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A debt consolidation loan may be a good option for borrowers with bad credit. Pre-qualify with multiple lenders and choose a loan with a lower interest rate than your existing debts.
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Last updated on December 11, 2023
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✅ Fact checked and reviewed
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✅ Fact checked and reviewed
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A debt consolidation loan can help you pay off multiple debts faster by combining them into one monthly payment, ideally at a lower interest rate.
Borrowers with bad credit may qualify for a debt consolidation loan with lenders that accept low scores. Consider these loan options when deciding if a debt consolidation loan is the right choice for you.
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Why trust NerdWallet
- 35+ personal loans reviewed and rated by our team of experts.
- 20+ years of combined experience covering personal loans and financial topics.
- Objective, comprehensive star rating system assessing 20+ categories and 70+ data points.
- Governed by NerdWallet's strict guidelines for editorial integrity.
NerdWallet's personal loans content, including articles, reviews and recommendations, is produced by a team of writers and editors who specialize in consumer lending. Their work has appeared in The Associated Press, USA Today, The New York Times, MarketWatch and many other national, regional and local publications. They have been cited in publications including The Harvard Kennedy School, and appeared on NerdWallet's "Smart Money" podcast as well as local TV and radio.
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Best Debt Consolidation Loans for Bad Credit
Lender ▾ ▾ | NerdWallet Rating ▾ ▾ | Est. APR ▾ ▾ | Loan amount ▾ ▾ | Min. credit score ▾ ▾ | Learn more |
|---|---|---|---|---|---|
Upgrade Top 3 most visited 🏆Get rateon Upgrade's website on Upgrade's website | 5.0 /5 Best for Debt consolidation loans for bad credit Rate discount | 8.49-35.99% | $1,000-$50,000 | 560 | Top 3 most visited 🏆Get rateon Upgrade's website on Upgrade's website |
Upstart Get rateon Upstart's website on Upstart's website | 4.5 /5 Best for Debt consolidation loans for bad credit Fast funding Flexible payments | 7.80-35.99% | $1,000-$50,000 | None | Get rateon Upstart's website on Upstart's website |
Prosper See my rateson NerdWallet's secure website on NerdWallet's secure website | 4.5 /5 Best for Debt consolidation loans for bad credit | 8.99-35.99% | $2,000-$50,000 | 560 | See my rateson NerdWallet's secure website on NerdWallet's secure website |
Best Egg Top 3 most visited 🏆Get rateon Best Egg's website on Best Egg's website | 4.5 /5 Best for Debt consolidation loans for bad credit Secured loans Wide range of loan amounts | 8.99-35.99% | $2,000-$50,000 | 600 | Top 3 most visited 🏆Get rateon Best Egg's website on Best Egg's website |
Universal Credit See my rateson NerdWallet's secure website on NerdWallet's secure website | 4.0 /5 Best for Debt consolidation loans for bad credit Fast funding Rate discount | 11.69-35.99% | $1,000-$50,000 | 560 | See my rateson NerdWallet's secure website on NerdWallet's secure website |
Avant Top 3 most visited 🏆Get rateon Avant's website on Avant's website | 4.0 /5 Best for Debt consolidation loans for bad credit Fast funding Flexible payments | 9.95-35.99% | $2,000-$35,000 | 550 | Top 3 most visited 🏆Get rateon Avant's website on Avant's website |
Our pick for
Debt consolidation loans for bad credit
on Upstart's website
Upstart
4.5
NerdWallet rating
Est. APR
7.80-35.99%
Loan amount
$1,000-$50,000
Min. credit score
None
Get rateon Upgrade's website
on Upgrade's website
Upgrade
5.0
NerdWallet rating
Est. APR
8.49-35.99%
Loan amount
$1,000-$50,000
Min. credit score
560
Check Rateon NerdWallet
on NerdWallet
Universal Credit
Est. APR
11.69-35.99%
Loan amount
$1,000-$50,000
Min. credit score
560
See my rateson NerdWallet's secure website
on NerdWallet's secure website
Prosper
4.5
NerdWallet rating
Est. APR
8.99-35.99%
Loan amount
$2,000-$50,000
Min. credit score
560
Get rateon Avant's website
on Avant's website
Avant
4.0
NerdWallet rating
Est. APR
9.95-35.99%
Loan amount
$2,000-$35,000
Min. credit score
550
Get rateon Best Egg's website
on Best Egg's website
Best Egg
4.5
NerdWallet rating
Est. APR
8.99-35.99%
Loan amount
$2,000-$50,000
Min. credit score
600
What is a debt consolidation loan for bad credit?
