Best Debt Consolidation Loans for Bad Credit
A good debt consolidation loan can help you save on interest, better manage monthly payments, get out of the red and improve your overall financial health. The catch is that you often need to be in relatively good financial health, with a decent credit score, to get one.
Still, there are personal loan providers with less stringent or alternative underwriting standards. In this guide, we’ll cover the best debt consolidation loans for bad credit borrowers, based on minimum credit score requirements, costs, repayment options and more.
MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.
Compare Top Debt Consolidation Loans
Lender | Interest Rates (APR) | Loan Amounts | Fees | Terms |
Upgrade | 7.74%–35.99% | $1,000–$50,000 | 1.85%–9.99% origination fee | 2–7 years |
Avant | 9.95%–35.99% | $2,000–$35,000 | Up to 9.99% origination fee | 2–5 years |
Upstart | 6.2%–35.99% | $1,000–$75,000 | 0–12% origination fee | 3 or 5 years |
Universal Credit | 11.69%–35.99% | $1,000–$50,000 | 5.25%–9.99% origination fee | 3–5 years |
OneMain Financial | 11.99%–35.99% | $1,500–$30,000 | 1%–10% or $25–$500 origination fee | 2–5 years |
Achieve | 6.25%–36% | $5,000–$50,000 | 1.99%– 9.99% origination fee | 2–5 years |
LendingClub | 6.53%–35.99% | $1,000–$60,000 | 0.00%– 8.00% origination fee | 2–7 years |
1. Best for Flexible Terms: Upgrade
Upgrade will consider applicants with credit scores as low as 580, and, among lenders with similar minimums, it’s among the most flexible. It offers loans as low as $1,000 and as high as $50,000 with terms between 2 and 7 years, and its fixed annual percentage rate (APR) range is competitive (7.74% to 35.99%).
While bad credit borrowers that qualify could see an APR offer on the higher end of that spectrum, Upgrade offers notable rate discount opportunities, including one for using all or some of your loan to pay off existing debts.
The drawbacks? Upgrade charges origination fees of 1.85% to 9.99%, a $10 returned payment fee and a $10 late fee after a 15-day grace period.
2. Best for Extra-Bad Credit Scores: Avant
Most Avant borrowers have credit scores between 600 and 700, but you could qualify with a score of 550, the lowest minimum on this list.
As a tradeoff, Avant’s fixed APRs are on the high side, ranging from 9.95% to the (standard for this category) 35.99%, and may charge a $15 returned payment fee and a $25 late payment fee after a 10-day grace period. Avant also charges origination fees of up to 9.99%, though, in a potential boon, you might qualify for a partial refund if you paid one over 5% and fully satisfy your loan ahead of its due date.
Avant’s loan sizes are relatively limited, ranging from $2,000 to $35,000, as are its loan terms of 2 to 5 years.
3. Best for No Credit Borrowers: Upstart
Upstart uses AI-enabled technology that considers alternative data, like education and professional background, to approve borrowers who might otherwise struggle to get a loan. It’s known for being particularly open to applicants with limited credit histories, so if a lack of a credit score is holding you back, you might want to request rates through Upstart’s pre-qualification process.
Upstart’s loans are generally competitive. Its fixed APRs range from a low 6.2% to 35.99%, and it offers loans between $1,000 and $75,000.
On the flip side, terms are limited to 3 or 5 years, and you face an origination fee of up to 12%. Plus, Upstart doesn’t offer direct pay to creditors.
4. Best for High Borrowing Amounts: Universal Credit
Universal Credit (which is actually powered by Upgrade) has a low credit score minimum of 560, the second lowest on this list, after Avant. Both its fixed APRs and origination fees start high at 11.69% and 5.25%, respectively, though both maximums (a 35.99% APR and a 9.99% origination fee) are standard for lenders in this category.
Among lenders with the lowest credit score minimums, Universal Credit offers one of the widest loan amount ranges of $1,000 to $50,000. It also offers direct pay to creditors for debt consolidation loan holders.
5. Best for Secured Loans: OneMain Financial
OneMain Financial doesn’t publicly disclose a minimum credit score requirement, but its target audience includes non-prime borrowers and users in online forums report approvals with credit scores as low as 600.
