Best debt consolidation loans for bad credit of August 2024
The average consumer debt balance for those with FICO scores below 580 grew 20.5% to $43,584 by the third quarter of 2023. And more people are using personal loans to consolidate debt to get a lower annual percentage rate (APR), a lower monthly payment, or escape a variable interest rate.
But getting a debt consolidation loan with bad credit has its challenges. The first of which is finding a legitimate lender that offers loans for bad credit. You may also want to take steps to improve your credit before applying.
Debt consolidation merges multiple debts - like high-interest credit card balances - into a new, larger debt, ideally at a lower APR. Unlike credit cards, personal loans for debt consolidation tend to have fixed rates and repayment timelines, as well as lower interest rates. This means your monthly payment won’t change, you’ll have a clear timeline for when the loan will be paid, and you can lower your payments and reduce your interest costs.
Best debt consolidation loans for bad credit
Universal Credit
Fox Money rating
Est. APR
11.69 - 35.99%
Loan Amount
$1000 to $50000
Min. Credit Score
560
Pros and cons
Borrowers with bad credit considered
No minimum income requirement
Autopay and direct pay discounts available
Can fund in one business day
High APRs
Potentially high origination fees
Not available in Iowa
More details
Overview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Loan amount
$1,000 - $50,000
Repayment terms
3, 5, or 7 years
Fees
Origination fee
Discounts
Autopay and direct pay
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Min. income
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Best bad credit personal loans
OneMain Financial
Fox Money rating
Est. APR
18.00 - 35.99%
Loan Amount
$1500 to $20000
Min. Credit Score
540
Pros and cons
Flexible eligibility requirements
Offers secured options
Competitive bad-credit loans
Physical presence
Availability
Origination fees
High starting APR
More details
Overview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Loan amount
$1,500 to $20,000
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Min. income
Does not disclose
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Best for all credit types
Avant
Fox Money rating
Est. APR
9.95 - 35.99%
Loan Amount
$2000 to $35000
Min. Credit Score
550
Pros and cons
Borrowers with bad credit considered
Funds as soon as the next business day
2-year loan terms available
No discounts offered
Origination fee
Not available in HI, IA, MA, ME, NY, VT, or WV
More details
Overview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Loan amount
$2,000 to $35,000**
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Min. income
$1,200 monthly
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
2 to 5 years
Best fast personal loans for all credit types
Upstart
Fox Money rating
Est. APR
7.80 - 35.99%
Loan Amount
$1000 to $50000
Min. Credit Score
620
Pros and cons
May fund in 1 business day
No minimum credit score requirement on lender site
Low minimum APR
Trustpilot score of 4.9/5 stars
May charge a high origination fee
No discounts offered
More details
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Loan amount
$1,000 to $50,000
Fees
Origination fee
Eligibility
Available nationwide
Min. income
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Fox Money rating
Fixed (APR)
7.80% - 35.99%
Loan Amounts
$1000 to $50000
Min. Credit Score
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Loan amount
$1,000 to $50,000
Fees
Origination fee
Eligibility
Available nationwide
Min. income
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Fox Money rating
Fixed (APR)
9.95% - 35.99%
Loan Amounts
$2000 to $35000
Min. Credit Score
Overview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Loan amount
$2,000 to $35,000**
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Min. income
$1,200 monthly
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
2 to 5 years
Fox Money rating
Fixed (APR)
11.69% - 35.99%
Loan Amounts
$1000 to $50000
Min. Credit Score
Overview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Loan amount
$1,000 - $50,000
Repayment terms
3, 5, or 7 years
Fees
Origination fee
Discounts
Autopay and direct pay
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Min. income
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Fox Money rating
Fixed (APR)
18.00% - 35.99%
Loan Amounts
$1500 to $20000
Min. Credit Score
Overview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Loan amount
$1,500 to $20,000
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Min. income
Does not disclose
Customer service
Phone, email
Soft credit check
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Fox Business does not make or arrange loans.
We evaluated the best debt consolidation loans for bad credit based on factors such as customer experience, minimum fixed rate, maximum loan amount, funding time, loan terms, fees, discounts, and whether cosigners are accepted. Our team of experts gathered information from each lender's website, customer service department, directly from our partners, and via email support. Each data point was verified by a third party to make sure it was accurate and up to date.
