Debt Consolidation Loans for Bad Credit in December 2024

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Written by
Carol Pope
Updated December 03, 2024
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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
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300

7.40% - 35.99%

36 or 60 months

$1,000 to $50,000

0.00% - 12.00%

Pros
  • One of the lowest credit score requirements on the market
  • Can get your money one day after you're approved
  • Sends money directly to your current creditors
Cons
  • Only two repayment terms to choose from (36 or 60 months)
  • Although you may be approved with bad credit, your rate will probably be high
  • Can't take out a loan with a second person

What to know

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If you have bad (or no) credit, lending platform Upstart is worth exploring. It requires a minimum score of 300, one of the lowest credit floors around. Also, unlike other traditional lenders, Upgrade approves some borrowers who don’t have a credit history.

However, if you have bad credit, you’ll likely be on the hook for a hefty origination fee and pay rates as high as 35.99%.

Read our full expert Upstart personal loan review.

How to qualify

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Upstart has transparent eligibility requirements, including:

  • Age: Be 18 or older
  • Administrative: Have a U.S. address, personal banking account, email address and Social Security number
  • Employment: Have a job or job offer that starts within six months, or have regular income
  • Credit-related factors: Debt-to-income (DTI) ratio no higher than 50% (45% in Connecticut, Maryland, New York and Vermont), no bankruptcies within the last year, fewer than six inquiries on your credit report in the last six months and no current delinquencies
  • Credit score: 300+
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550

9.95% - 35.99%

24 to 60 months

$2,000 to $35,000

Up to 9.99%

Pros
  • Fast funding timeline (as soon as the day after you're approved)
  • Easily manage application and payments through mobile app
  • Reports to all three credit bureaus
Cons
  • Might not offer enough money if you have a large amount of debt to consolidate
  • Potential for high origination fee
  • $25 late payment fee

What to know

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Since Avant reports to all three credit bureaus — Equifax, Experian and TransUnion — consolidating through Avant can help you improve your creditworthiness. Avant also funds your loan as quickly as the next business day.

You can only borrow up to $35,000 with Avant, so you’ll need to consider other lenders if you’re consolidating more debt. You’ll also need to budget for a potentially high origination fee that Avant will take out of your loan before sending it to you.

Read our full expert Avant personal loan review.

How to qualify

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To get a loan with Avant, you’ll need to meet the following minimum requirements:

  • Residency: Not available to residents of Hawaii, Iowa, Maine, Massachusetts, New York, Vermont, Washington and West Virginia.
  • Administrative: May need to submit bank statements, pay stubs or tax documents to prove your income. Avant may also call your employer to verify your employment.
  • Credit score: 550+
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560

8.99% - 35.99%

24 to 60 months

$2,000 to $50,000

1.00% - 9.99%

Pros
  • Get better chances of approval by adding a second person with good credit to your loan
  • Peer-to-peer loans are typically easier to qualify for
  • Change your due date up to once a year
Cons
  • Keeps 1.00% - 9.99% of your loan as an origination fee
  • Cancels loan request if investors don't fund at least 70% of your loan within 14 days
  • $15 late fee (or 5% of the unpaid balance, whichever is greater)

What to know

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Prosper is a peer-to-peer loan platform that links investors with borrowers. Prosper allows you to apply with a co-applicant, which could improve your odds of getting a loan and help you qualify for more money.

Although you can get your loan as soon as the next business day after Prosper approves you, getting to that stage can take up to five business days. And since it’s peer-to-peer, you’ll need to wait for an individual investor to pick up your loan request.

Read our full expert Prosper personal loan review.

How to qualify

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To get a loan with Prosper, you must meet the following requirements:

  • Age: Be 18 or older
  • Citizenship: Be a U.S. citizen
  • Administrative: Have a U.S. bank account and Social Security number
  • Residency: Not live in Iowa or West Virginia
  • Credit score: 560+
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580

9.99% - 35.99% (with autopay)

24 to 84 months

$1,000 to $50,000

1.85% - 9.99%

Pros
  • Offers next-day loans
  • Use your car as collateral to improve your approval chances
  • Get better odds of approval by adding a second person with good credit to your loan
Cons
  • Keeps between 1.85% - 9.99% out of every loan as an origination fee
  • $10 late payment fee

What to know

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Upgrade offers joint loans. If you’re looking to consolidate debt that you and someone else have accrued together, it’s worth your time to check your rates with Upgrade. You can also put your car up as collateral with a secured loan to access lower rates.

If your score is low, you’ll likely pay a steep origination fee. Upstart charges $10 for missed or late payments.

Read our full expert Upgrade personal loan review.

