3 Steps to Get a Debt Consolidation Loan for Bad Credit

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A debt consolidation loan is a type of personal loan that lets you combine multiple debts and leaves you with just one payment. Through consolidation, you might also get a lower interest rate, which could help you save money and potentially pay off your debt faster.

You’ll typically need good to excellent credit to qualify for a debt consolidation loan — but there are a few things you can do to help you get approved even with poor credit.

Here are three steps to get debt consolidation loans for bad credit:

Check your credit history
Improve your debt-to-income ratio for better rates
Compare loan rates

1. Check your credit history

Lenders will review your credit to determine your eligibility for a loan. This is why it’s important to check your credit history to make sure it’s as strong as it can be. After all, the better your credit, the lower the rate you could qualify for via lenders.

Visit AnnualCreditReport.com to access your credit reports from each of the three national credit bureaus — Experian, Equifax, and Transunion — for free.

Each of the three major credit bureaus compile credit reports based on different information. Not all creditors report to the same bureaus, which is why your credit report with each bureau may vary. In fact, these reports can generate different types of credit scores, including:

FICO: Your FICO score is a three-digit number determined by your credit report that gives lenders an idea of how likely you are to pay off your loan. Your FICO score takes into account how long you’ve had credit, how much credit you have, your credit utilization, and if you make payments on time. A good FICO score is considered 670 or higher.
VantageScore: Your VantageScore is another three-digit number determined by your credit report. The VantageScore formula considers your payment history, the amount of time your accounts have been open, your credit versatility, your credit usage, and any recent inquiries. A good VantageScore is considered 670 or higher.
Other credit scores: The three credit bureaus may also take other reports into consideration, such as your Credit Information Bureau (India) Limited, or CIBIL, report. Your CIBIL score is calculated by your payment history for different loan types and credit institutions over a period of time. CIBIL scores range from 300 to 900, and a score above 700 is considered good.

If you find any errors in your credit report, make sure to dispute them with the appropriate credit bureaus to potentially give your credit score a boost. The more you can clean up your credit history, the better your chances of qualifying for a debt consolidation loan.

Keep in mind: Some lenders are more willing to work with poor credit than others, which means you might still be able to get a loan even if you can’t quickly improve your credit.

Just remember that bad credit loans generally come with higher interest rates than good credit loans, making them more expensive to repay.

You can compare your prequalified rates from Credible’s partner lenders below in two minutes. This includes some lenders that offer personal loans for poor or fair credit.

How to improve your credit score

If you’re working on building or improving your credit, here six steps you can take to boost your score:

Build your credit profile: Having a few active accounts in your name shows that you’re responsible with borrowing and repaying money. Also consider maintaining old accounts that you’ve paid off to lengthen your credit history.
Get a credit builder loan: Credit builder loans come with shorter repayment terms — from six months to two years — and your funds are deposited into a savings account with your lender. With this type of loan, you’ll make regular principal and interest payments that are reported to each of the three major credit bureaus, and you’ll get your funds back at the end of the loan term.
Make payments on time: Your payment history has a large impact on your credit score, so getting your monthly payments in on time is a great way to boost your score. Setting up automatic payments can help you avoid missing payments, and could also qualify you for rate discounts with certain lenders.
Pay off past-due accounts: Falling behind on payments can drag down your credit score in the short-term and over the long haul. In fact, late payments can stay on your credit report for up to seven years, so it’s a good idea to have all of your balances up-to-date.
Lower your credit utilization rate: Your credit utilization rate is the amount of credit you’re using divided by your total available credit. Having a low credit utilization rate shows lenders that you’re only using the credit that you need, which demonstrates your financial responsibility. A good credit utilization rate is considered 30% or lower.
Limit applications for new accounts: When you submit an application for financial products such as loans or credit cards, lenders perform a hard credit inquiry to check your score and decide if you qualify. Multiple hard credit inquiries can temporarily harm your credit score and decrease the length of your credit history.

Learn More: Where to Get a Personal Loan

2. Improve your debt-to-income ratio for better rates

Lenders look at your debt-to-income (DTI) ratio to see how much of your income goes toward debt. To calculate your DTI ratio, add up all of your monthly bill payments, then divide that by your monthly income.

