Best Debt Consolidation Loans for Bad Credit

Jackie Veling
Written by
Last updated on April 2, 2024
Edited by
✅ Fact checked and reviewed
Kim Lowe
Edited by
✅ Fact checked and reviewed

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Best Debt Consolidation Loans for Bad Credit

🏆 Top 3 most visited
Upgrade
Upgrade
🏆 Top 3 most visited
Best for Debt consolidation loans for bad credit
5.0
Rate discount
Est. APR
8.49-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Get rate
on Upgrade's website
on Upgrade's website
View details
🏆 Top 3 most visited
Upstart
Upstart
🏆 Top 3 most visited
Best for Debt consolidation loans for bad credit
4.5
Fast funding
Flexible payments
Est. APR
7.80-35.99%
Loan amount
$1K-$50K
Min. credit score
None
Get rate
on Upstart's website
on Upstart's website
Prosper
Prosper
Best for Debt consolidation loans for bad credit
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
560
See my rates
on NerdWallet's secure website
on NerdWallet's secure website
🏆 Top 3 most visited
BestEgg
Best Egg
🏆 Top 3 most visited
Best for Debt consolidation loans for bad credit
Secured loans
Wide range of loan amounts
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
600
Get rate
on Best Egg's website
on Best Egg's website
Universal Credit
Universal Credit
Best for Debt consolidation loans for bad credit
Fast funding
Rate discount
Est. APR
11.69-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Check Rate
on NerdWallet
on NerdWallet
Avant
Avant
Best for Debt consolidation loans for bad credit
Fast funding
Flexible payments
Est. APR
9.95-35.99%
Loan amount
$2K-$35K
Min. credit score
550
Get rate
on Avant's website
on Avant's website
Upgrade
🏆 Top 3 most visited
Upgrade
Get rate
on Upgrade's website
on Upgrade's website
Best for Debt consolidation loans for bad credit
🏆 Top 3 most visited
Est. APR
8.49-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Best for Debt consolidation loans for bad credit
Rate discount
Upstart
🏆 Top 3 most visited
Upstart
Get rate
on Upstart's website
on Upstart's website
Best for Debt consolidation loans for bad credit
🏆 Top 3 most visited
Est. APR
7.80-35.99%
Loan amount
$1K-$50K
Min. credit score
None
Best for Debt consolidation loans for bad credit
Fast funding
Flexible payments
Prosper
See my rates
on NerdWallet's secure website
on NerdWallet's secure website
Best for Debt consolidation loans for bad credit
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
560
Best for Debt consolidation loans for bad credit
BestEgg
🏆 Top 3 most visited
Best Egg
Get rate
on Best Egg's website
on Best Egg's website
Best for Debt consolidation loans for bad credit
🏆 Top 3 most visited
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
600
Best for Debt consolidation loans for bad credit
Secured loans
Wide range of loan amounts
Universal Credit
Best for Debt consolidation loans for bad credit
Est. APR
11.69-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Best for Debt consolidation loans for bad credit
Fast funding
Rate discount
Avant
Get rate
on Avant's website
on Avant's website
Best for Debt consolidation loans for bad credit
Est. APR
9.95-35.99%
Loan amount
$2K-$35K
Min. credit score
550
Best for Debt consolidation loans for bad credit
Fast funding
Flexible payments

Our pick for

Debt consolidation loans for bad credit

Upstart
Get rate
on Upstart's website
on Upstart's website
Upstart

Upstart

4.5
Est. APR

7.80-35.99%

Loan amount

$1,000-$50,000

Min. credit score

None

Upgrade

Upgrade

Est. APR

8.49-35.99%

Loan amount

$1,000-$50,000

Min. credit score

560

Universal Credit

Universal Credit

Est. APR

11.69-35.99%

Loan amount

$1,000-$50,000

Min. credit score

560

Prosper

Prosper

Est. APR

8.99-35.99%

Loan amount

$2,000-$50,000

Min. credit score

560

Avant

Avant

Est. APR

9.95-35.99%

Loan amount

$2,000-$35,000

Min. credit score

550

BestEgg

Best Egg

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

Pros

  • Save interest and time.
  • Fixed, predictable payments.
  • Ability to build credit.
  • Clear finish line to being debt-free.

Cons

  • May not qualify for a low rate.
  • Temporary hit to your credit.
  • Doesn’t address the root causes of debt.

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.

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

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.

Online lenders

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.

Banks

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.

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.

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.

Last updated on April 2, 2024

Methodology

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.

NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.

To recap our selections...

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
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