Take control of your finances and consolidate your debt, even if you have bad credit.
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- Minimum credit score: 550
- Min. loan amount: $1,000
- Max. loan amount: $100,000
- APR: Starting at 3.84%
- Loan terms: 2 to 7 years
- Funds available as soon as next business day
- No impact on your credit score to see offers
What is a debt consolidation loan for bad credit?
Some specialist lenders offer large, unsecured personal loans to people with bad credit. Interest rates are higher than with standard loans, but you may still be able to reduce what you’re currently paying. Debt consolidation involves bringing separate debt balances together into one loan.
You can generally consolidate personal loan, car loan or credit card debt. The lender may repay the debt on your behalf or you may be required to use your debt consolidation loan funds to pay out your existing loans and close the accounts.
Compare debt consolidation loans for bad credit
How to compare bad credit debt consolidation loans
Like any debt or loan solution, it’s important to compare your options to find the best option for you. Here are some things to keep in mind when comparing bad credit debt consolidation loans:
- The lender. Unfortunately, there are disreputable lenders who prey on those with bad credit, promising fair loans but then charging high rates and fees. Before you apply for a loan with a lender you should take a look at their website and see how easy it is to locate information, if they are easily contactable, and what previous customers have to say.
- Fees. One way to find out if the fee structure is fair is to compare your options online and see what other lenders are charging. Some fees you might expect to pay include loan establishment fees, monthly account maintenance fees, additional payment fees, and so on.
- Rates. The point of a debt consolidation loan is to save you money from reduced interest across your credit accounts, so if the rate charged is too high then you may not be saving much money. Again, compare your options to see what a reasonable interest rate is.
- Loan terms. Terms offered by the lender should meet your debt-consolidating needs. These include how much your monthly payments will be and how much interest you’re paying over the course of the loan.
- What you’re able to consolidate. This may differ between lenders, so you might want to check this before you apply. Some lenders allow you to consolidate any debts from your open accounts, but they may have limits. Other lenders may only allow you to consolidate credit card debt or only personal loan debt. Make sure you’ll be able to consolidate what you need to when you compare your options.
What are the benefits of consolidating your debt?
There are various advantages to consolidating your debt, including:
- Single monthly payments. By consolidating your debts you’ll only have to worry about one monthly payment as opposed to several, so your debt is easier to keep track of and you’re less likely to miss a payment.
- Reduce interest. By consolidating your debt you might be able to reduce the interest you’re paying if your debt consolidation loan has a lower rate than some of your existing accounts.
- Save money. Most loans and credit cards come with fees, so by consolidating your debts into one loan you can save money from not paying separate fees.
- Get in a better financial position. By consolidating your debts and having more control over your repayments you can help get yourself into a better financial position so you can start working on repairing your credit.
How to make a bad credit debt consolidation loan work for you
Not everyone who takes out one of these loans improves their financial situation. It’s important to go about these loans the right way and make sure you don’t make your debt even worse. Here are some ways to make these loans work for you:
- Lower your interest. One of the main points of these loans is to take advantage of an overall lower rate of interest across your loans. Make sure you do your calculations and work out if you’re actually saving money on your new loan’s interest rate.
- Budget. Before you take on a new loan it’s important to budget for the payments. You’ll notice a significant change in your finances when you make a payment as you’ll be paying for one big loan rather than several little ones, so it will take some adjusting.
- Compare your loan options. To make sure you’re getting the best deal, compare your loan options before you apply. This will help ensure you get the lowest rate and fees available to you.
- Seek advice. If you’re struggling to consolidate your debts or are wondering how best to manage your payments, you can seek financial advice to help improve your financial situation. This will help ensure you repay your debts and improve your credit situation.
Bottom line
While a debt consolidation loan is often a viable option to consider if you’re trying to get a handle on your debt, the same solution won’t work for everyone. Before you take out one of these loans you should figure out how much money you’ll save on interest and fees, including any early repayment fees for your existing loans, to find out if consolidating your debt is the best choice for you.
Frequently asked questions
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