Keep in mind: Having a low DTI ratio makes you less of a risk to lenders and could make it easier to qualify for better rates.

Here are a couple of ways to improve your DTI ratio:

Increase your income. The more money you make, the less of your total income you have to put toward debt. If you want to boost your income, you might consider asking for a raise, starting a side hustle or transitioning to a higher-paying field.
Reduce your debt. Paying down some of your debt could help show lenders that you can afford a new debt consolidation loan.

Two strategies for reducing your debt are the debt snowball and the debt avalanche methods.

The debt snowball method focuses on paying off your smallest debts first, allowing you to pay off one debt quickly. You can then use that money toward paying off your next smallest balance, and so on, which can help you pay off all of your debt quickly.
The debt avalanche method involves paying off your debt with the highest interest rate first, while making minimum payments on your other balances in the meantime. Once you’ve paid off your debt with the highest interest rate, you’ll use the money you were putting toward that balance into the next highest interest debt until all of your balances are paid off.

It’s also important to consider how much a debt consolidation loan will cost you over time. This way, you can prepare for any added expenses. You can estimate how much you’ll pay for a loan using our personal loan calculator below.

Enter your loan information to calculate how much you could pay

Loan amount ? Enter the total amount borrowed $

Interest rate ? Enter your annual interest rate %

Loan term ? Enter the amount of time you have to repay your loan years

Total Payment $

Total Interest $

Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.

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Check Out: Credit Card Consolidation Loans

3. Compare loan rates

A wide variety of lenders offer personal loans for debt consolidation, and they each list loan amounts, terms, and fees. Be sure to do your research and compare loan rates from as many lenders as possible to find the right loan for you.

Tip: Having a low interest rate could help you save money on interest charges over the life of your loan. This could even make it possible to pay off your loan faster.

Keep in mind that if you have poor credit, you likely won’t qualify for the lowest rates available. But comparing lenders can still help you find the best rate for your circumstances.

Here are Credible’s partner lenders that offer debt consolidation loans for bad credit:

