Updated: March 22, 2024
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Handling multiple debts can be tricky. That's where debt consolidation comes in. Instead of many bills, you focus on one loan. This can make things simpler and might even save you money if the new loan has a better rate.
Looking into debt consolidation, especially with bad credit, can feel tough. But below, we've listed some top loans made just for this purpose. We've also added some helpful tips and info to help you decide if debt consolidation is the right step for you.
If you have bad credit, debt consolidation loans can be daunting, but some lenders have truly shined. They've made a mark with their competitive interest rates, flexible repayment terms and excellent customer service. Here's our pick of the best lenders to help those with bad credit streamline their finances and potentially reduce their debt burden.
Upgrade is one of MoneyGeek’s top picks for low-income borrowers seeking a personal loan. This lender does not have minimum income requirements and accepts applicants with a FICO score of at least 560. They offer loans of up to $50,000, and their repayment terms are flexible at 60 months maximum.
Upgrade doesn’t charge penalties for individuals who pay off their loans early. They also provide a discount if you sign up for autopay.
However, because Upgrade caters to borrowers with low and fair credit, their interest rates are relatively high. Their loans also carry an origination fee and late payment penalty. Although they only conduct a soft inquiry during pre-qualification, they don’t allow co-signers. Nonetheless, this lender accepts joint applications, giving borrowers with poor credit a better chance of loan approval.
Pros
Cons
Upgrade is the second-best option for those with bad credit. The company offers loans in amounts as low as $1,000 and as high as $50,000. If qualified, you may get an interest rate as low as 5.94%. Getting funds also does not take long, because Upgrade releases money on the same business day that your loan application is approved. For convenience, the company accepts online applications. Borrowers can access their loan information through its mobile app.
However, Upgrade may not be a great option for some people. For example, the company does not allow borrowers to use the money to fund their post-secondary education. Upgrade also has a 2.9%–8% origination fee. Finally, if you have a credit score below 560, an Upgrade personal loan is not for you.
Pros
Cons
Avant can be a good option for borrowers who don't have excellent credit standing because they only have a minimum credit score requirement of 600. They also conduct soft credit inquiries when you check for possible loan options, which doesn't impact your credit score. However, it does have a pay-off — its interest rates. Even at the low end of the spectrum, you can expect an APR of 9.95% at the very least.
Avant offers several advantages to borrowers who prioritize efficiency and convenience. You can complete the entire application process online — from checking whether you pre-qualify to closing. You can also manage your loan using their mobile app, which works best if you're always on the go.
Pros
Cons
LendingPoint, a financial technology platform founded in 2014, reviews loan applications and approves loans using proprietary algorithms and artificial intelligence. You can apply for loans ranging from $2,000 to $36,500 if you have a minimum credit score of 590 and an annual salary of at least $20,000.
Apart from its A+ rating with the Better Business Bureau and low eligibility criteria, the company's noteworthy qualities include the absence of a prepayment penalty and speedy loan processing.
Additionally, the company does not place restrictions on loan usage. You are good to go as long as the intended use is legitimate. However, LendingPoint may not be for you if you wish to apply for a joint loan or want a co-signer. Additionally, West Virginia and Nevada residents are not eligible to apply.
