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Compare debt consolidation loans for bad and fair credit

Debt consolidation can help you organize your finances, but it may not mean savings if you have poor credit.

Using a personal loan to consolidate debt can help you save on interest and pay down your accounts quickly. That's because loans have lower rates than a credit card and fixed repayment terms to keep you on track.

But borrowers with credit scores below 670 could struggle to qualify for low enough rates to benefit from a debt consolidation loan. The few lenders that accept bad or fair credit charge origination fees of up to 10% and rates higher than your typical credit card.

Debt consolidation can still help you manage your debt payments and avoid rising interest rates if you have bad credit. But you may want to save this option for paying down accounts with rates over 36% APR.

To narrow down your choices, compare APR, credit score requirements and amounts available through different lenders. Select Compare for up to four lenders to weigh their benefits side by side. To check your rate, select Go to site, or More info to read an expert review.

Name Product Filter Values APR Min. credit score Loan amount
Upstart personal loans
Finder Score: 4.2 / 5: ★★★★★
Upstart personal loans
7.80% to 35.99%
300
$1,000 to $50,000
This service looks beyond your credit score to get you a competitive-rate personal loan.
SoFi personal loans
Finder Score: 4.4 / 5: ★★★★★
SoFi personal loans
8.99% to 29.99%
680
$5,000 to $100,000
A highly-rated lender with competitive rates, high loan amounts and no required fees.
Best Egg personal loans
Finder Score: 3.8 / 5: ★★★★★
Best Egg personal loans
8.99% to 35.99%
640
$2,000 to $50,000
Fast and easy personal loan application process. See options first without affecting your credit score.
Upgrade
Finder Score: 4 / 5: ★★★★★
Upgrade
8.49% to 35.99%
620
$1,000 to $50,000
Check your rates with this online lender without impacting your credit score.
LendingPoint personal loans
Finder Score: 3.3 / 5: ★★★★★
LendingPoint personal loans
7.99% to 35.99%
620
$2,000 to $36,500
Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
Happy Money
Finder Score: 3.8 / 5: ★★★★★
Happy Money
11.72% to 24.50%
640
$5,000 to $40,000
Pay down your debt with a fixed APR and predictable monthly payments.
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How does debt consolidation work?

The definition of “consolidate” means to combine things into a more effective whole. Debt consolidation involves using one big loan to pay off two or more credit card accounts or loans.

It can help you organize your debts and could save you money on interest charges if you get a lower rate on the consolidation loan than the average rate across your debts you want to pay off.

Most debt consolidation loans are unsecured personal loans. Typically, the loan provider sends the funds directly to your creditors. Then you work to pay off the personal loan that consolidated your debt.

Debt consolidation example

Let’s say we have a credit card with a 27% interest rate and a $4,000 balance. In this example, our minimum payments are calculated by interest plus 1% of the balance, so our first minimum payment is $130 per month.

If we kept paying the minimum payment (without racking up more charges), we’d be paying a whopping $8,294.48 total after 268 months (22+ years) — yeesh.

Now, let’s see what happens if we consolidate with the average personal loan rate of 11.23%, reported by the Federal Reserve. We’ll choose a two-year term.

For the debt consolidation loan, our monthly payment is $186.86 and we pay a total of $4,484.61.

Overall, we save $3,809.87 in interest charges. Yes, the monthly payment is a little higher each month with the consolidation loan, but we also pay off the amount 20 years faster and save thousands of dollars.

Breakdown:

Minimum monthly paymentTermTotal amount paid
Keeping the credit card$130*268 months$8,294.48
Debt consolidation loan$186.8624 months$4,484.61

*Minimum payments decrease over time

Can I get a debt consolidation loan with bad or fair credit?

Yes, some lenders offer debt consolidation loans for fair or bad credit. But it’s not always a good option.

Most of the time, debt consolidation loans are unsecured personal loans. With poor credit, personal loans tend to come with much higher rates and additional fees, plus they’re harder to qualify for than if you had good credit.

For poor credit debt consolidation loans, you may want to consider online lenders that use alternative factors in your application, such as work history or education. You could also look into credit unions or banks that you have current accounts with for potential discounts or more accommodations. And if none of those work, other alternatives for debt relief may be better suited for poor credit.

Can I save money by consolidating with bad credit?

Yes, debt consolidation could mean saving money. Just remember that debt consolidation doesn’t reduce your total amounts owed — savings may come from reduced interest charges.

But if you have poor credit, you may struggle to qualify for a low rate when consolidating.

For fair and bad borrowers with credit scores of 580 to 619, the average APR on a personal loan was 83.61% in the last quarter of 2022, according to LendingTree’s consumer data. The much higher APR for lower credit score borrowers is likely due to qualifying for higher interest rates, short-term installment loans or payday loans.

How to qualify for a debt consolidation loan

Debt consolidation loans are personal loans, which can be a little harder to qualify for with bad credit. Many personal loan providers require credit scores in the 600s or higher.