Lender	Fixed rates	Loan amounts	Min. credit score	Loan terms (years)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	9.95% - 35.99% APR	$2,000 to $35,000^**	550	2, 3, 4, 5*
Fixed APR: 9.95% - 35.99% APR Variable APR: N/A Min. credit score: 550 Loan amount: $2,000 to $35,000** Loan terms (years): 2, 3, 4, 5* Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday) Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except HI, VT, MA, ME, NY, WV Customer service: Phone, email Soft credit check: Yes Loan servicer: Avant Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes Min. Income: $1,200 monthly
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.99% - 35.99% APR	$5,000 to $35,000	600	2, 3, 4, 5
Fixed APR: 8.99% - 35.99% APR Variable APR: N/A Min. credit score: 600 Loan amount: $2,000 to $50,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 1 to 3 business days after successful verification Fees: Origination fee Discounts: None Eligibility: Available in all states except DC, IA, VT, and WV Customer service: Phone Soft credit check: Yes Loan servicer: Best Egg and Blue Ridge Bank Min. Income: None Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.99% - 24.99% APR	$2,500 to $35,000	660	3, 4, 5, 6, 7
Fixed APR: 6.99% - 24.99% APR Min. credit score: 660 Loan amount: $2,500 to $40,000 Loan terms (years): 3, 4, 5, 6, 7 Time to fund: As soon as the next business day after acceptance Fees: Late fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone Soft credit check: Yes Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	10.5% - 29.99% APR	$5,000 to $40,000	640	2, 3, 4, 5
Fixed APR: 10.5% - 29.99% APR Min. credit score: 640 Loan amount: $3,000 to $40,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 2 to 5 business days after verification Fees: Origination fee Discounts: None Eligibility: Available in all states except MA and NV Customer service: Phone, email, chat Soft credit check: Yes Min. Income: $25,000 Loan Uses: Debt consolidation and credit card consolidation
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.3% - 35.89% APR	$1,000 to $40,000	600	3, 5
Fixed APR: 8.3% - 35.89% APR Min. credit score: 600 Loan amount: $1,000 to $40,000 Loan terms (years): 3, 5 Time to fund: Usually takes about 2 days^† Fees: Origination fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone, email Soft credit check: Yes Loan servicer: LendingClub Bank Min. Income: None Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.99% - 35.99% APR	$2,000 to $36,500	600	2, 3, 4, 5, 6
Fixed APR: 7.99% - 35.99% APR Min. credit score: 600 Loan amount: $2,000 to $36,500 Loan terms (years): 2, 3, 4, 5, 6 Time to fund: As soon as the next business day Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except NV and WV Customer service: Phone, email Soft credit check: Yes Min. Income: $20,000 Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.99% - 23.99% APR	$5,000 to $100,000	700	2, 3, 4, 5, 6, 7 (up to 12 years for home improvement loans)
Fixed APR: 5.99% - 23.99% APR Min. credit score: 700 Loan amount: $5,000 to $100,000 Loan terms (years): 2, 3, 4, 5, 6, 7* Time to fund: As soon as the same business day Fees: None Discounts: Autopay Eligibility: Available in all states except VT Customer service: Phone, email Soft credit check: No Loan servicer: LightStream Min. Income: Does not disclose Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	18.0% - 35.99% APR	$1,500 to $20,000	None	2, 3, 4, 5
Fixed APR: 18.0% - 35.99% APR Min. credit score: None Loan amount: $1,500 to $20,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 1 to 2 business days after approval Fees: Origination fee Discounts: None Eligibility: Must have photo I.D. issued by U.S. federal, state or local government Customer service: Phone, email Soft credit check: Yes Min. Income: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.74% - 17.99% APR	$600 to $50,000 (depending on loan term)	700	1, 2, 3, 4, 5
Fixed APR: 7.74% - 17.99% APR Min. credit score: 700 Loan amount: $600 to $50,000* Loan terms (years): 1, 2, 3, 4, 5 Time to fund: 2 to 4 business days after verification Fees: None Discounts: None Eligibility: Does not disclose Customer service: Phone, email Soft credit check: No Min. Income: Does not disclose Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	11.69% - 35.93% APR⁷	$1,000 to $50,000	560	3, 5
Fixed APR: 11.69% - 35.93% APR⁷ Min. credit score: 560 Loan amount: $1,000 to $50,000 Loan terms: 3, 5, or 7 years ⁸ Time to fund: Within one day, once approved⁹ Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases Fees: Origination fee Discounts: Autopay Eligibility: A U.S. citizen or permanent resident; not available in DC, IA Customer service: Phone, email Soft credit check: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	8.49% - 35.97% APR	$1,000 to $50,000	600	2, 3, 5, 6
Fixed APR: 8.49% - 35.97% APR Min. credit score: 600 Loan amount: $1,000 to $50,000* Loan terms (years): 2 to 7 Time to fund: Within a day of clearing necessary verifications Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except Washington, DC Customer service: Email Soft credit check: Yes Min. Income: Does not disclose Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.4% - 35.99% APR⁴	$1,000 to $50,000⁵	580	3, 5, or 7 years⁴
Fixed APR: 5.4% - 35.99% APR⁴ Min. credit score: 580 Loan amount: $1,000 to $50,000⁵ Loan terms (years): 3, 5, or 7 years⁴ Time to fund: As soon as 1 - 3 business days⁶ Fees: Origination fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone, email Soft credit check: Yes Min. Income: $12,000 Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
Compare rates from these lenders without affecting your credit score. 100% free! Compare Now Trustpilot
All APRs reflect autopay and loyalty discounts where available \| LightStream disclosure \| ¹⁰SoFi Disclosures \| Read more about Rates and Terms

Tip: If your credit is less than stellar, consider applying for a personal loan with a cosigner. Applying with a cosigner with good credit not only increases your chances of getting approved, but can also get you a better interest rate and more favorable terms.

When comparing lenders, make sure to check if they allow cosigners on personal loans. Also, be mindful of the responsibilities of a cosigner: They’re legally responsible for repayment if you can’t meet your monthly dues. Not being able to repay the loan would damage the cosigner’s credit in addition to yours.

