Debt Consolidation Loans for Bad Credit UK – 2023 Review

Are you looking for a way to manage your debts? This guide is here to help. We’ll talk about something called debt consolidation loans, which can be a good way for people with bad credit in the UK to handle their debts. Here’s what 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.

Our website offers guidance to more than 170,000 people each month on money matters. We understand that dealing with unpaid debt can be worrying, but don’t forget that you’re not alone. There are many ways to manage debt, and we’re here to help you understand them.

Let’s get started and learn more about debt consolidation loans for bad credit in the UK.

What is debt consolidation?

Debt consolidation is a method used to reduce your number of creditors and save money. It involves taking out large enough credit to pay off two or more existing debts. Therefore, you consolidate multiple debts into one newer debt. 

It is used by people who are struggling with their finances and tiptoeing towards arrears. You can also use it if you just want to save some money on your monthly repayments. 

The true cost of a bad debt consolidation loan

Think about this.

If you get a £30,000 debt consolidation loan at 4% on a 15 year term, it’ll cost you £221 per month to pay back. That exact same loan at 5% is about £18 per month more expensive.

Well, that’s a full £2,916 more expensive over the entire term.

Fill out the short form below to access the best debt consolidation loan rates available from the UK’s leading lenders.

How does debt consolidation work?

Debt consolidation works by taking out new credit, such as a personal loan, and then using the money to pay off multiple existing debts, if not all of them.

You can use the money from the loan to pay off personal loans, credit card debt, store cards and more. Thus, you switch from having many monthly repayments payable to different lenders to just one monthly payment to track. This makes it easier to manage your money.

Although streamlining your debts is beneficial, debt consolidation is only worthwhile if you can save money at the same time. This is achieved by getting a loan with a lower interest rate than the interest payments on existing debts. 

It’s important to realise that these loans don’t solve any underlying reasons why your debts may have gotten out of control.

You must keep up with the new loan repayments to avoid further issues. 

What is a debt consolidation loan?

A debt consolidation loan is a type of loan used to consolidate debts by putting all the money you owe together.

An unsecured debt consolidation loan should only be used to pay off your current credit, and not for any other purpose. 

Some personal loans without a specific use can also function as debt consolidation loans. It’s best to check with the lender that this is allowed before applying. One lender may have different rules from another. 

You should only apply for a debt consolidation loan with a lender that is authorised and regulated by the Financial Conduct Authority (FCA).

You’ll need to be a UK resident to apply and over a certain age, typically 18. 

It should be said that there are other ways to consolidate debts, such as:

1. Balance transfer credit cards to consolidate credit cards only
2. Remortgaging to release equity and use the money to pay off debts. Secured loans like these present greater risks. 
3. Some debt solutions (e.g. IVAs) are comparable to consolidation, although not exactly the same. 

Free Debt Consolidation Loan Quote

There are A LOT of debt consolidation loan lenders and you need to get the right deal.

I’ve teamed up with Loans Warehouse to find you the right deal for you.

Get your free quote

In partnership with Loans Warehouse

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.

Moreover, 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. Moreover, 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. 

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. 

What are the cons of a debt consolidation loan?

While a debt consolidation loan may benefit some, it is not always the best decision for all situations.

You should be fully aware of some drawbacks of debt consolidation before making a decision.

1. Consider that the loan you are taking out to cover your outstanding debts is going to be a sum of all your outstanding totals combined. Therefore, you should be confident that you can consistently afford this new monthly amount to prevent further damage to your credit file.
2. Consider that not everyone is guaranteed to be accepted for a debt consolidation loan. Being denied one can cause your credit score to worsen. Whilst not all debt consolidation loans require a good credit score, you should ensure that you are eligible.
3. Consider that debt consolidation loans aren’t always a cheaper alternative as you are not guaranteed a lower interest rate. You may even be charged further costs or fees. Therefore, the loan overall may cost you more than your current outstanding debts. Be sure to check terms and rates first.

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. 

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. 

How to get a debt consolidation loan with bad credit

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. 

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.

Feeling like Chandler?

All of this information can feel a bit overwhelming.

Don’t panic! There’s plenty of help available.

After lots of research, I decided to partner with Loans Warehouse. They’re an award-winning service who can help find the right loan for you.

You can find out what’s available for you below.

Fill out this short form to get started

Where to get a debt consolidation loan with bad credit

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.

Let’s look at some examples.

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 a bad credit debt consolidation loan 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. 

I rejected a lot of companies

I spent a long time searching for a debt consolidation loan company that my readers could trust.

Loans Warehouse were the best by far.

Tap below to get your free debt consolidation loan quote from them now.

Ps. It won’t affect your credit score.

Get your free quote

In partnership with Loans Warehouse

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.

More bad credit debt consolidation loan info

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.