debt consolidation loan, you can reduce your monthly payments by extending your loans and by lowering your interest rate. If you are struggling to manage your bills, then don’t wait any longer to get a loan that fits your budget and your lifestyle. Debt can have long term crippling effects on your financial health – the longer you wait, the longer these effects will take place in your life.

When you do decide to commit to consolidating your debt, you need to keep a few things in mind to make sure that you’re getting the best deal possible. There are a lot of predatory lenders in the market trying to take advantage of those who are desperate to escape the clasps of debt – this is especially true in the student debt consolidation industry. For this reason, you should always ensure to do as much research as possible into the company that you’re working with. Never trust a company that doesn’t have a considerable online presence. In addition, be wary of companies that contact you first – they may be trying to partake in a scam.

Lastly, make sure that you give yourself enough time to compare and contrast different options. If you’re heavily in debt, you don’t want to make any decisions that will make your financial situation worse. That’s why it’s important to ask lenders for a total cost of the debt that you’re taking on, you want to compare it against what you’re currently liable to pay. Make sure that there are no hidden fees or charges that put the cost above what you’re currently paying. Most of all, approach consolidation with an open mind and enthusiasm – this is the first step in getting your life back on track.

FAQ

We put together this FAQ to help you find useful information if you're trying to consolidate your debt with bad credit. This had been divided into sections to help you have an easy read and easily locate the answers you’re looking for.

Debt Consolidation Basics

You need to understand what debt consolidation is before applying for one. This section covers the main questions that will clear the air on debt consolidation. You will find the best method of paying off debts and the risk that comes with debt consolidation.

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What is better, debt consolidation or debt settlement?
Debt settlement is not usually a good option to debt relief because creditors might renege on their promise. Debt consolidation is the better of the two because you pay at your convenience. It becomes lighter if you can curtail your spending excess.
How do debt consolidation loans work?

Debt consolidation loans are a pool for collating a borrower’s debts into one account and offsetting bills in fragments. A borrower that chose to consolidate debt submits an application with his credit scores and when approved, he will be issued funds to offset his bills while the creditor takes charge of his credit cards pending repayment of issued loans. So how does debt consolidation work for different scenarios? Read more and find out.

Is it bad to consolidate debt?
Debt consolidation is a good way to get your finance out of the red for some time but restrictions have to be taken. Consolidating debt becomes tough when you’re not able to manage your finance and pay-back. The downside to debt consolidation is increased frugality; spending more than you earn.
What are the disadvantages of consolidation?
The major downside to consolidation is no guarantee of savings. You only get to incur debts if you’re not careful with your spending and keeping up with your credit scores.
Do debt consolidation loans hurt your credit score?
Yes. You can protect your credit score from losing value if you pay back loans on time.
How long does debt consolidation stay on your credit report?
Debt consolidation stays an average of seven years on your credit report.
How long does it take to improve credit score after debt settlement?
Improved credit scores are determined by the severe effect a loan had on your credit score. You might be looking at a few months and this can extend to years. In severe cases, it takes seven years to rebuild a credit score after debt settlement.
Is it bad to consolidate your debt?
Debt consolidation becomes bad when your utilization rate goes down; causing your credit score to shoot up.

Debt Consolidation Process

Debt consolidation allows you to offset bills and pay back gradually. If you’re looking for ways to obtain debt consolidation loans with bad credits and you don’t want such loans to have a negative impact on your credit scores, this section helps you understand how best you can source loans without hurting your credit scores.

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Can you get debt consolidation with bad credit?

Yes. You can present collateral to get the loan. A cosigner will be an added advantage. The collateral will be considered payment when the cosigner fails to live up to expectations if you didn’t pay back on time. Learn more about how to get approved for debt consolidation loan.

How hard is it to get a debt consolidation loan with bad credit?
Getting a loan consolidation with a bad credit score is not easy to come by. Most times, applications are refused after scrutiny checks. It gets worse when your credit history is not favorable.
How to qualify for a debt consolidation loan with bad credit

You have to prove your creditworthiness by tendering your credit report. A creditor is then left with the option of accepting or declining your loan application with a bad credit score. Enlisting the services of a cosigner will be helpful to secure debt consolidation loan with your bad credit. We help you find the best bill consolidation loan that fits your credit.

