5 Best Debt Consolidation Loans for Bad Credit (Rates & Reviews)

5 Best Debt Consolidation Loans for Bad Credit (Rates & Reviews)
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Brittney Mayer
By: Brittney Mayer
Posted: November 4, 2016
BadCredit.org's popular "How-To" series is for those who seek to improve, rebuild or better understand their subprime credit rating.

A few weeks ago, while in line at the grocery store, I glimpsed a woman whose wallet held more credit cards than I’ve ever seen in one place. Her straining pocketbook held the financial equivalent of a Baskin Robbins — it looked like she had an entire 31-flavor buffet of credit cards.

Though this woman may be an extreme example, most of us do tend to have a variety of credit lines at any given time — usually a combination of installment loans (mortgages, student loans, etc.) and credit cards. In many cases, having multiple credit accounts in good standing can improve your score — but, when you fall behind on one type of debt, it can strain your ability to keep up with the rest.

For some, a good way to get a handle on their debt is to get it all in one place through a debt consolidation loan. Keep reading to learn more about debt consolidation, or skip ahead to find reviews of our top companies.

How it Works | Company Reviews | Bad Credit Approval Tips

What is a Debt Consolidation Loan and How Does it Work?

In a sentence, debt consolidation is the process of taking out one large loan to pay off multiple, smaller loans. The key idea is to combine — or consolidate — several loans with different terms into one loan, hopefully with more favorable terms.

For example, let’s look at our hypothetical friend, Pete. Our friend Pete has a total of $10,000 of debt, spread across four accounts, like so:

Debt Amount APR Lender
$1,000 9% Student Loan Company A
$3,000 11% Personal Loan Company A
$2,000 21% Credit Card Company A
$4,000 17% Credit Card Company B

Not only does each of Pete’s debts have a different lender, but they all have different interest rates — some of them quite high. So, Pete is currently paying four different people, at four different times, with four different interest rates.

In an ideal consolidation world, Pete would be able to pay off all four of his loans with a single, larger loan that averages out to a lower interest rate than his current debts carry. Not only would he be able to simplify his payments, but he’d lower them, as well.

At the very least, Pete could lower his monthly payments by getting a new loan with a longer term length — up to 30 years in some cases. While this will mean he’ll pay more interest in the long run, it may help him better manage his payments in the short term, helping to prevent missed payments or even default.

Credit Card & Other Unsecured Debt Consolidation

Credit cards and other high-interest unsecured debt (debt not backed by collateral) are the main reasons many people consider debt consolidation. A large number of credit cards can carry interest rates in the high double-digits; rates of 20% to 25% (or even more) are especially common in the subprime markets.

Those high interest rates come with high monthly payments, and it can be easy to get caught in the “minimum payment” cycle — which only leads to an ever-growing balance. Paying off your credit cards with a consolidation loan can help you avoid that cycle, as well as any credit score hits from missing payments when the balance becomes unmanageable. Be sure to look for an interest rate lower than that of your current debts.

Student Loan Debt Consolidation

Student loan consolidation can be a big help to recent graduates struggling to pay multiple student loans after leaving school. It can be a good way to simplify the payments — a new student loan for every year or semester can mean a number of different hands in your pocketbook — as well as potentially trade a variable interest rate for a fixed one.

The thing to know about student loan consolidation is that not all student loans can be consolidated. While most federal student loans can be consolidated, private education loans are not eligible. You also won’t be eligible for consolidation if you are already in default on your student loans.

Top 5 Debt Consolidation Loan Companies

Choosing the best company for your debt consolidation loan will be mostly a matter of research. You’ll want to comparison shop loan terms, as well as check out the reputation of the providers, before entering an agreement. Of course, the best place to start is by reading the expert reviews on our top companies below.

  • Loans from $2,000 to $35,000
  • Bad credit is no problem
  • Large lender network. Available in all 50 states.
  • Use the loan for any purpose
  • Fast approval and funding (as soon as 1 business day)
  • Click here for application, terms, and details.
★★★★★

5.0

Overall Rating

Interest Rate In Business Since Application Length Reputation Score
6.00% and Up 1997 4 minutes 9.5/10
  • Signature loans from $1,000 to $20,000
  • Perfect credit not required
  • Use for anything - emergency expenses, medical bills, car repairs
  • Five minute application
  • Fast approval
  • Large network of lenders
  • Click here for application, terms, and details.
★★★★★

4.8

Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1997 5 minutes 9.5/10
  • Short-term loan of $100 to $1,000
  • Bad credit is no problem
  • Large network of lenders
  • Loan decision as fast as a few minutes; funding as soon as next business day
  • Required: Income of $1000+/month and at least 90 days on job
  • Click here for application, terms, and details.
             
★★★★★

4.6

Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1997 5 minutes 9.0/10
  • Short-term loans $300 to $1,000
  • Compare loan offers from multiple lenders
  • Funds wired in as little as one day
  • Specializes in bad credit
  • Must have a job and checking account to qualify
  • Not available in: GA, PA, WA, WV
  • Click here for application, terms, and details.
     
★★★★★

4.5

Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1997 6 minutes 9.0/10
  • Cash loans of $300 to $1,000
  • Receive cash in as little as 24 hours
  • Options for US, UK and Canadian applicants
  • Bad credit OK
  • Note: Payday loans are designed for short-term needs and may have high interest rates
  • Not available in: GA, PA, WA, WV
  • Click here for application, terms, and details.
 
★★★

3.0

Overall Rating

Interest Rate In Business Since Application Length Reputation Score
Varies 1997 4 minutes 6.0/10

Different loan providers will have different requirements, so if your top pick doesn’t offer you favorable terms, try another lender. That said, don’t enter into an agreement with a company with whom you don’t feel comfortable doing business, regardless of the terms they offer.

How to Get a Consolidation Loan with Bad Credit

When you’re already struggling with poor credit, trying to manage a variety of high-interest loans can make matters even worse. Unfortunately, it’s more difficult to qualify for the lowest interest rates when you are in need of a subprime loan, so you may not be able to lower your payments through interest rate reduction alone.

That said, you can still lower your monthly payments, making your debt more manageable on a monthly basis, by getting a consolidation loan with a longer loan period than your current loans. By spreading your payments over a longer period of time, you can lower your overall monthly payments. Of course, extending the amount of time you make payments means you’ll be paying more interest in the long run.

If you’re having trouble getting a consolidation loan through conventional lenders, you may need to look for lenders who specialize in subprime loans, like the top-rated providers picked by our experts. The terms will likely be less favorable, but can still be preferable to default.

Make the Most of Consolidation with Low Interest Rates

Whether you have a handful of installment loans or an entire buffet of credit card flavors, debt consolidation can help simplify your finances, making it easier to manage your payments.

You’ll get the most out of the consolidation process by focusing on your interest rate; the lower the rate, the lower your overall payments. Try to find a consolidation loan with an interest rate that is lower than that of the majority of the debt you’re going to consolidate to avoid actually increasing the amount of interest you are paying on some of your debt.