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We looked through dozens of lenders that offer debt consolidation loans to find the top loan companies with attractive options for borrowers with bad credit. To help you with your search, we've compiled those lenders into a list of the best debt consolidation options by credit score. While these lenders do have options for bad credit borrowers, not everyone will qualify, so you should shop around to find the best option for you.
How to Get a Debt Consolidation Loan with Bad Credit
Getting a debt consolidation loan with bad credit may be difficult, as your lender options will be limited. However, there are several debt consolidation loan companies that try to make their loan products accessible for those with less than perfect credit. And if you are able to qualify, using a debt consolidation loan can potentially help you manage your loans more easily, lower your interest rate and improve your credit score.
Debt consolidation loans allow you to combine your various debts into one personal loan with a single interest rate and loan term. The goal is to lower your rate or lower your monthly payment and, overall, make managing your bills each month easier. By doing this, you may even improve your credit score, if you are able to stay on top of your payments.
Still, although these loans can help you, they can also cost more, as your debt consolidation loan interest rate will depend on your current rates and your credit score. If you’re given a higher rate than what you currently have, your monthly payment may increase depending on your loan term. Before deciding on a debt consolidation loan, you should calculate how much you're paying now and compare it to the quotes you received from lenders.
It is important to shop around for the best debt consolidation loan rates with reasonable terms, in addition to looking at alternative options. With a bad credit score, you should explore any options available to you, as some may not work out. Below, we've listed our top debt consolidation picks for bad credit and alternatives to consider if debt consolidation won't work for you.
Best Debt Consolidation Loans for Bad Credit
If you've decided to consider your debt consolidation lender options, we searched through and found some of the best personal loan companies to choose from. Always compare rates before settling with one company.
Debt Consolidation for Credit Scores Under 650
Finding a debt consolidation loan with a credit score under 650 will be slightly tricky, but it is definitely doable, especially if you are working to improve it. Here are some lenders for credit scores under 650 to consider:
Why we like it: Avant offers personal loans starting at $2,000, with a maximum loan amount of $35,000, depending on the state that you live in. The company states that most of its customers who receive loans have a credit score between 600 and 700, making it a possible option for borrowers looking for a debt consolidation loan with a credit score under 650. The lender also offers flexibility in how you pay off your loan, allowing you to pay by personal or cashier's check, debit card, bank account withdrawal or money order without having to pay fees.
Drawbacks: Rates and terms vary from state to state, meaning that you may not be able to get some of the lowest rates that Avant offers. Although keep in mind that with a bad credit score, it may be difficult to qualify for those low rates anyway. On top of this, loans are not available for all states, and Avant cannot lend to residents of Iowa, Colorado or West Virginia.
Why we like it: Upstart requires a credit score of 620 to qualify for a loan. For California residents, the minimum credit score is 580. Loans are typically available one day after approval, so this lender is great if you need to consolidate your loans right away. And unlike many other lenders, Upstart has a large loan amount range, allowing you to borrow as little as $1,000 and as much as $50,000. Upstart is available to residents of almost every state except Iowa and West Virginia.
Drawbacks: Although Upstart only requires a credit score of 620, it can still be difficult to qualify for a loan, as the lender also evaluates your educational and job history. Keep in mind that your lender won't actually be Upstart, it will be a bank that the company has partnered with to provide you with a loan offer. Also, all loans have an origination fee, which means you'll get less than the amount you asked for, as the amount will include the fee.
Debt Consolidation for Credit Scores Under 620
Having a credit score under 620 will make it more difficult to qualify for a debt consolidation loan, especially one with a reasonable interest rate. However, there are still lenders that may be able to meet your needs. Here are our top picks for debt consolidation for credit scores under 620:
Why we like it: OneMain Financial is one of the few lenders that will give loans to borrowers with credit scores under 620. As expected, its rates aren't the most competitive, but compared to payday lenders, it offers much better debt consolidation rates. And with a low credit score, you likely won't qualify for the lowest rates that lenders offer, making the company a reasonable option. OneMain Financial also offers a rewards program to help borrowers make their payments on time. These perks include deals for major retailers, restaurants, travel and more.
Drawbacks: In order to complete your debt consolidation loan application, you will need to visit a local OneMain Financial branch. There are over 1,600 branch locations across 44 states, but there are no locations in Alaska, Arkansas, Connecticut, Massachusetts, Rhode Island or Vermont. Also, OneMain Financial doesn't have the best rates, so if you think you may be able to qualify for a lower rate, which may be difficult with a low credit score, you should look at rates from other debt consolidation companies.