How do I get a consolidation loan to pay off debt with bad credit?
Banks and credit unions are places where you can get a loan to pay off debt. Banks, however, reject some proposals that have bad credit undertones but credit unions are far better.
How to get approved for a debt consolidation loan with bad credit
Banks look the other way when your credit score is not fair. You will get approved for a debt consolidation loan if you go through the channel of unsecured loans. You will have to tender your asset such as a car as collateral to secure the loan. The asset ceases to be yours if you fail to repay the loan in time.
Can I get a debt consolidation loan with poor credit?
Obtaining consolidation with poor credit is risky but there are options you can try. You can get loans with poor credits by accessing crowd-funding on peer lending platforms. Upstart is a good platform that issues loans with poor credit. You can also check with lenders that place minimum requirements on credit scores.
Can you get a personal loan with a credit score of 550?
Lenders are always on the lookout for personal loan borrowers with a credit score of 720. The low credit of 550 can fetch a personal loan if a cosigner is enlisted or you improve your credit scores by reducing loan intake.
Can you get a personal loan with bad credit?
Online lenders allow you to get personal loans with bad credit. They have flexible pay-back requirements and you have to pre-qualify to access rates accruable to your loan.
How can I get a $5,000 loan with no credit?
You can get a $5,000 loan with no credit if you could convince the lender of your capability to repay at given time. Also, check the eligibility status before submitting an application.
How to get a debt consolidation loan with bad credit 550 score

A 550 credit score is at the borders of bad credit and this reduces the chances of getting loans. You can get an unsecured debt consolidation loan if there’s a willing cosigner to offset your loan if you didn’t meet up with the loan repayment requirements.

Debt Consolidation Companies

Debt consolidation has a long process and most times, loan requests are turned down. There are companies that accept bad credits for debt consolidation loans. If you’re interested in these companies, you need to know how they function. This section covers some common questions about debt consolidation companies.

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What is the best debt consolidation company?

There are lots of companies offering debt consolidation services. You should look out for companies with low-interest rates in addition to offering varieties of services such as unsecured loans. Take a look at Lending Tree debt consolidation for example.

Which loan company is best for bad credit?
There are companies that take the risk of issuing loans even when indications point that a borrower might not pay back in time. These companies advertise as bad credit lenders. You can find many bad credit lenders online.
What are the best debt consolidation loans for bad credit?
Debt consolidation loans take different forms and there are companies that offer borrowers the best rate with their bad credit score. Consolidation loans that will allow you to consolidate the entirety of your credit card balance will lower your credit utilization and raise your credit score.
Where can I get a loan from with no credit check?
Loans without credit checks are risky and lenders such as payday and title lenders charge high interest rates. Generally, you should avoid loans that don’t come with a credit check as you’ll wind up paying a lot of money in interest to borrow.
Does Debt Consolidation have alternate sources?
Debt consolidation companies are not the only source to obtain a debt consolidation loan. Online lenders and banks also offer the same service but it would be better you check them out before applying. This section covers alternate sources to debt consolidation loans.
Can I borrow money from a bank with bad credit?
Yes. Banks offer secured and unsecured loans but the latter is for customers that have a good credit history. A bad credit might not be considered for a loan and a secured loan is the best bet to borrowing money from the bank with a bad credit.

Secured loans demand collaterals such as houses and cars in exchange for the loan and you will forfeit same if you didn’t meet up with loan conditions.

Can I get a loan from a Credit Union with bad credit?
Credit Unions are more flexible and are places you can access loans with bad credit score. The unity and non-profit undertone make access to loans on Credit Unions worth it. You also get to choose between secured and unsecured loan terms; each with flexible terms.
Where to get debt consolidation loans with bad credit
Credit Unions and online lenders offer consolidation of debts to bad credit borrowers.
How to get a large debt consolidation loan with bad credit
You can get large debt consolidation loans to offset bills even with bad credit scores. Borrowers have three options to access this loan and each is efficient. Credit Unions offer flexible loan repayment options and getting loans here is after a borrower had joined the Union. Online lenders and companies allow you to get a large debt consolidation loan with a bad credit score.

Debt Consolidation Risks

Applying and obtaining a debt consolidation loan has risky undertones. You might end up losing your credit card or reducing your credit scores. This section answers some common questions on debt consolidation risks and positive measures to avoid them.

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Can I use my credit card after debt consolidation?

Your credit card is still functional even after getting consolidation loans. The only downside is that credit card balance will be reduced. Learn how you can consolidate credit card debt with bad credit.

Do debt relief programs affect your credit score?

Debt relief programs allow you to pay off loans in real-time. Your credit score gets negatively affected if you don’t pay up in time. Positive effects await a credit score that its borrower offsets his loans in time. This may or may not be different with military debt relief.

Dan Steadman

Dan Steadman

Financial Advisor, MoneyBeagle

Dan is one of the top financial experts when it comes to debt consolidation. With more than 20 years of experience helping people tackle debt, he has a unique insight when it comes to solving debt-related problems. 

Dan got his start when he went to work for a bank after getting his Business Degree. He worked his way up and became a loan officer. This position gave him unique insights into the ways that financial products work and how people can utilize different financial products to improve their lives. He’s seen hundreds of success stories and just as many failures – so he knows what steps are most likely to help his readers.

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