Read our full lender rating methodology for more information.
As long as you can qualify, debt consolidation works the same regardless of your credit. It allows you to combine multiple smaller debts into a single loan with one monthly payment. You use the funds to pay off your initial balances, and begin making payments on your new loan.
Lenders who cater to borrowers with bad credit may have more lenient qualification requirements, but you'll likely face higher-than-average rates. The average APR for a 24-month personal loan was 12.49% in February 2024, according to the Federal Reserve, but rates can top out around 36%.
Learn More: What is debt consolidation?
Tip
Trying for a lower rate isn’t the only opportunity consolidation can present. With personal loans, for example, you can use an online calculator to view possible loan amounts, rates, terms, and monthly payments that could make payoff more manageable.
Many personal loan lenders provide the option to prequalify to view possible rates, terms, and amounts you may qualify for with just a soft credit pull (meaning it won't hurt your score). You'll first need to provide the lender - or loan marketplace - some personal information, such as your name, date of birth, and Social Security number.
Important
Prequalification is not an offer of credit, and your final rate could be higher. Once you apply, the lender will conduct a hard credit pull, which could ding your score by a few points temporarily.
When shopping for a loan, pay attention to the following:
- APR: The annual percentage rate includes the interest rate and any upfront fees. Those with good credit usually qualify for the lowest rates, but comparing APRs across lenders can help you land more competitive terms. Some debt consolidation lenders, such as Universal Credit, even offer rate discounts for allowing direct pay to creditors.
- Fees: Many personal loan lenders charge origination fees, which are accounted for in the APR and typically deducted before you receive the funds. This means you may need to borrow more to pay off the same amount of debt. Other common fees include late payment fees and insufficient funds fees.
- Available loan amounts: Add up your debt so you can narrow your search to lenders that can offer that amount.
- Repayment terms: Personal loan repayment terms typically range from 1 year to as long as 7 years, but this varies by lender. A longer term often means a lower monthly payment, but more money spent on interest. Decide how much you can comfortably afford to pay each month for the life of the loan and use that to guide your search.
- Customer service: You can get an idea of what a company's service is like by reading reviews on sites like the Better Business Bureau and Trustpilot, looking at official complaints, and seeing what customer service methods and hours are available. Look for any patterns in the feedback.
Pros and cons of debt consolidation for bad credit
Pros
- Simplified finances
- Chance for a lower APR
- Could lower monthly payment
- Potential to boost your credit
- Replace a variable interest rate for a fixed rate
Cons
- May be difficult to qualify
- Might come with fees
- No guarantee of a lower rate
- Chance for continued cycle of debt
- Simplified finances: Debt consolidation allows you to reduce your number of monthly payments.
- Chance for a lower APR: Personal loans have lower APRs on average than credit cards, according to the Fed.
- Could lower monthly payment: A lower rate combined with a longer repayment term could help reduce your monthly payment.
- Potential to boost your credit: If you're consolidating multiple credit card balances, you could see your credit utilization drop sharply, which can boost your score, as can making on-time payments consistently.
- Replace a variable interest rate for a fixed rate: If you have credit card debt, you likely have a variable interest rate, which means your rate could increase. Replacing it with a fixed rate personal loan means your monthly payment won't change for the life of the loan.
- May be difficult to qualify: With bad credit, you're likely to qualify with fewer lenders, limiting your options.
- Might come with fees: Some consolidation loans require upfront costs, like origination fees, along with other potential fees.
- No guarantee of a lower rate: You may end up qualifying for a higher rate than what you're currently paying.
- Chance for continued cycle of debt: Debt consolidation doesn't address possible underlying financial habits that can hurt your budget.
How much you're approved to borrow (and if you're approved at all) is based largely on your credit score, income, and the monthly payment the lender thinks you can manage. Review each lender's requirements carefully before applying to avoid unnecessary hard inquiries on your credit report.
The best ways to improve your chances of qualifying for a debt consolidation loan are to build up your credit score, increase your income, apply with a cosigner, or get a secured personal loan. If you use a cosigner, they will be responsible for paying the loan if you don't.