Why we like it: Peerform is a marketplace lender where your loans are funded by investors who focus on a variety of factors in addition to your credit score. To qualify for a debt consolidation loan from Peerform, you will need a minimum credit score of 600. Borrowers will need a minimum of one year of credit history to be eligible. Loan amounts range from $10,000 to $35,000 for debt consolidation with maximum rates depending on whether you need a three-year or five-year loan.
Drawbacks: Peerform charges origination fees for its loans between 1% and 5%, which can take a small chunk out of your loan. When you have a lower credit score, your origination fee will generally be on the higher end. You won't be able to add a co-signer to help get a better rate or origination fee, as they are not allowed. Also, Peerform is not available for borrowers in Connecticut, North Dakota, Vermont, West Virginia, Wyoming and D.C.
Alternatives to Debt Consolidation Loans
Debt consolidation may not be an option for everyone, especially those with poor credit scores, and it might not be the best or cheapest option available. All borrowers should explore all their options before settling on a debt consolidation loan, as there could be alternatives to try instead or to use simultaneously. Here are some other ways to pay down and manage your debt. Keep in mind that not all of these options are recommended:
Balance transfer credit cards: Balance transfer credit cards with a promotional 0% APR are a good option for consolidating debt if you can pay it off during the promotional period. The promotional rate is usually only offered for a limited period, ranging from just a few months to as long as 21 months. If you don't pay off the balances you transfer before the promotional period ends, you'll have to either pay the higher interest rate or transfer the remaining balance to a new promotional 0% APR balance transfer card.
Credit counseling: Talking with a credit counseling service can help you come up with a plan for the best way to tackle your debt. Solutions from credit counselors may include budgeting, debt management plans, consolidating debt and bankruptcy, in some cases. However, some credit counselors work on commission and will try to sell you services that you don't need. Consider working with a National Foundation for Credit Counseling (NFCC)-certified consumer credit counselor.
Debt management plan: Unlike debt consolidation, you won't combine your debt into one loan. However, your debt will usually be consolidated and you'd work with a debt management company to help you negotiate with current creditors and come up with a way to repay your debt. Keep in mind that you will be responsible for paying all of the debt owed, unlike debt settlement. Also, doing this could impact your ability to receive another loan while in repayment, as some creditors will note on your credit report that you are paying through a third party.
Home equity loan: Home equity loans use the equity in your home to consolidate and secure your debt, which means the lender can foreclose on your home if you default on the loan. You may get a lower interest rate, since the loan is secured by your home. But you also may lose your home if you have trouble paying off the debt, which isn't a risk with other debt consolidation options. For this reason, many people recommend not using a home equity loan for debt consolidation.
401(k) loan: Using a 401(k) loan can be complicated and have unintended consequences if you deviate from your plan. For instance, if you lose your job while repaying your loan, you may have to pay the balance owed in full or have the remaining balance treated as a distribution, which requires paying taxes and penalties. In most cases, using a 401(k) loan to consolidate debt isn't a good idea.
Debt settlement: Debt settlement is very different from debt consolidation. Instead of combining your debt, you or a company that works on your behalf negotiates with your creditors to pay a lump sum that's less than the full amount you owe. Even though paying less than you owe may sound like a good option, debt settlement has many negative consequences, as it can damage your credit score and you'll likely incur late fees, interest, and, in most cases, you'll owe taxes on the amount of debt forgiven by your lender.
We evaluated dozens of personal loan companies to find the best debt consolidation loans for borrowers with bad credit. In our reviews, we considered the following criteria:
- Competitive APRs: In most states, the maximum allowed APR for a personal loan is 36%. We looked at companies that offered rates equal to or less than this. For bad credit borrowers, APRs will likely be on the higher end.
- Range of loan amount and terms: A majority of the companies on this list let individuals borrow at least $25,000, with multiple options for repayment terms. Typically, loans are offered in repayment terms of two to seven years.
- Fair fees: Many companies in this category do not charge any prepayment fees. However, there are some with origination fees of no more than 6% and late fees of no more than $25 or 5% of the monthly past due.
- Transparent rate and fee disclosure: Reputable companies will present rates, fees and loan amounts up front instead of requiring you to apply to figure out what the cost of the loan will be. Companies included in this list had transparent and easy-to-find rate and fee schedules.
- Company credibility: We evaluated the credibility of the companies on this list based on user reviews, Better Business Bureau (BBB) ratings and the company itself. All companies on this list had positive user reviews and/or BBB ratings.