Debt Consolidation Loans for Bad Credit

What is a debt consolidation loan?

A debt consolidation loan is a single loan that pays off several existing debts, such as loans, credit cards and overdrafts, into one convenient payment. Debt consolidation can mean you could access better interest rates and reduce your monthly loan payments.

Using a loan to consolidate your debt like this can help you gain transparency on what you owe, which ultimately means you’re less likely to default with just one monthly payment.

Can I get a debt consolidation loan with bad credit?

Yes, you can get a debt consolidation loan with bad credit, but it’s worth noting that you won’t have as many loan options available to you. Lenders are always willing to consider a variety of borrowers, regardless of their credit score, but you might find it more difficult to find a suitable lender.

It’s always worth improving your credit score wherever possible. You can take some really simple actions to boost your score: check out these tips on improving your credit score. By improving your credit score, you can unlock better interest rates and higher loan amounts, and you’ll have a better choice when it comes to lenders.

How do debt consolidation loans work?

Let’s say you have several debts you’re currently paying, i.e. credit cards, store cards, loans etc. Instead of paying each debt separately (along with interest on each), you can take out a debt consolidation loan to pay off these existing debts. This means you have one payment each month instead of several, so it’s easier to keep track of your finances.

Advantages of a debt consolidation loan

There are many advantages of a debt consolidation loan, here are just a few:

• Better visibility over your finances
• Repaying one loan instead of several
• Access better interest rates and save money
• Have a clear ‘debt-free’ end date to work towards
• Improve your credit rating by paying off revolving credit facilities (like credit cards)

Disadvantages of a debt consolidation loan

As with any loan application, there are some disadvantages to applying for a consolidation loan. Here are a few:

• Bad credit might mean you can’t get one
• Might cost you more in the long run due to longer-term borrowing
• If the loan is secured, you could lose your property if you default on repayments
• Might incur early repayment charges from your other debt or balance transfer fees
• Interest is based on your credit score, so it might not be lower than your previous payments

What type of debts can be used for a debt consolidation loan?

A consolidation loan is used to pay off existing credit. You can consolidate most unsecured debts, including:

• Personal loans
• Payday loans
• Store cards
• Credit cards
• Phone bills
• Overdrafts

As long as it’s unsecured, you can usually resolve the debt through consolidation.

What debts can’t you consolidate? You can’t consolidate things like your mortgage or car finance payments.

What are the best loans for debt consolidation with bad credit?

There is no one “best loan” that will suit everyone’s needs. That’s why it’s essential to understand your options and shop around for the best deal. You can compare many lenders in one place with the help of a broker like us. We can match your criteria with the best lender and loan product to save you time searching online.

Can I apply for a debt consolidation loan without a credit check?

No, lenders will always perform a credit check on you before lending you money. This ensures they lend responsibly to consumers in line with the Financial Conduct Authority (FCA) guidelines. The lender needs to check what kind of borrower you are — are you reliable? Have you got a pattern of missing repayments? The lender needs to understand the risks of lending to you.

What kinds of debt consolidation loans for poor credit are available?

There are two types of debt consolidation loans — unsecured loans and secured loans. Read about each below:

Secured debt consolidation loans

A secured debt consolidation loan is a loan secured with an asset, therefore reducing the lender’s risk. If you miss repayments, however, you could lose your asset (most commonly your property or car).

Secured loans mean you can usually access better interest rates and larger loan amounts. We don't recommend taking out a secured loan when consolidating unsecured debts.

Unsecured debt consolidation loans

An unsecured debt consolidation loan is one for which you don’t need to offer up collateral — this, therefore, poses less risk to you. An unsecured loan is usually quicker to access, too.

Looking for an unsecured short term loan? Apply now, and we’ll do our best to match you with a suitable lender for your needs.

Can you get a bad credit debt consolidation loan with no guarantor?

Yes, you can get a debt consolidation loan with bad credit and not need a guarantor. All lenders have different criteria, but many providers will not insist on having a guarantor. If you’d rather have a guarantor loan for debt consolidation, that’s no problem — there are many lenders willing to accept loan agreements cosigned by your guarantor.

Where do I go for help if I’m in financial difficulty?

If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.