Debt Consolidation Loans for Bad Credit: Options and Costs

A debt consolidation loan with bad credit is possible, but it is usually expensive. The real question is not "can I get approved?" but "will this loan cost less than what I am doing now?" With a low score, the answer is sometimes yes and often no. This page shows how to check, what to try first and which offers to walk away from.

What lenders look at

Lenders do not only look at your credit score. They also review:

• Income and job stability. Can you make the new payment?
• Debt-to-income ratio (DTI). Your monthly debt payments divided by gross monthly income. A high DTI is a common reason for denial.
• Recent delinquencies. Recent late payments or collections weigh more than old ones.
• Banking history. Some lenders verify deposits and account standing.

Improving any of these, even slightly, can change the offer. Paying one small card to zero before applying can lower utilization and DTI at the same time.

What it costs with bad credit

Installment loan APRs in our rates and fees disclosure range from 5.99% to 35.99%, and borrowers with poor credit are usually offered rates toward the top of that range. Some lenders also charge an origination fee taken out of the loan amount. The Federal Reserve's G.19 release reported an average rate of 22.36% on credit card accounts assessed interest in August 2026. That means a bad-credit consolidation loan can easily cost more per year than the cards it replaces.

Worked example (clearly labeled)

Say you owe $8,000 across cards averaging 27.99% APR and pay $300 a month.

The 29.99% loan saves a little and finishes sooner, but only if there is no fee and you do not add new card balances. The 35.99% loan costs more than simply paying the cards. Run your own numbers with the debt consolidation calculator.

Options to compare, cheapest first

1. Nonprofit debt management plan

A nonprofit credit counselor can review your budget and, if it fits, set up a debt management plan. You make one payment to the agency and it pays your creditors, often at reduced interest rates the creditors agree to. There is no new loan and no credit score cutoff. The FTC suggests looking for counseling through credit unions, universities, Cooperative Extension and military personal financial managers, and asking about all fees first. See debt management plans and the NFCC at nfcc.org.

2. Credit union personal loan

Credit unions often price loans below many online lenders and may weigh your membership history. Federal credit unions are generally limited to an 18% interest rate ceiling on most loans under National Credit Union Administration rules, which can make them much cheaper for bad-credit borrowers if you qualify. See credit union alternatives.

3. Secured personal loan

If you have savings or a paid-off vehicle, a secured loan can carry a lower APR. The tradeoff is real risk: if you default, the lender can take the collateral. Never use a car you need for work as collateral for unsecured card debt unless the math and budget are rock solid. See secured vs unsecured personal loans.

4. A cosigned loan

A creditworthy cosigner can help you qualify at a lower rate. The CFPB explains that a cosigner is legally responsible for the debt if you do not pay, and missed payments can hurt their credit too. Read cosigner loan options before asking anyone.

5. An online bad-credit installment loan

These are easier to get but usually priced near the top of the range. Compare the APR and total cost (not the payment) against your current cards. If the loan does not save money, skip it.

Red flags and scams

The FTC warns about debt relief offers that charge fees before doing anything, promise to make debt disappear or tell you to stop paying creditors. It is illegal for debt relief companies that sell by phone to charge you a fee before they settle or reduce your debt. Also walk away from:

• "Approval for everyone" promises. Legitimate lenders review applications.
• Upfront "insurance" or "processing" fees before the loan funds. See loan scams.
• Requests to pay with gift cards, wire transfers or crypto.
• Pressure to borrow more than you need.

Fix the credit while you pay

Even if you do not consolidate, the CFPB's guide to rebuilding credit lists the basics: pay on time every month, keep balances low relative to limits, and dispute errors on your reports. Our how to improve your credit score guide walks through each step. Check your reports for free at AnnualCreditReport.com.

Will consolidation hurt my credit more?

A new loan adds a hard inquiry and a new account, which can dip the score a little at first. Lower card utilization and on-time payments usually help over the following months. Details: does debt consolidation hurt your credit?.

Next steps

• List each debt with balance, APR and minimum payment.
• Call a nonprofit credit counselor and one local credit union.
• If you still want a loan, compare offers by APR and total cost with the calculator.
• Use the form on this page to see whether partner lenders may have an offer. Checking offers through our form does not affect your credit score; a lender may do a hard pull if you choose to apply.

Examples are illustrations, not offers. Rates, fees and terms vary by lender, state and credit profile, and approval is not guaranteed. BestLoanForYou is not a lender and does not make credit decisions.

Frequently asked questions about debt consolidation loans for bad credit: options and costs