Pros
Cons
Managing multiple debts can be a challenge, especially if you're looking for loans to consolidate debt for bad credit. Debt consolidation personal loans for bad credit offer a way to simplify your financial life, bringing several advantages:
While debt consolidation loans for bad credit can be beneficial, they come with potential risks:
Managing various debts can be daunting, especially with bad credit. Debt consolidation combines these debts for simplicity. Here's a breakdown of common debts and considerations when thinking of using consolidation loans to deal with bad credit:
Type of Debt | Notes and Considerations |
|---|---|
Credit Card Debts | Credit cards often have high interest rates. Consolidating can merge multiple card payments and potentially lower the total interest with debt consolidation loans for bad credit from direct lenders. |
Medical Bills | Sudden healthcare expenses can pile up. Consolidation can streamline these bills and even negotiate the owed amount. |
Other Personal Loans | From unforeseen costs to planned buys, merging multiple personal loans can lead to a singular payment and a more favorable rate. |
Student Loans | Consolidation simplifies repayments. But be aware: federal loans come with perks (like tailored repayment plans) that might be lost. |
Payday Loans | Because they are known for sky-high interest rates, consolidating payday loans can break the debt cycle and diminish overall interest, especially when you use guaranteed debt consolidation loans. |
Home Equity Loans | These usually have lower rates but are tied to your home. Consolidating might transition to an unsecured loan, lessening the risk to your property. |
Auto Loans | For those with multiple car loans or steep interest auto loans, consolidation can unify payments and offer improved terms. |
Retail Store Cards | Store cards can have hefty rates. Consolidating these into a debt consolidation personal loan for bad credit can make payments easier and cut down interest. |
Navigating bad credit debt consolidation loans can be a daunting task, especially when faced with numerous options and varying terms. In this section, we'll delve into the essential factors you should consider, providing clarity and guidance as you explore your options.
Your Credit Score
Your credit score is like a financial report card. A score above 700 can fetch you better debt consolidation loans with attractive interest rates. But a lower score might mean higher rates or tougher terms.
Total Amount of Debt
Gauge your total debt. If you owe amounts like $5,000 on one card and $7,000 on another, that's $12,000 in total. This is important information when searching for consolidation loans that can cover your entire debt.
Interest Rates on Current Debts
Monitor the interest rates of your existing debts. If one card has a 22% rate and another 18%, your aim should be a consolidation loan with a rate lower than your current highest to ensure savings.
Loan Terms and Conditions
These are your loan's guidelines. They detail the loan's duration and potential consequences of missed payments. Grasping these terms is vital, especially when considering unsecured debt consolidation loans or other specific loan types.
Fees and Charges
Some direct lenders might have hidden costs. An origination fee, for instance, is a setup charge. Some consolidation loans might also penalize early repayments. Being aware of these can prevent unexpected expenses, ensuring your loan remains cost-effective.
Choosing the right debt consolidation loan for bad credit is pivotal for your financial well-being. With a plethora of lenders, terms and offers available, making an informed decision is key. Follow this systematic guide to pinpoint the ideal loan tailored to your needs:
Evaluate interest rates from various direct lenders for debt consolidation loans. If your credit cards charge rates like 23% and 19%, and you spot a consolidation loan at 15%, that's potential savings. Target a loan rate that's lower than your existing debts.
Loan durations differ among lenders. For a $10,000 loan at 15%, a 2-year term might mean around $480 monthly, while a 5-year term could be about $240. Opt for a term that aligns with your budget. Shorter durations might have steeper monthly payments but can expedite debt clearance.
Determine feasible monthly payments. If a loan suggests $300 monthly, but you can only spare $250, rethink your options. Ensure the monthly commitment won't strain your finances.
Reputation is telling. If "QuickLoans" offers a tempting rate but has numerous online complaints about hidden fees, that's a red flag.
Different lenders have unique criteria, like minimum credit scores. If a lender's threshold is 680 and you're at 670, which they may consider bad credit, enhance your score or explore your debt consolidation options with other lenders.
Scrutinize the details. A seemingly attractive rate might come with a 4% origination fee on a $10,000 loan, adding an immediate $400 to your debt.
Life's unpredictable. If unforeseen circumstances affect your payment ability, know if your lender offers grace periods or deferments without added costs.
Never underestimate professional guidance. If you're torn between two debt consolidation loan offers, a financial expert can highlight aspects you might've overlooked, potentially saving you money and hassle.