A debt consolidation loan is a personal loan you use to pay off multiple forms of debt, such as credit cards, medical bills and unsecured loans. You’re then left with one monthly payment — your new consolidation loan — which can help simplify and speed up getting out of debt.
Debt consolidation loans are available to borrowers across the credit spectrum. Though borrowers with good and excellent credit (690 credit score or higher) will likely qualify for lower interest rates, there are still options for borrowers with bad credit (629 credit score or lower).
» MORE: How to get a debt consolidation loan with bad credit
When is a debt consolidation loan a good idea?
When considering whether to take out a debt consolidation loan if you have bad credit, you’ll want to make sure the annual percentage rate, or APR, is lower on the consolidation loan than the combined interest rate of your existing debts. By choosing a loan with a lower APR, you’ll save money on interest and lower your monthly debt payment.
Rates on debt consolidation loans vary, but borrowers with a credit score of 629 or lower may qualify for an estimated average APR around 21%, according to anonymized data from users who pre-qualified with NerdWallet.
You can use our debt consolidation calculator to plug in your existing debts, see your combined interest rate and calculate your potential savings with a debt consolidation loan.
Pros and cons of debt consolidation loans for bad credit
Like with any financial decision, it’s important to carefully weigh the benefits and risks of getting a debt consolidation loan with bad credit.
Pros of debt consolidation loans for bad credit
You’ll save money on interest: By successfully consolidating your debts under a loan with a lower interest rate, you’ll save money on interest. You can even apply that savings to your debt to speed up your payoff time and get out of debt faster.
You’ll have fixed monthly payments: Debt consolidation loans come with monthly payments that are fixed over the life of the loan, so you’ll owe the same amount each month, which makes it easier to budget.
You can build credit: Reputable lenders will report your payment history to the three major credit bureaus – Experian, TransUnion and Equifax – so paying off your debt consolidation loan on time can help build your credit score.
You’ll have a clear finish line: By taking out a loan with a set repayment term — and assuming you make all payments on time — you’ll know exactly what day you’ll be debt-free, which can be motivating in paying off your debt.
Cons of debt consolidation loans for bad credit
It may be hard to get a low enough rate: Borrowers with bad credit may have a hard time qualifying for a lower rate than their current debts. (See ways to improve your chances of approval below.)
Your credit will take a small, initial hit: Applying for a debt consolidation loan will require a hard credit inquiry, which temporarily knocks a few points off your credit score.
Consolidation doesn’t address the root causes of debt: If you chronically overspend, or simply don’t make enough income to cover your expenses, consolidating your debts won’t fix those issues.
Pros of debt consolidation loans for bad credit | Cons of debt consolidation loans for bad credit |
|---|---|
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Where to get a debt consolidation loan with bad credit
You can get a debt consolidation loan from three types of lenders: credit unions, online lenders and banks.
Credit unions are one of the best places to look for a debt consolidation loan if you have bad credit. That’s because credit unions are willing to lend to borrowers with lower credit scores while still offering affordable rates. You will need to become a member of the credit union before applying.
» MORE: How a credit union loan works
Online lenders also lend to borrowers with bad credit. Though their rates could be higher than some credit unions, they offer other convenient perks. For example, online lenders will typically fund a loan quickly — sometimes the same day you’re approved — and many send the funds directly to your creditors, saving you the step of paying off the debts yourself.