Typical requirements include:

  • Good credit over 670
  • Active bank account
  • Be 18 years or older
  • Have enough income to repay the loan
  • Full-time employment or consistent income
  • DTI of 43% or lower

Watch out for lenders that guarantee approval

Legitimate lenders don’t advertise “guaranteed approval.” If you see a lender that does, take it as a red flag and look elsewhere.

A personal loan provider should fully review an application and consider your creditworthiness, income, current debts and more. In other words, a provider concerned about your ability to repay will check if you can handle the loan. A provider that promises approval regardless of your situation may mean they don’t care about your financial wellness.

How to compare bad credit debt consolidation loans

Lenders vary greatly in fees and interest, so it’s important to shop around and compare offers. Here are five considerations when choosing a lender when your credit score is less-than-stellar:

  • Focus on alternative lenders. Big banks may turn you away if your credit score is below 670. Look for lenders with lower credit score requirements or alternative underwriting processes, such as Upstart. Or, consider a community bank, which may have more flexibility with credit score cutoffs.
  • Compare APRs. When choosing a bad credit debt consolidation loan, make sure the APR you get is the lowest possible. The APR is the actual interest rate you pay once all fees and other charges are included in your rate.
  • Factor in origination fees. Lower credit borrowers may have a hard time finding a lender that doesn’t include origination fees. With origination fees typically ranging between 1% and 10% for bad to fair credit borrowers, the goal is to find the lowest fee possible.
  • Check the lender’s reputation. Disreputable lenders prey on people with bad credit, promising fair loans but later charging high rates and fees. If you’re unsure, check a lender’s BBB rating to see what complaints are lodged against them.
  • Consider loan terms. Most lenders offer personal loans with repayment terms from 24 to 60 months, but some, like Upgrade, allow 84-month terms. You pay more interest with a longer term, but your payments are typically lower.
  • Make sure your debt is eligible. Many personal loan lenders only allow you to consolidate credit card debt or uncollateralized personal loan debt and don’t let you pay off secured personal loans or student loans— even private student loans. Check the restrictions of the specific lender you’re considering.

Alternatives to personal loans for debt consolidation

If debt consolidation doesn’t yield savings or you’re simply not qualifying due to a poor credit score, consider these other options to sort out debt.

DIY debt payoff strategies

If you’re worried about interest charges and your loans don’t carry prepayment penalties, you could pay extra each month as you can to reduce interest and finish the loan early.

There are also debt payoff strategies, such as the debt avalanche method or debt snowball method. The debt avalanche method involves paying all your minimum payments but putting extra toward your debt with the highest interest rate until it’s paid off, then working down the line. The snowball method focuses on paying off your smallest balances first to keep you motivated.

Balance transfer credit cards

This involves moving debts onto a single balance transfer credit card. However, you may need good credit to qualify.

Consolidate with a credit card

If you can qualify for a low rate credit card with a high limit, you may be able to pay everything off with that. The best credit cards come with 0% introductory interest rates for a limited time, and if you pay off the card quickly enough, you could save a lot of money in interest charges.

Debt relief programs or counseling

Other debt relief strategies include:

  • Debt settlement — Negotiating with your creditors to reduce how much you owe or reduce your interest rate.
  • Debt relief companies — You’ll have to make sure these companies are legit, but debt relief companies may help you reduce balances, settle debt or negotiate for lower amounts.
  • Credit counseling — You can set up to meet with a debt expert to organize your finances and find a way out of debt.
  • Government programs — This can include the program Making Home Affordable which may help you reduce your debt. There are also government grants for lower-income families to help cover costs.

Home equity products

If you have a home with a lot of equity, you could take out a home equity loan or home equity line of credit. Just know your home is collateral on these lending options, and you may need good credit to qualify.

5 final tips when looking for debt relief or consolidation

It can be tough to reduce your debt while your credit score isn’t perfect. Here are some quick tips for getting out of debt and searching for consolidation options.

  1. Don’t consolidate if it costs more. Be sure to use a loan calculator to determine if consolidating debt saves you money.
  2. Keep making payments on time. Your payment history plays a big role in your credit score, so continue to make your credit card payments on time before applying for a debt consolidation loan.
  3. Repair your credit before applying. Errors and delinquent accounts could be hurting your credit. Review your credit reports for mistakes, and try to improve your credit score before applying.
  4. Don’t apply for every loan. Each time you apply, the lender does a hard check on your credit, which causes your score to drop by a few points. Instead, try to get prequalified first with a soft credit check and only apply for loans you really want.
  5. Avoid lenders that push for higher amounts. If you want a specific amount to cover your debts, but a lender tries to persuade you to take on more than you need, they may not be interested in your financial well-being.

Visit our guide to debt consolidation to learn about more options.

Written by

Bethany Hickey

Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto. Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt. Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others. Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full profile

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