A debt consolidation loan could be the first step to financial recovery

With a debt consolidation loan, you can combine multiple debts and have just one monthly payment. Plus, you might qualify for a lower interest rate than you’ve been paying, which means you could save money and potentially pay off your debt faster.

Tip: Although a debt consolidation loan could be a good strategy to manage your debt, it’s also important to critically look at your financial situation to understand how you arrived there in the first place. This way, you can hopefully avoid similar circumstances in the future. For example, if you find yourself deep in debt, it’s probably worth making a (better) budget.

Alternatives to debt consolidation loans

If you don’t qualify for a debt consolidation loan, here are some other options to consider:

Speak with your lenders

If you’re facing financial difficulties, reach out to your lenders and other creditors. They might offer hardship assistance, payment plans, or other options that can help you avoid missing payments and hurting your credit.

For example: If you’re a SoFi borrower and have lost your job through no fault of your own, you could be eligible for the lender’s Unemployment Protection benefit. This program places your loan into forbearance for up to three months at a time (up to 12 months total over the life of your loan), though interest would continue to accrue onto your balance.

Home equity loans

A home equity loan could be another way to consolidate debt if you’re a homeowner. This type of loan lets you tap into your home’s equity while using your home as collateral.

If you’re considering a home equity loan vs. a personal loan, note that home equity loans tend to have lower rates than personal loans because there’s less risk to the lender. Unfortunately, you assume more risk:

Keep in mind: If you can’t keep up with your payments on a home equity loan, your home could be vulnerable to foreclosure.

With that said, it might be easier to qualify for a home equity loan even if you have poor credit. Just remember that each lender will have its own eligibility requirements.

Check Out: Where to Get a $10,000 Personal Loan

Sign up for a debt management plan

Not-for-profit credit counseling agencies can help you tackle your debt through a debt management plan. These plans generally last three to five years and are available to anyone who has debt, regardless of the amount.

If you sign up for a debt management plan, the agency will work on your behalf to contact your lenders and negotiate a payment plan. You’ll make monthly payments to the agency, which will send the appropriate funds to your creditors.

A debt management plan might also lower any fees or finance charges. Note that some plans might charge modest setup fees or monthly fees, depending on the agency.

Tip: You can find not-for-profit credit counselors via the National Foundation for Credit Counseling and the Department of Justice.

Learn More: How to Get Out of Credit Card Debt Fast

Debt settlement

Unlike debt management plans, debt settlement is offered by for-profit companies that try to settle outstanding debts with your creditors for less than you owe.

Many debt settlement companies will tell you to stop paying your bills while the settlement process is pending. This is not a good idea, however, as you could rack up late fees and potentially hurt your credit, making it hard to borrow in the future.

Also keep in mind that debt settlement might not actually work if your creditors refuse to negotiate, and you could end up hurting more than helping your finances in the long run. Be sure to consult with an attorney or financial advisor first before taking this route.

Tip: If you decide to pursue debt settlement, make sure you work with a reputable company. Watch out for red flags that could indicate a scam, such as a stranger promising your debt will be settled or erased in exchange for upfront payment.

Bankruptcy

If you’ve exhausted your other options, filing for bankruptcy could help you take control of your debt. It could lessen or erase some or all of your debt obligations — but at a cost.

Bankruptcy is extremely damaging to your credit and will stay on your credit report for up to 10 years, depending on which type of bankruptcy you choose. Because of this, bankruptcy should be a last resort.

Tip: Bankruptcy could make it extremely difficult to apply for new credit until the bankruptcy information falls off your credit report.

If you decide to file for bankruptcy, it’s a good idea to start rebuilding your credit as soon as possible to potentially qualify for loans in the future.

Learn More: Debt Consolidation vs. Bankruptcy: How to Choose

If you decide to use a personal loan for debt consolidation, remember to consider as many lenders as possible to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.

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About the author

Dori Zinn

Dori Zinn is a student loan authority and a contributor to Credible. Her work has appeared in Huffington Post, Bankate, Inc, Quartz, and more.

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