» COMPARE: The best debt consolidation loans
Banks typically offer consolidation loans with low interest rates, but they’re harder to qualify for and often require borrowers to have good or excellent credit. Plus, some don’t offer the option to pre-qualify, meaning you can’t check your rates without a hit to your credit score. If you have bad credit, it may be best to look elsewhere.
How to get approved for a debt consolidation loan with bad credit
You can improve your chances of qualifying for a loan by addressing your credit, as well as considering types of debt consolidation loans that may be easier to qualify for.
Focus on quick wins for your credit: Start by paying down any small debts if you can. This will lower your overall debt-to-income ratio, which could help quickly build your score. You can also check your credit report for errors and file a dispute.
Consider a co-signed or joint loan: If you add a co-borrower to your application via a co-signed or joint loan — especially if that person has a higher credit score than you do — it could improve your chances of getting approved for a loan or getting a lower rate. For both co-signed and joint loans, the additional applicant is on the hook for repayment, but only in a joint loan do they have equal access to the loan funds.
Tie collateral to the loan: Applying for a secured loan, in which you pledge collateral like your car or savings account to help guarantee the loan, is another way to help your application and potentially get a lower rate. But if you fail to repay the loan, the lender can seize the collateral.
How to apply for a debt consolidation loan with bad credit
To apply for a debt consolidation loan with bad credit, you’ll first want to pre-qualify, which you can do with most online lenders.
Even if you ultimately go with a credit union, it’s still smart to see your options. Since pre-qualifying does not include a hard credit check, you can check potential rates, loan amounts and terms with no risk to your credit score.
» MORE: Pre-qualify with lenders on NerdWallet
Once you’ve decided on a lender, you’ll need to fill out an application. Most applications are online and require you to list personal details like name, address and Social Security number; contact information; income and debts; and desired loan amount, loan purpose and repayment term.
After you submit the application, you’ll wait to hear from the lender whether you’re approved or denied. Some decisions are instantaneous, while some take longer, especially if more documentation, like proof of employment, is required.
If you’re approved, look carefully over your loan agreement before signing. Once you sign the agreement and receive the funds in your account, send them to your creditors. If the lender offers to send the funds themselves, ask for a confirmation or check with your creditors to make sure all debts have been paid.
It’s important to make a plan for tackling your new consolidation loan. Create a budget that takes this monthly payment into account and stick to it until the loan is paid off.
Other debt consolidation options for bad credit
A debt consolidation loan isn’t your only option for getting out of debt if you have bad credit.
You can also take a do-it-yourself approach with the debt snowball or debt avalanche method. With the debt snowball method, you tackle your smallest debt first and then work your way up, building momentum as you go. With the debt avalanche, you tackle your most expensive debt first, meaning the one with the highest interest rate, and apply your savings to the next highest and so on.
If you’d like help with tackling your debt instead, credit counseling can be a great resource. Credit counselors at a reputable non-profit can help negotiate your interest rates down and put you on a debt management plan, which will help you pay off your credit card debt over three to five years.
» MORE: How credit counseling can help you
If you have significant debt (more than 40% of your income) and you don’t think you can pay it off within five years, bankruptcy is another option, but it’s hard on your credit score, and you’ll likely want to consider other alternatives first.
» COMPARE: Your options for debt relief
Last updated on December 11, 2023
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NerdWallet’s review process evaluates and rates personal loan products from more than 35 technology companies and financial institutions. We collect over 50 data points from each lender and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
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NerdWallet's Best Debt Consolidation Loans for Bad Credit
- Upstart: Best for Debt consolidation loans for bad credit
- Upgrade: Best for Debt consolidation loans for bad credit
- Universal Credit: Best for Debt consolidation loans for bad credit
- Prosper: Best for Debt consolidation loans for bad credit
- Avant: Best for Debt consolidation loans for bad credit
- Best Egg: Best for Debt consolidation loans for bad credit
