Debt Consolidation Loans for People With Bad Credit 

Are you wondering where to get a debt consolidation loan with bad credit? You’ve come to the right place. Every month, more than 170,000 people visit our site seeking advice on money matters.

In this article, we’ll cover:

• What a debt consolidation loan is.
• The true cost of a bad debt consolidation loan.
• How a debt consolidation loan works.
• Where to get a debt consolidation loan with bad credit.
• The pros and cons of getting a debt consolidation loan.

When it comes to combining debts, StepChange advises ensuring it aligns with your budget, making the new payment plan easier to handle.¹

I know debt consolidation loans can be a bit confusing, but don’t worry. We’re here to help you understand them.

Is it a good idea to get a debt consolidation loan?

Debt consolidation can be an effective way to make managing your money easier and prevent debts from growing out of control.

Also, it is proven to help many people save money by securing lower interest rates on their new monthly repayments. 

But that doesn’t necessarily mean you should consolidate your debts. Everybody’s situation is different. Also, there may be a better way to tackle your credit problem.

I suggest you get free debt advice from any reputable debt charity (e.g. StepChange, National Debtline or MoneyHelper).

They can assess your situation and recommend the most efficient and effective way out of your debt. 

Debt Consolidation Pros & Cons

Understanding the pros and cons of debt consolidation will help you make an informed decision and manage your debts effectively. That’s why I’ve put together this table.

How much can I borrow?

You can typically borrow between £1,000 and £25,000. Some lenders only lend between £7.500 and £25,000.

If you want to borrow more or less than what is allowed, you’ll need to search for a different loan provider.

Asking for more credit than you need is not a wise idea and could result in bigger debt. 

Can I get a debt consolidation loan with bad credit?

When you apply for a loan to consolidate your debts, the lender will complete a credit check.

Those with a good to excellent credit score are likely to be accepted and offered an interest rate close to the lender’s APR representative example. 

Unfortunately, if you have a poor credit score, you might be rejected.

Or you might be approved but offered an interest rate much higher than the advertised APR representative example.

If the interest rate offered is higher than expected, this loan may no longer be beneficial for debt consolidation purposes. 

All lenders will need to know you can afford the loans, which means having a stable income from a job. 

How to get one

There is no magic formula to get a UK debt consolidation loan with a poor credit score.

But there are some things you can do to make sure you’re looking in the right places.

The best way to get a debt consolidation loan with bad credit in the UK is to apply to lenders that are more likely to accept people with bad credit. 

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You can also increase your chances by trying to make some quick fixes to your score. The most effective way to improve your credit score is to look for mistakes in your credit history.

If there is an error, you can ask the lender responsible for the error to remove it, and if they refuse, you can ask the credit reference agency to do it for them.

You should also register on the electoral roll, as this verifies your ID and can positively affect your credit score.

Where to get one

Most high-street banks are likely to reject people with bad credit because they have the lowest representative rates on the market (generally).

Debt consolidation loans for those with a bad credit score are usually advertised more prominently by online lenders, although not exclusively.

Debt consolidations loans for all purposes

• Stuck paying high interest on credit card debts & loans?
• Looking for a better interest rate?
• Stuck with the confusion of multiple repayment plans?

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Debt consolidation loans for bad credit UK

Below are five examples of unsecured loan providers advertising debt consolidation loans for people with a bad credit history.

These are not necessarily the best on the market or in a particular order.

They’ve been provided as examples of what’s available – and they may be worth considering. 

#1: Finio Loans

Finio Loans (formerly Likely Loans) are currently advertising bad credit debt consolidation loans with a representative 39.9% APR. They provide credit from £500 to £5,000, repayable over one, two or three years. 

#2: Shawbrook Bank

Shawbrook Bank offers personal debt consolidation loans with a representative APR of 16.6%. They also offer repayment periods of up to seven years, which is longer than many other loan providers. 

#3: Everyday Loans

Everyday loans are another option, offering generic personal loans for people with a bad credit history. These loans can be used to consolidate debts. They currently have a representative 99.9% APR.

#4: Solution Loans

Solution loans offer short-term loans up to £2,000 and larger personal loans up to £25,000 for the purpose of consolidating debts.

They specifically advertise them for people with an unsatisfactory or poor credit rating. Their representative APR is 14.3% (variable).

#5: Pegasus 

Pegasus offers these loans for people with poor credit and has some of the best customer reviews on the market, even recognised by some big newspapers and finance institutions.

They also claim to provide the funds within an hour of approval. You can borrow from £2,000 to £15,000 only.

Their representative APR is 14.9%, but you must apply to see what you can get.

Will it impact your credit score?

Applying for one of these loans will not significantly impact your credit score.

However, applying for many of these loans consecutively could alert lenders and cause your application to be rejected.

You can only seriously damage your rating if you fail to repay the loan amount in full and on time. If you don’t, the lender can record payment defaults on your record. 

Can I get a guarantor loan for debt consolidation?

An alternative option to a debt consolidation loan for people with bad credit is to look for one of these loans with a guarantor.

If the person fails to make their monthly payments on time and in full, it will also be the guarantor’s responsibility. This is why most guarantors are family members or very close friends.

The guarantor must be someone with a good credit rating or a homeowner in the UK. Usually, they are of a certain age, such as between 25 and 50.

If your credit report is hindering you from getting a personal loan alone, this could be a good alternative. 

Debt consolidation loan comparison

To compare debt consolidation loans between different lenders, you can use the representative APR.

This is the rate that at least 51% of applicants received, but it doesn’t mean you’ll be offered this rate. So take it with a pinch of salt.

Many online websites provide a debt consolidation comparison function to make things easier. Don’t rely on these entirely, as they may not have been updated, and you could miss a better deal. 

If you want to compare debt consolidation loans with a poor credit score, you may want to consider each lender’s maximum APR as well. This is the maximum interest and fees you can be charged if approved for the loan. 

Rejected for a loan? Consider a DMP instead!

And if you cannot get approved for any unsecured loans, a Debt Management Plan is another option.

Debt Management Plans are considered a way to consolidate debts without actually consolidating them.

They work by getting multiple creditors to agree to a plan where you make a single monthly payment, which is then split between everyone you owe.

Within the plan, you may even be able to agree for creditors to freeze interest to save you money. 

Since you don’t pay any creditors off in this solution, you don’t need to apply for more credit and have your credit score assessed.

The only downside is that if you start making underpayments, creditors can report these as partial payments. This will negatively affect your credit score.

We have more tips on DMPs and how best to use them to get rid of pesky creditors.

The final word

For more information and answers to common debt consolidation questions, see our other guides and tips.

We’ve recently published scores of articles on this topic to help you. And don’t forget that debt charities can provide a personalised support service.

StepChange is one of the best advice charities around, and they operate in Scotland, England and Wales. You can also visit MoneyHelper or Citizens Advice.

References

1. StepChange – Debt consolidation loans