How to Get a Debt Consolidation Loan With Bad Credit – NerdWallet

Getting a debt consolidation loan if you have badly citation may require some shopping around, but there are options, including loans from credit rating unions and on-line lenders. Some lenders even cater specifically to borrowers with bad recognition ( a credit rating score below 630 FICO ) and consider factors beyond seduce, such as education, income and job history. here ‘s how to determine when a debt consolidation loan is a thoroughly mind for tackling your debt and how to get one.

What is a debt consolidation loan?

A debt consolidation lend is a personal loanword you use to combine and pay off multiple debts at once — think credit batting order balances, medical bills or other unbarred personal loans — so you ’ ra left with one monthly payment. ideally, this payment comes with a lower matter to rate than your current debts, which can save money and help you get out of debt quicker.

Is a debt consolidation loan a good idea?

If you ’ ra struggling to pay off debt and can qualify for a low adequate interest rate on a lend, debt consolidation is broadly a full theme. here are some of the benefits :

  • It saves money on interest. arguably the biggest profit of debt consolidation is the money you save on sake by consolidating debt under a lower rate. even a couple of share points makes a big difference in overall interest saved. Use our debt consolidation calculator to see your electric potential savings .
  • You may pay off debt fast. When you consolidate at a lower interest rate, you can get out of debt debauched by applying the savings to your remaining remainder. You can besides choose a short repayment condition on a debt consolidation loanword, adenine long as you can afford the monthly payments .
  • It simplifies the serve. rather of keeping track of multiple debts, with a debt consolidation loan, you ’ ll have lone one payment to make. Debt consolidation loans besides have fixed terms, so you ’ ll know your bribe date, which can keep you motivated .
  • It could build your credit. Though taking out a debt consolidation loan will temporarily knock a few points off your credit score, the overall effect should be positive as you start to dig out of debt .

How to get a debt consolidation loan with bad credit

Check your credit report

Are mistakes on your accredit report the argue your score is abject ? check for errors such as amiss accounts, incorrectly reported payments or inaccurate citation limits. You can check your credit composition weekly for free at each of the three major citation reporting chest of drawers — Experian, Equifax and TransUnion — using AnnualCreditReport.com.

Be ready for any loan application

NerdWallet tracks your credit score and shows you ways to build it — for free.

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tied a small bulge in your credit rating score may increase your odds of qualifying for a debt consolidation lend. Going from a bad to a clean recognition score ( a FICO score of 630 to 689 ) could besides lead to a more low-cost loanword with a lower interest pace.

Improve your debt-to-income ratio

If you don ’ t need to consolidate debts correct off, consider ways to increase your income and pay off small debts. This improves your debt-to-income proportion, which lenders practice to evaluate your ability to repay a lend. The lower the DTI proportion, the more likely a lender may approve your lend application.

Add a co-signer

Some lenders allow co-signers, which can help you qualify for a loanword and get a lower rate. typically, the co-signer ’ south credit score must meet or exceed the lender ’ second minimal necessity. Keep in heed that the co-signer takes on adequate province for the lend. If you miss payments or fail to repay the loanword, your co-signer ’ sulfur credit rating score may suffer.

Shop around

compare interest rates and terms from multiple lenders to get a loanword with repayments that fit your budget. You can pre-qualify with most on-line lenders and see estimated rates. This involves a soft recognition hindrance, which does n’t hurt your credit score. Look for consumer-friendly features such as direct requital to creditors, which means the lender sends the lend funds to your creditors, simplifying the process — and eliminating any temptation to use the cash for something else.

Where to get a debt consolidation loan for bad credit

lender Minimum credit grudge APR range Get started
Navy Federal

4.0NerdWallet rating NerdWallet ‘s ratings are determined by our editorial team. The scoring formula takes into bill factors we consider to be consumer-friendly, including impact to recognition score, rates and fees, customer experience and responsible lending practices .

none . 7.49 % – 18.00 % .

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on NerdWallet .

