How to Get a Debt Consolidation Loan With Bad Credit

Getting a debt consolidation loan with bad credit may require you to build your credit score or add a co-signer.

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Getting a bad credit loan for debt consolidation may require shopping around, but there are options, including loans from credit unions and online lenders. In fact, some lenders cater to borrowers with bad credit (a credit score below 630) and consider factors beyond your score, such as education, income and job history.

How to get a debt consolidation loan with bad credit.

  • Check your credit report.

  • Improve your debt-to-income ratio.

  • Add a co-signer.

  • Shop around for the best rates and features.

Ideally, a debt consolidation loan should have a lower interest rate than the combined rate on your current debts and allow you to pay off your debt more quickly. Use our debt consolidation calculator to determine if a loan makes sense for you.

How to get a debt consolidation loan with a low credit score

  • Check your credit report: Are mistakes on your credit report the reason why your score is bad? Check for errors such as wrong accounts, incorrectly reported missed payments or inaccurate credit limits. You can check your credit report for free once a year at each of the three credit bureaus at Even a small bump in your score may improve your odds of qualifying, and going from a bad to a fair credit score (a FICO score of 630 to 689) might shave about 5 percentage points from your interest rate, according to a survey of lenders that partner with NerdWallet.

  • Improve your debt-to-income ratio: If you don’t need to consolidate debts right away, consider ways to increase your income and pay off small debts. This improves your debt-to-income ratio, which lenders use to evaluate your ability to repay a loan.

  • Add a co-signer: Some lenders allow co-signers, which can help you qualify for a loan and get you a lower rate. Typically, the co-signer’s credit score must meet or exceed the lender’s minimum requirement. Keep in mind that the co-signer takes on equal responsibility for the loan, and you and your co-signer's credit scores will be on the line.

  • Shop around: Compare interest rates and terms from multiple lenders to get a loan with repayments that fit your budget. You can pre-qualify with most online lenders and see estimated rates. This typically involves a soft credit check, which doesn't have an impact on your credit score. Shop for consumer-friendly features such as direct payment to creditors, which means the lender sends your loan money to your creditors, simplifying the process — and eliminating any temptation to use the cash for something else.

Summary of consolidation loan options

Where to get a debt consolidation loan for bad credit

Credit unions

Credit unions are not-for-profit financial organizations that may offer more flexible terms and lower rates than online lenders.

Federal credit unions cap annual percentage rates on personal loans at 18%, which is lower than the upper-limit charged by most online lenders.

Credit unions don’t allow you to pre-qualify for a loan; applying typically requires a hard credit check, which can temporarily hurt your credit score and make it harder to shop around.

You also need to become a member of the credit union to apply for a loan. This typically means living or working nearby and paying a small membership fee.

Navy Federal Credit Union and First Tech Federal Credit Union both provide personal loans for debt consolidation, with low rates, no origination fees and no minimum credit score requirements. First Tech also offers direct payment to creditors.

Online lenders

Online lenders provide fast funding, since you can often complete the entire loan process online and get funded within a few days to a week.

The biggest drawback is rates can be higher than rates at credit unions. In 2020, borrowers with bad credit (below 630 FICO) qualified for rates between 26.6% and 32.4%, according to a NerdWallet survey.

Online lenders may also charge origination fees that cover the costs of processing your loan. The fee is typically deducted from the loan proceeds, so you might have to request a larger loan in order to get the full amount you need.

Here are online lenders that offer debt consolidation loans for bad credit:

Avant requires a minimum credit score of 580 and $20,000 in gross annual income. About half of the company’s borrowers use its loans for debt consolidation.

OneMain has no minimum credit score or income requirements, but its starting APR is higher than other lenders.

Upstart and Upgrade have similar minimum credit score requirements, but offer lower starting APRs than OneMain and Avant.

Managing your debt consolidation loan

  • Make a budget: Debt repayment is part of a balanced budget that allocates money toward your needs, wants, savings and debt. Building a budget can help you track your repayment progress, cut back spending and gain more control over your finances.

  • Stop using credit cards: Avoid running up new debt on the credit cards you’ve paid off, but don’t close the credit card accounts, which could hurt your credit score.

  • Keep in touch with the lender: If you fall behind on payments, it’s best to contact the lender as soon as possible to see if it will work with you. Some lenders may offer a hardship program or temporary suspension of your payments until you get back on track.

Debt consolidation loan alternatives

If debt consolidation loans don't work for you, here are some possible alternatives.

Debt snowball method

The debt snowball method uses early wins to keep you on track to being debt-free. In this method, you arrange your debts from the smallest balance to the largest. You then prioritize paying off your smallest debts, even if other debts have higher interest rates. Once your smallest debt is repaid, put the monthly payment for that debt toward your next-smallest balance until that's paid off. Continue to roll payments toward each debt until you're debt-free.

Debt management plan

A debt management plan from a nonprofit credit counseling agency can help reduce your interest rate and pay off debt faster. It’s an option if you have credit card debt and if you can stick to a payment plan for several years while not using the credit cards.


Discharging your debts in bankruptcy may be an option if you are overwhelmed by debt and it will take five years or longer to repay it through consolidation. Bankruptcy wipes out most kinds of unsecured debt, including credit cards and medical bills.

While your credit score may initially take a hit, it should begin to recover within months after you file for bankruptcy.