Related: How to get a personal loan
If your debt consolidation loan application is denied, don't panic. The best way forward is to learn what triggered the rejection. A low credit score, insufficient income, and/or high debt-to-income ratio are all common reasons a loan application may be denied.
Important
Lenders are required by law to provide you an adverse action letter listing their reasons for denial and your rights as a consumer.
Best for: Borrowers comfortable putting an asset on the line
If you can't qualify for an unsecured loan with your preferred terms, you may be able to secure one using an asset such as a car, investment account, or even the fixtures in your home. Just know that whatever you pledge can be seized by the lender if you don't make payments.
Check out: Secured vs. unsecured personal loans
Best for: Paying down debt without a loan
If you can afford your monthly payments and have a bit of extra room in your budget, consider tackling your debt using either the debt snowball or avalanche method. The snowball method involves prioritizing your smallest debt while making minimum payments on your others. You then apply the freed-up minimum payment to the next debt. The avalanche method works on a similar principle, but focuses on paying down your highest-interest debt first.
Related: How to pay off debt fast
Best for: Those who can pay down their debt using a 0% APR offer
If you have high-interest credit card debt, you may be able to save money by transferring some or all of it to an existing credit card with a 0% introductory APR offer. If you can repay the balance within that offer period, you won't pay any interest at all. Check your current cards for offers, since it's unlikely you'll get approved for a new 0% APR credit card with bad credit.
Best for: Borrowers with sufficient equity in their home who are comfortable using it as collateral
Both home equity loans and lines of credit allow you to borrow against the equity you've built in your home to pay off debt. Since both are secured by your home, they may be easier to qualify for relative to an unsecured personal loan. If you're unable to make payments, however, you could lose your home.
Best for: Utilizing retirement savings
If your plan allows it, you may be able to borrow against your employer-sponsored 401(k). You won't need to undergo a credit or income check, and you may be able to borrow up to 50% of your vested account balance, or $50,000 (whichever is less).
Just know that borrowing from your 401(k) carries significant risks, especially if you lose or leave your job and can't repay the loan in full. You could owe income tax on the unpaid loan amount plus a 10% penalty tax if you were under 59 ½ when you received the loan.
Important
If you’re considering bankruptcy, you may want to avoid touching your 401(k) since qualified retirement accounts are generally protected during bankruptcy proceedings (meaning, you get to keep the money).
Best for: If you can't afford payments
A debt management plan, usually offered through a credit counseling organization, can help consolidate your debts. The counselor works on your behalf to negotiate lower rates or payments on your debts. You then make one monthly payment to the organization, which distributes it to your creditors.
Best for: A last resort
When you go through bankruptcy, your nonexempt assets are liquidated to pay off your debts, or you enter into a 3- to 5-year repayment plan (if you file for Chapter 13 as opposed to Chapter 7). Any debt that can't be repaid through liquidation or a payment plan is typically forgiven, with some exceptions.
Though it can eliminate your high-interest debt, bankruptcy has serious implications for your credit score and can remain on your report for up to 10 years, making it difficult to obtain new credit such as an auto loan or mortgage, especially for the first year after you file. Speak with an attorney about your options before proceeding.
A debt consolidation loan may temporarily hurt your credit, as it results in a new hard inquiry and reduces the average age of your accounts. As long as you make on-time payments on the loan, though, you're likely to see your score improve.
If you're paying off revolving debt like credit cards, your score may rise relatively quickly as you decrease your credit utilization. But you'll want to keep those accounts open and balances low after you pay them off.
The most effective long-term way to improve your credit score is to make on-time payments on all your bills, every month. Other ways to boost your score include limiting hard inquiries on your credit report and maintaining long-standing credit accounts.
For more short-term gains, consider signing up for a service that reports utility payments to one or more credit bureaus, like Experian Boost. Or, become an authorized user on someone else's credit card.
If you already have a relationship with a traditional bank or credit union, you could start by asking if you qualify there. Additionally, consider online lenders who work with borrowers with bad credit. You can prequalify via a personal loan marketplace to see which lenders are most likely to approve your application and where you may be able to get the best rates.
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Meet the contributor:Erin Gobler
Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.
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