5 Best Debt Consolidation Loans for Bad Credit of 2025

If you’re overwhelmed by high-interest debt, consolidating it into one manageable loan can make a big difference. For those with bad credit, finding a lender who offers reasonable terms can be tricky.

However, a number of lenders specialize in helping people with less-than-perfect credit. A debt consolidation loan can simplify your finances by combining multiple payments into one, and with the right lender, you could even lower your interest rates.

Top 5 Debt Consolidation Loans for Bad Credit

The best debt consolidation loan for you depends on factors like your debt amount and creditworthiness. Fortunately, several companies cater to bad credit borrowers with various loan amounts, interest rates, and terms. Here’s a look at some of the best options currently available.

How Debt Consolidation Works

Debt consolidation allows you to roll multiple debts into one loan, making repayment easier and potentially lowering your interest rate. Here’s how it works:

• Combine multiple debts into one loan – Instead of managing several payments with different due dates, you make a single fixed payment each month.
• Potentially lower interest rates – If you qualify, your new loan may have a lower interest rate than your current debts, helping you save money over time.
• Simplify your finances – With just one payment, it’s easier to stay on top of your debt and avoid late fees.

This can be especially helpful if you’re struggling with high-interest credit card debt, as consolidation may reduce the amount you pay in interest and help you pay off your balance faster.

How to Qualify for a Debt Consolidation Loan

Getting approved for a debt consolidation loan when you have bad credit isn’t impossible, but it does take some planning. Lenders want to see that you can repay the loan, so they look at specific factors before making a decision.

What Lenders Look For

Most lenders evaluate the following:

• Credit score – Many lenders require at least a 580 credit score, but some accept lower scores. The better your credit score, the lower your interest rate will be.
• Debt-to-income (DTI) ratio – Lenders check how much of your income goes toward existing debt. A DTI below 45% improves your chances of approval.
• Income stability – A steady job or reliable income source reassures lenders that you can make your payments. Some lenders have minimum income requirements.
• Credit history – Even if your credit score is low, a history of on-time payments can work in your favor.

Improve Your Chances of Approval

If your credit score is on the lower end, here’s what you can do to boost your approval odds:

• Apply with a cosigner – A cosigner with better credit can help you secure a lower rate.
• Consider a secured loan – Some lenders offer secured debt consolidation loans that require collateral, such as a car.
• Reduce your DTI – Pay down small debts before applying to improve your debt-to-income ratio.

Prequalify Before You Apply

Some lenders offer prequalification, which lets you check your potential rates and terms without a hard credit pull. This helps you compare offers and avoid unnecessary credit inquiries. Look for lenders that provide this option so you can see what you qualify for before submitting a full application.

Where to Get a Debt Consolidation Loan With Bad Credit

Finding a debt consolidation loan with bad credit can be challenging, but some options are more accessible than others.

Local banks – Traditional banks may be less flexible with bad credit applicants, but if you already have an account and a good banking history, you might have a better chance of approval.

Online lenders – The easiest option for bad credit borrowers. Many online lenders specialize in personal loans for debt consolidation and offer quick approval processes.

Credit unions – Some credit unions offer lower interest rates than online lenders, but they often require membership and have stricter credit requirements.

Alternatives to Debt Consolidation Loans for Bad Credit

If you don’t qualify for a debt consolidation loan or want to explore other options, here are some alternatives to consider:

• Balance transfer credit cards – If you can qualify for a 0% intro APR balance transfer card, you can move high-interest debt to it and pay it off interest-free during the promotional period. However, approval usually requires good credit.
• Credit counseling – A nonprofit credit counseling agency can help you negotiate lower interest rates and create a structured debt repayment plan.
• Negotiating with creditors – Many lenders and credit card companies are willing to work with borrowers who are struggling. You can request lower monthly payments, reduced interest rates, or a temporary hardship plan.
• Home equity loan – If you own a home, you may qualify for a home equity loan or HELOC to consolidate debt at a lower interest rate. Be careful—this puts your home at risk if you can’t make the payments.
• Bankruptcy – If your debt is unmanageable and you have no way to repay it, bankruptcy may be an option. While it severely impacts your credit, it can provide a fresh start if you’re drowning in debt.

Final Thoughts

A debt consolidation loan can simplify your payments and potentially lower your interest rate, making it easier to manage your debt—even if your credit isn’t perfect. But not all lenders offer the same terms, so it’s important to compare interest rates, fees, and repayment options before committing to a loan.

Lower payments can help you stay on track, but they won’t solve the problem if you continue to accumulate debt. The key to making debt consolidation work is sticking to a repayment plan and avoiding new high-interest balances while paying off your loan. Responsible borrowing and smart financial habits will help you get ahead in the long run.

Frequently Asked Questions

What is a debt consolidation loan for bad credit?

A debt consolidation loan for bad credit allows you to combine multiple debts into one loan with a fixed monthly payment. These loans are designed for borrowers with lower credit scores who may struggle to qualify for traditional personal loans.

What’s the minimum credit score for a debt consolidation loan?

Most lenders require a credit score of at least 580, but some may accept credit scores that are even lower. However, lower scores typically come with higher interest rates and stricter terms.

What will my interest rate be?

Interest rates vary based on your credit score, income, and lender. For bad credit borrowers, rates typically range from 6% to 36%. Prequalifying with multiple lenders can help you find the best rate.

Are there fees?

Many lenders charge origination fees ranging from 1% to 10% of the loan amount. Some may also have late payment fees or prepayment penalties for paying off the loan early. Always check the loan terms before applying.

Can I consolidate multiple debts?

Yes, you can use a debt consolidation loan to pay off multiple credit cards, personal loans, or other debts. This can simplify repayment by combining everything into a single loan with one monthly payment.

Will a debt consolidation loan help my credit score?

It can, but it depends on how you manage it. Making on-time payments and reducing your overall debt can improve your credit score over time. However, applying for a new loan may cause a temporary dip due to a hard credit inquiry.