How to qualify

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To qualify for a loan through Upgrade, you must meet the requirements below:

  • Age: Be at least 18 years old (19 in some states)
  • Citizenship: Be a U.S. citizen, permanent resident or live in the U.S. with a valid visa
  • Administrative: Have a valid bank account and email address
  • Credit score: 580+
See Personalized Results Read Our Expert Review

600

8.98% - 35.99%

24 to 60 months

$1,000 to $40,000

3.00% - 8.00%

Pros
  • Can change your due date one time
  • Add another person to your loan to potentially qualify for more money or better rates
  • 15-day grace period for payments
Cons
  • Only offers up to $40,000
  • Charges an origination fee of 3.00% - 8.00% on all loans

What to know

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You can take some of the stress out of the debt consolidation process by having LendingClub pay up to 12 of your creditors directly. Plus, applying for a LendingClub loan with a co-borrower who has excellent credit can help you get better rates and more money.

However, this online lender charges an origination fee on every loan and you can only borrow up to $40,000.

Read our full expert LendingClub personal loan review.

How to qualify

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To be eligible for a LendingClub personal loan, you must meet the following requirements:

  • Age: Be at least 18 years old
  • Citizenship: Be a U.S. citizen or permanent resident
  • Administrative: Have a verifiable bank account
  • Credit score: 600+
See Personalized Results Read Our Expert Review

640

8.95% - 17.48%

24 to 60 months

$5,000 to $40,000

1.50% - 5.50%

Pros
  • Customer service available seven days a week
  • No application or late payment fees
  • Consolidation loans specifically geared toward credit card debt
Cons
  • May need to wait seven business days for approval
  • Can't add a second person to your loan
  • Loans not available in Iowa, Massachusetts or Nevada

What to know

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Happy Money offers loans specifically for refinancing credit card debt. Even if you barely qualify for a loan, your maximum APR will only be 17.48% — much lower than many other lenders that offer debt consolidation loans for bad credit.

You can’t get a small loan from Happy Money, and you’ll need a credit score of at least 640 to qualify. You will also have to pay an origination fee (albeit one that’s lower than some competitors).

Read our full Happy Money personal loan review.

How to qualify

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Happy Money provides clear eligibility requirements as to how you can qualify for a loan:

  • Age: Must be 18 years or older
  • Administrative: Must have a valid Social Security number and checking account
  • Residency: Not live in Iowa, Massachusetts or Nevada
  • Credit score: 640+
  • Payment history: Zero current delinquencies on your credit profile
See Personalized Results Read Our Expert Review
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What is a debt consolidation loan for bad credit?

A debt consolidation loan for bad credit is a personal loan that you use to roll (or consolidate) many debts into one. These are typically unsecured loans, which means they don’t require collateral.

The goal is to get a lower interest rate on a debt consolidation loan than you’re currently paying across multiple loans. This may be possible even if you have a less-than-perfect history, as some lenders specialize in bad credit.

Aside from lower rates, consolidating can also help you reduce the number of debt payments you make each month. And if you choose a shorter loan term, you can pay off your debt faster.

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Pros and cons of a debt consolidation loan for bad credit

ProsCons

 Save money with lower interest rates than you’re currently paying

 Can reduce the size — and number — of monthly payments

 Could improve your credit score if credit utilization goes down

 Difficult to qualify for a low APR with bad credit

 You may not qualify for a large enough loan to pay off all debts

 New hard inquiry can negatively impact an already bad credit score

Will the interest rate you receive be worth it? If you have serious credit problems, you’ll likely have trouble qualifying for a decent APR. Compare the interest rates on your existing debts with possible rates for debt consolidation loans. Loan prequalification lets you compare estimated APRs without hurting your credit score.

Do you have a debt payoff plan? Consolidation alone usually isn’t enough to help you achieve freedom from debt. But if you’re willing to follow a plan to get out of debt, a consolidation loan could help.

Can you avoid new debt? You don’t want to pay off your current debts with a consolidation loan and start racking up more debt. You’ll need to be 100% committed to avoiding new debt, or consolidation could snowball into a bigger money and credit problem down the road.

