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If you’re looking for a debt consolidation loan with bad credit, don’t worry — it’s still possible to get out of debt and get approved for a loan even if your credit needs work.

Consolidating debt can be a smart way to pay less in interest and potentially pay your debt off faster. With a debt consolidation loan, you borrow enough money to pay off your other unsecured debts. Then, you make one monthly payment to pay back the loan you took out to cover those debts.

Bad credit loans for debt consolidation are available through online lenders, peer-to-peer lenders and sometimes traditional lenders like banks and credit unions. If you have less-than-perfect credit, it’s still important to choose a lender that charges reasonable interest rates and offers fair terms.

Here’s what to do — and what to watch out for — when searching for a bad credit debt consolidation loan.

Check your credit score

Lenders base their loan decisions on your credit history, which goes into a credit-scoring model to come up with your credit score. The lower the credit score, the higher the interest rate on your loan. Too low a score, and the lender won’t approve the loan at all.

Knowing your credit score will help you understand which debt consolidation loans you should apply for and whether you’re likely to get approved. Since applying for a loan impacts your credit, you don’t want to needlessly lower your credit score by applying for a loan you won’t get approved for.

Most lenders categorize bad credit as a score of 629 and below, fair credit as 630-689, and good credit as 690-719. However, some lenders may accept credit scores in the high 500s or lower. One example is Avant, which has listed 580 as its minimum requirement.

Once you know your credit score, you’ll know if you should apply for a bad credit loan with a lender who specializes in debt consolidation loans for bad credit, or if should apply for a personal loan from a traditional lender.

Check your credit score for free at

Visit your local credit union

If you belong to a credit union, talk to a loan officer about qualifying for a personal loan. Credit unions may look beyond your credit score and take into account your entire financial history and personal circumstances. A credit union may also offer lower interest rates than a bigger bank or online lender.

Use an online lender

Online lenders like Prosper, Upstart and Avant are good places to look for debt consolidation loans for bad credit.

With an online lender, you can:

  • Compare rates without impacting your credit score
  • Apply quickly and easily, without lots of paperwork or visiting a branch in person
  • Get funds in as little as one business day

Online lenders may be more likely to approve you for a bad credit loan than a traditional, brick and mortar bank.

Check online lender rates on our Personal Loans Marketplace.

Try peer-to-peer lending

Peer-to-peer lending has changed from a type of crowdfunding, where individual investors loaned money directly to borrowers, to a much bigger business than it used to be. Today, companies and firms invest millions with web banks, and those banks find lenders that meet their criteria.

You may still be able to find a debt consolidation loan through peer-to-peer lending sites, but don’t expect the individualized, grassroots experience of the past.

In addition to unsecured consolidation loans, some peer-to-peer lenders offer secured loans, where you put up collateral in exchange for borrowing money. Cars and homes, as well as luxury items like jewelry and art, can be used to secure a cash loan for debt consolidation. Just make sure you don’t fall behind on payments or stop making payments. If you do, the lender can seize your property.

Consider debt settlement

If you can’t find a bad credit loan or can’t get approved, you may want to consider a debt settlement program. Debt settlement companies like National Debt Relief and Freedom Debt Relief work with you to pay off your debt at a discounted rate. You then pay back the debt settlement company with interest over time.

Debt settlement may have a negative impact on your credit score. In order to participate in this type of program, you have to default on all of the accounts you want to pay off. While this might be the smartest choice for some, think of it as a step above bankruptcy.

Watch out for predatory lenders

Some debt consolidation lenders are predatory. They lend to people with low credit scores but charge extraordinarily high interest rates. According to, a Texas-based subprime lender charges up to 365% interest on its loans to borrowers with bad credit.

Payday loans can be even worse. According to, a 2-week payday loan can come with an APR of 780% or more.

Avoid these types of lenders at all costs. Accepting a loan with such a steep interest rate can be extremely expensive and cause you to go deeper into debt.

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