Admittedly, OneMain is one of the pricier options on this list with fixed APRs ranging from 11.99% to 35.99% and origination fees of 1% to 10% or $25 to $500. (It also charges fees for returned or late payments.)
Still, OneMain offers unsecured and secured debt consolidation loans and opting for the latter, which requires a titled vehicle as collateral, could help you qualify for more favorable terms. Keep in mind, you could lose that collateral if you default on the loan. OneMain offers loans between $1,500 to $30,000 with 2- to 5-year terms.
6. Best for Personalized Support: Achieve
Achieve will consider applicants with credit scores as low as 620, though you’ll need a credit score of at least 660 to borrow over $35,000. (Its loan limits range from $5,000 to $50,000.) It allows co-borrowers to increase your approval odds, even with bad credit, however.
Achieve’s origination fees of 1.99% to 9.99% are pretty standard for this category, and its fixed APRs are competitive at 6.25% to 36%. Plus, Achieve offers a rate discount to debt consolidation loan holders who opt for direct payment to creditors.
One nice standout perk? Each Avant borrower gets a dedicated loan consultant to support them throughout the application process.
7. Best for Joint Applications: LendingClub
LendingClub looks for a minimum credit score of 600 and at least 3 years of credit history with 2 or more accounts. But it lets you up your approval odds with a joint application, and you can even pre-qualify with your co-borrower to check eligibility and rates without hurting your credit scores.
Across lenders that allow co-borrowers, LendingClub is decidedly flexible. It extends loans between $1,000 and $60,000 with terms of 2 to 7 years, and its APRs range from 6.53% to 35.99%, though you’ll need a high credit score to qualify for LendingClub’s best rates, and, unfortunately, it's up to 5% APR discount on debt consolidation loans.
If you get a debt consolidation loan, you can opt to have LendingClub pay up to 12 of your creditors directly.
What Is a Debt Consolidation Loan for Bad Credit?
A debt consolidation loan is a singular installment loan you use to pay off multiple outstanding debts, like credit card balances, collection accounts or payday loans. A debt consolidation loan for bad credit is one that’s available to borrowers with credit scores below 601. Major credit scoring models classify bad credit as scores between 300 and 600.
Debt consolidation loans generally serve two main purposes:
They let you combine multiple bills into one, much easier-to-manage monthly loan payment.
They could help you save on interest if their APR is lower than the average APR across your outstanding credit accounts.
Achieving that second aim with a debt consolidation loan for bad credit can be tricky, as borrowers with low scores are unlikely to qualify for top-tier financing.
Pros and Cons of a Debt Consolidation Loan for Bad Credit
Understanding the pros and cons of a debt consolidation loan for bad credit can help you determine whether one is the right move.
Pros | Cons |
• Simplifies debt management: You’ll have one fixed-rate monthly payment to manage, instead of multiple due dates, minimums and potentially variable APRs. • Fixed repayment schedule: Debt consolidation loans come with a set end date. Plus, once you make a payment, you can’t re-run up your balance. • Credit score improvements: Prompt monthly payments, lower debt levels and proper management of an installment account should work in your score’s favor over time. | • High APRs: While you may get approved for a debt consolidation loan with bad credit, you might not qualify for an APR that is lower than the APR average across your existing debts. • Costly fees: Debt consolidation loans for bad credit are likely to impose origination fees, late fees, returned payment fees and other ancillary charges. • Potential debt cycle: A new loan could exacerbate money woes if, for instance, you use the funds to pay off credit cards that you immediately start using again. |
How To Get a Debt Consolidation Loan with Bad Credit
These steps could help you secure a manageable debt consolidation loan, even with bad credit.
Check your credit score, so you know how you rate and whether there’s anything you can do to improve your creditworthiness before applying.
Research and pre-qualify with multiple lenders known to accept borrowers with your credit profile. Pre-qualifying provides you with estimated rates and approval odds without generating a hard inquiry and further harming your credit score.
Ask for only what you need. That’ll up the odds that your debt-to-income ratio, another key consideration among lenders, won’t climb too high. It could also demonstrate prudence, as you won’t be asking the lender to take on more risk than necessary.