Debt consolidation personal loans for bad credit are a sought-after choice for many aiming to streamline their debts. However, they're not the sole avenue. Depending on your financial landscape, objectives and inclinations, other alternatives might resonate more. Here's a comprehensive look at various options to aid your decision-making:
Options | Description |
|---|---|
These cards typically flaunt an introductory phase (like 12 or 18 months) with minimal or 0% interest. Shifting your high-interest debt here can curtail interest costs. Yet, be wary of post-promotional rates. | |
Drawing against your home's equity can fetch lower interest rates. But, given your home acts as collateral, non-repayment risks foreclosure. | |
Debt Settlement or Management Programs | Here, a third party dialogues with your creditors to trim your debt or tweak repayment conditions. It can lighten your debt burden but might dent your credit score. |
Bankruptcy | A last-resort option, bankruptcy can pave the way for a financial reset but casts a long shadow on your credit. |
Some contemplate borrowing from their 401(k) retirement fund. It might offer lower rates and bypass credit checks, but potential penalties, tax implications and retirement savings impact are vital considerations. | |
Peer-to-Peer (P2P) Lending | Platforms like LendingClub or Prosper facilitate direct individual-to-individual lending. Borrowers might snag rates lower than conventional consolidation loans, but credit scores remain influential. |
Credit Counseling | Engaging a credit counselor can furnish insights, craft a debt blueprint, and facilitate conversations with creditors, resulting in a structured debt approach. |
Personal Savings | Allocating personal savings to tackle high-interest debt can be judicious, but safeguarding an emergency buffer and overall savings is paramount. |
Negotiate Directly with Creditors | Engaging directly with your creditors might yield reduced rates or enhanced repayment terms, streamlining your debt without resorting to instant debt consolidation loans for bad credit or similar solutions. |
If you're considering debt consolidation loans for bad credit, you likely have questions. In this section, we answer the most common queries to help you understand your options and make confident decisions.
Initially, applying for a debt consolidation loan for bad credit might cause a minor drop in your credit score due to the credit inquiry. However, over time, if managed well, such loans can enhance your credit by lowering your credit utilization and cementing a punctual payment history.
Securing a debt consolidation loan for bad credit hinges on factors like your credit score, income and the debt amount you aim to consolidate. Individuals with robust credit scores generally have higher approval odds and receive more favorable terms.
Debt consolidation can streamline financial management by merging multiple payments. If you obtain a rate lower than your existing debts, it can be cost-effective. However, scrutinizing the terms and ensuring consistent consolidated loan payments is crucial to avert added financial woes.
Absolutely. If you have bad credit, the core intent of a debt consolidation loan is to settle multiple debts, amalgamating them into one loan with a singular monthly payment.
Perks encompass potential lower interest rates, one consolidated payment, enhanced credit scores over time and streamlined financial oversight.
Some pitfalls might be higher rates for those with bad credit, the risk of deeper debt if undisciplined, potential collateral loss on secured loans and extra charges.
While numerous debts like credit card dues, medical expenses and other personal loans can be consolidated, some, such as federal student loans, might have benefits that could be lost when merged with a personal loan.
A debt consolidation loan for bad credit provides a sum to settle multiple debts, repaid in fixed installments over a designated term. In contrast, a balance transfer card lets you shift debts to a new card, often with a promotional low or 0% interest for a set duration.
At MoneyGeek, we meticulously examined over 30 personal loan lenders, leveraging 35+ distinct data points spanning six pivotal categories: loan affordability, accessibility, consumer friendliness, customer service, flexibility and lender transparency.
For each ranking criteria, we zeroed in on key data points paramount for selecting a debt consolidation personal loan for bad credit. These encompassed APR ranges, loan amounts, minimum credit scores, minimum income thresholds, application fees and disbursement durations.
We prioritize you, our valued consumer. Hence, we also incorporated each lender's customer support quality, business ratings and supplementary features enhancing your borrowing journey — such as prequalification, diverse payment avenues and user-friendly mobile apps.
After rigorous evaluation, our selections are tailored with your welfare at the forefront. Our suggestions for and expert insights into debt consolidation loans for bad credit aim to empower you in making an informed lender choice, optimizing debt consolidation and fulfilling your financial aspirations.
About Christopher Boston
Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.
Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.
The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.
Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about
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