October 2021 Bad Credit Debt Consolidation Loans
|Lender||APR range||Minimum loan amount||Maximum loan amount||terms||Recommended credit score|
|5.94% to 35.97% with automatic payment discount||$ 1,000||$ 50,000||36-60 months||580+|
|9.95% to 35.99%||$ 2,000||$ 35,000||24-60 months||600+|
|First Tech Federal Credit Union
Best maximum loan amount
|6.70% to 18%||$ 500||$ 50,000||24-84 months||580+|
Ideal for quick financing
|5.97% to 29.99% with automatic payment discount||$ 2,000||$ 45,000||36-60 months||580+|
|PenFed Credit Union
Ideal for small loans
|5.99% –17.99%||$ 600||$ 35,000||6–60 months||580+|
How To Get A Debt Consolidation Loan With Bad Credit?
Getting debt consolidation with bad credit can limit your choices, but it is not impossible to find a lender. First, it’s a good idea to check your credit score to see where you stand, and then look for lenders who have lower credit requirements to increase your chances of getting approved.
Even though your options may be limited, you’ll want to shop around and compare lenders to see who will offer you the best rates and terms. Then compare that to the rates you’re currently paying with existing debt to see if it’s worth making the change.
Where Can You Get a Debt Consolidation Loan With Bad Credit?
Credit unions and online lenders tend to offer better rates for those with poor credit. Credit unions are great if you’re interested in in-person service, but in most cases you’ll need to become a member (usually by paying an annual fee or opening a savings account) in order to be approved for a membership. ready.
Online lenders, on the other hand, generally don’t require you to become a member while offering the same types of customer service online or over the phone. However, if you are not comfortable with managing and paying off your loan online, this may not be the best choice.
What Credit Score Do You Need To Get A Debt Consolidation Loan?
Generally, the higher your credit score, the better your chances of getting a debt consolidation loan. Even though the lenders on our list require a minimum credit score of 580 or 600, you may need to meet other requirements, such as a certain annual income and debt-to-income ratio limits, to be approved.
What’s the best way to consolidate debt?
Besides shopping around for debt consolidation loans, one of the best ways to get approved for a competitive rate is to add a co-signer. Ideally, this should be someone with a good credit profile, a better one than you, who you trust, and who understands the responsibilities and consequences of co-signing a loan. Alternatively, you can work on improving your debt ratio by increasing your income or paying off more of your debts before submitting an application.
Are There Alternatives To Debt Consolidation?
Here are a few options, each with its pros and cons.
Home equity loan
This type of loan involves tapping into the equity in your home and may offer a low interest rate because it is a secured loan. A major risk is that you put your home as collateral, which means that if you don’t pay off the loan, you run the risk of foreclosure.
Debt Management Plan (DMP)
You can work with a certified credit counselor to lower fees with your creditors. Then you will consolidate your payments, making a single payment to your advisor, who will then pay your creditors. It can save you money, but most advisors charge a monthly fee. Additionally, a DMP takes a few years to complete.
Filing bankruptcy can help you cancel your debt or negotiate a deal with your creditors. However, you will damage your credit making it much more difficult to approve some loans in the future.
The bottom line
Having bad credit doesn’t mean there aren’t debt consolidation options for you. This could mean that you will be qualified for a higher APR than someone who is more creditworthy, but as long as the rate is lower than what you are currently paying it can save you hundreds or even thousands of dollars in the long run. term. .
Compare what’s available and find out what it takes to increase your chances of getting approved to improve your financial situation. If you find that a personal loan is not the best choice for you, research the alternatives and see if you are able to take the risk. In some cases, it’s also best to wait until your credit situation improves so that lenders are more likely to approve you for a loan with terms and rates you agree to.
How we choose the best debt consolidation loans for bad credit
Investopedia is committed to providing consumers with unbiased and comprehensive personal lender analysis for all borrowing needs. We’ve collected over 25 data points from over 50 lenders, including interest rates, fees, loan amounts, and repayment terms, to make sure our content helps users get it right. borrowing decision for their needs.