Consider a co-borrower. One with a good credit score might boost your approval odds. Keep in mind that this person is also assuming responsibility for the loan and could face credit or financial damages for failures to repay as agreed.
Opt for a secured loan backed by a vehicle or other collateral. While this move comes with its risks, namely, you could forfeit the collateral if you default on the loan, it might up your approval odds and help you qualify for more affordable APRs.
Alternatives to Consolidating Debt with Bad Credit
If you can’t qualify for a debt consolidation loan for bad credit or feel the move ultimately isn’t in your best interest, you have other options.
Home equity loan: If you own a home, you might be able to borrow against your equity, and that collateral could help you qualify for the loan or a home equity line of credit (HELOC). HELOCs and home equity loans generally offer lower APRs than debt consolidation loans or credit cards. The big trade-off is that you risk your home.
401(k) loan: Some employer-sponsored retirement plans let you borrow some of your savings.The upsides: 401(k) loans don’t require a traditional credit check and whatever interest you’re charged goes back into the account. Just note: If you leave your job, the loan may become due immediately and failure to repay might incur tax penalties.
Credit counseling: Non-profit credit counseling agencies often offer free financial planning advice. They can also help you negotiate and set up a debt management plan (DMP) with multiple creditors, usually for a small monthly fee of $25 to $55, plus an initial $75 set-up fee. DMPs generally exclude certain debts, like auto loans, unsecured personal loans and mortgages.
Peer-to-peer lending: Online platforms, like Prosper, connect borrowers with investors willing to lend money for debt consolidation and other purposes. These platforms tend to utilize lower credit and income standards, making them an option if you have bad credit. Fees and APRs for less-qualified applicants may be high, however.
Balance transfer credit card: Some card issuers offer 0% APRs on balance transfers for a set period, typically 12 to 24 months from account opening. (After that, the APR usually jumps dramatically.) Most require at least fair credit to qualify, and you’re likely to face a 3% to 5% balance transfer fee.
No matter what option you choose, it’s a good idea to understand all terms and conditions, have a strong repayment plan and avoid taking on new debts while you’re paying off old ones.
FAQs
Can I get approved for debt consolidation with bad credit?
You can get approved for a debt consolidation loan with bad credit. However, your options are generally more limited and you might have a harder time qualifying for terms that make the new loan worthwhile.
What credit score is needed for a debt consolidation loan?
Credit score requirements for debt consolidation loans vary by lender. Many require good to excellent credit (scores of least 661). However, some lenders will accept borrowers with no credit, fair credit or even bad credit, depending on their full risk profile.
Will a debt consolidation ruin my credit?
A debt consolidation loan won’t ruin your credit if you manage it properly. While some borrowers see initial score drops due a credit inquiry, credit utilization spike or other factors, the effects vary. If you make timely payments and successfully lower your total debts, the move should improve your credit over time.
Do banks offer debt consolidation?
Many traditional banks, including Wells Fargo and U.S. Bank, offer debt consolidation loans. While these loans often advertise competitive terms, traditional banks also tend to have more stringent underwriting standards than online lenders. In other words, borrowers with bad credit might have difficulty qualifying.
Is it hard to get a debt consolidation loan?
It can be hard to get a debt consolidation loan with bad credit, particularly at an APR low enough to make the loan manageable or worthwhile. However, there are lenders that accept borrowers with bad credit, and you could improve your approval odds with collateral, a willing co-applicant, and an otherwise strong financial profile.
Sources
Upgrade.com - Upgrade Personal Loan Website
Avant.com - Avant Personal Loan Website
Upstart.com - Upstart Personal Loan Website
Universal-credit.com - Universal Credit Personal Loan Website
Onemainfinancial.com - OneMain Financial Personal Loan Website
Achieve.com - Achieve Personal Loan Website
LendingClub.com - LendingClub Personal Loan Website
Reddit.com - Upgrade or OneMain?
Vantagescore.com - The Complete Guide to Your VantageScore 4.0 Credit Score
Myfico.com - What is a Credit Score?
IRS.gov - Retirement topics - Plan loans
Wellsfargo.com - Wells Fargo Personal Loan Website
Usbank.com - U.S. Bank Personal Loan Website
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