OneMain

4.0NerdWallet rating NerdWallet ‘s ratings are determined by our editorial team. The scoring formula takes into explanation factors we consider to be consumer-friendly, including affect to credit score, rates and fees, customer experience and responsible lend practices .

none . 18.00 % – 35.99 % .

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at OneMain .

Upstart

4.5NerdWallet rating NerdWallet ‘s ratings are determined by our column team. The scoring formula takes into bill factors we consider to be consumer-friendly, including affect to credit score, rates and fees, customer experience and responsible lend practices .

none . 5.39 % – 35.99 % .

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at Upstart .

upgrade

5.0NerdWallet rating NerdWallet ‘s ratings are determined by our editorial team. The scoring formula takes into history factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and creditworthy lending practices .

560 5.94 % – 35.97 % .

Check rates

at Upgrade .

Universal Credit

4.5NerdWallet rating NerdWallet ‘s ratings are determined by our editorial team. The scoring rule takes into score factors we consider to be consumer-friendly, including impact to credit score, rates and fees, customer experience and creditworthy lend practices .

560 8.93 % – 35.43 % .

Check rates

at Universal Credit .

Credit unions

credit unions are nonprofit organization fiscal organizations that may offer more flexible terms and lower rates than on-line lenders. Federal credit unions cap annual share rates on personal loans at 18 %. citation unions don ’ triiodothyronine typically allow you to pre-qualify for a loan ; applying requires a hard credit check mark, which can temporarily lower your credit rating score and make it harder to shop around. You besides need to become a member of the credit union to apply for a lend, which may mean surviving or working nearby and paying a small membership tip. A local recognition marriage is a good place to start.

Online lenders

Online lenders provide fast financing, since you can often complete the application on-line and get funded within a few days. Online lenders may charge higher rates for bad-credit borrowers than credit unions do. In 2021, borrowers with bad credit ( below 630 FICO ) qualified for an average estimate APR of 25.3 %, according to a NerdWallet sketch. Online lenders may besides charge origin fees that cover the costs of processing your loan. The fee is typically deducted from the loanword proceeds, so you might have to request a larger lend to get the wide amount you need. upgrade is one of the best on-line lenders for a bad-credit lend. If you get a debt consolidation loan and have Upgrade send the funds directly to your creditors, you can qualify for an extra rate discount rate of 1 to 5 percentage points. Upstart besides accepts applications from borrowers with bad credit and will evaluate alternative data on your application, like college major and influence history, which could boost your odds of approval and getting a low pace. If you use the loanword to pay off credit menu debt, Upstart will send the funds to your credit tease issuers.

Debt consolidation loan alternatives

If debt consolidation loans wo n’t work for you, here are some potential alternatives.

Other debt payoff methods

The debt snowball and debt avalanche methods are popular strategies for paying off debt without consolidating. The snowball method acting uses early wins to keep you on track to becoming debt-free. In this method, debts are arranged from the smallest poise to the largest. Once the smallest debt is repaid, the monthly payment for that debt goes toward the next-smallest balance until that ‘s paid off. then, you continue to roll payments toward each debt until you ‘re debt-free. The avalanche method acting follows a similar scheme, but starts with your highest-interest debt. then, when that ’ s paid off, you tackle the second-highest-interest debt and so forth until all debts are paid. This set about can save money and ultimately prison term, but may not have the immediate wins of the snowball method acting.

Debt management plan

A debt management plan from a nonprofit credit counseling agency can help reduce your matter to rate and pay off debt debauched. It ’ s an option if you have credit circuit board debt and if you can stick to a payment plan for several years while not using the credit cards.

Bankruptcy

Discharging your debts in bankruptcy may be an option if you are overwhelmed by debt and it will take five years or longer to repay it through consolidation. Bankruptcy wipes out most kinds of unbarred debt, including credit cards and medical bills. While your credit score may initially take a collision, it should begin to recover within months after filing for bankruptcy .

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