How to qualify for a debt consolidation loan if you have bad credit

  1. Check your credit score. You can check your credit score with LendingTree Spring. You can also request a free copy of your credit report from all three credit bureaus at AnnualCreditReport.com.
  2. Research lenders in your credit band. If you have bad credit, many lenders might not be willing to extend you a loan — but that doesn’t mean you’re out of options. Check minimum credit score requirements for potential lenders.
  3. Check with local credit unions. A credit union personal loan may benefit those who have bad credit when it comes to debt consolidation. Credit unions are not-for-profit, member-owned financial institutions that have membership requirements typically based on where you live or work.
  4. Consider a cosigner. Bad credit borrowers may consider getting a personal loan with a cosigner by enlisting the help of a friend or family member who has good credit and would be willing to cosign on a loan. Review our list of the best personal loans with a cosigner. Be aware that not all lenders allow cosigners.
  5. Apply for prequalification. Prequalification involves a soft credit inquiry, so you can check your eligibility and the terms you may be offered without affecting your credit score. If you have bad credit, even losing a few points from a hard credit inquiry could affect your chances of getting the loan.
  6. Formally apply for the loan. This will involve a hard credit inquiry and could slightly (but temporarily) impact your credit score. When you reach this stage of the application process, be prepared with documents that show your ability to repay debt, such as tax returns and pay stubs.
  7. Use the loan funds to pay off other debts. If approved, the lender will typically deposit the money into your bank account within a few days. You can use this money to pay off your debts, like credit cards and payday loans.

Watch out for predatory lenders. Having bad credit can make you an easy target for predatory lenders that offer payday loans or car title loans. These types of loans don’t typically require a credit check, but they come with sky-high APRs and short repayment terms that can trap you in a cycle of debt.

Alternatives to consolidating debt with bad credit

Credit counseling or debt management plan

If you’ve fallen into debt, you could contact a nonprofit credit counseling agency that helps people negotiate with creditors and creates a debt management plan. Debt management plans can simplify your monthly debt payment, much like a consolidation loan does.

Credit counselors often are an affordable option relative to financing your debt, but make sure you find a credit counselor who meets your specific needs. They can also help you create a budget and teach money management skills.

Home equity loan

Sometimes you can get better terms with a secured loan, which uses collateral. With a home equity loan or home equity line of credit (HELOC), you can use your home to finance your new loan — but watch out, because nonpayment can eventually lead to foreclosure.

Other secured loan

Home equity loans are one of many types of secured loans, which can involve collateral like cars, bank accounts and other valuable items. Loans secured with cars or funds in a savings or investment account will likely have more favorable terms — but again, they come with serious risk that the lender will seize your asset if you stop making payments.

401(k) loan

Some companies let you borrow from your 401(k). The interest you pay goes back into your 401(k), but you can only borrow up to half of the vested amount or $50,000 (if the vested amount is higher). You might also have to pay the balance in full if you leave your job.

What to do if you don’t qualify for another loan

If you can’t get approved for a debt consolidation loan, there are more strategies for reaching your financial goals.

Debt management strategies

With discipline and a sensible debt payoff plan, you can pay off your existing debt yourself. Create a budget, limit your expenses and use extra money to pay off the debt. Some debt payoff techniques focus on paying off the debt with the highest interest (debt avalanche) or smallest balance (debt snowball).

Improve your credit score

The best way to improve your chances of getting a new loan is to boost your credit score. Improving your score may take time, especially if you have a track record of missed payments, but steady, responsible credit usage can help bring your score back up. Start by making on-time payments, and disputing possible errors.

Debt settlement

Debt settlement services will significantly hurt your credit score by encouraging you to miss payments and avoid contacting creditors while the company negotiates with them. While they can reduce your overall debt burden, creditors don’t have to work with them, and even if they do, you’ll still have to pay fees as a percentage of the starting debt.

Bankruptcy

Only to be considered as an option of last resort, bankruptcy is a legal process in which you can clear debt under certain conditions, some of which may allow creditors to repossess assets. Bankruptcies will also damage your credit score and future ability to borrow money.

How we chose our picks for best debt consolidation loans for bad credit

We reviewed more than 30 lenders that offer personal loans to determine the best debt consolidation lenders for bad credit. To make our list, lenders must offer competitive annual percentage rates (APRs). From there, we prioritize lenders based on the following factors:

  • Accessibility: Lenders are ranked higher if their personal loans are available to more people and require fewer conditions. This may include lower credit requirements, wider geographic availability, faster funding and easier and more transparent prequalification and application processes.
  • Rates and terms: We prioritize lenders with more competitive fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
  • Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide any unique perks to customers, like free wealth coaching.

LendingTree reviews and fact-checks our top picks on a monthly basis. Based on our systematic rating and review process, the best debt consolidation loans for bad credit come from Upstart, Avant, Prosper, Upgrade, LendingClub and Happy Money.

Frequently asked questions

If you’re able to keep up with your loan payments, debt consolidation loans may actually help with your credit score. As you pay off your debt, you’ll reduce your debt-to-income ratio and demonstrate to creditors that you can make timely payments. Over time, this can boost your credit score.

Different lenders have different credit score requirements. Some will require that you have a good credit score while others will accept fair credit. The lower your credit score, the higher your APR will likely be.

If you want to apply for a debt consolidation loan but you have a lot of debt, getting approved may be difficult, but not impossible. For starters, check your credit score to see where you stand and work on cutting down on your debt. You can do this by using methods like the debt snowball method or the debt avalanche method.