Debt Consolidation Loan for Poor Credit
Written by, Marija Petkova
Updated November, 10, 2022
The best way to manage multiple debts is to get a debt consolidation loan.
But, it can prove more challenging to find a good deal if you have a bad credit score.
To help you find the best option possible, we picked the best lenders that offer a debt consolidation loan for poor credit.
Let’s dive in.
- Loan type: Unsecured
- Loan amount: £300 – £50.000 for existing customers; £1000 – 25.000 for new customers
- Representative APR: 3.5%
- Loan term: 1-7 years
- Rating: 10/10
- Loan type: Secured and unsecured
- Loan amount: £5.000 – £75.000
- Representative APR: 12.9%
- Loan term: 1-10 years
- Rating: 9.8/10
- Loan Type: Unsecured
- Loan amount: £1.000 – £35.000
- Representative APR: 13.9%
- Loan term: 1-7 years
- Rating: 9.7/10
- Loan type: Unsecured
- Loan amount: £2.000 – £15.000
- Representative APR: 31.3%
- Loan term: 2-6 years
- Rating: 9.5/10
- Loan type: Unsecured
- Loan amount: £300 – £1.000
- Representative APR: 43.1%-87.5%
- Loan term: 6-12 months
- Rating: 9.3/10
- Loan type: Unsecured
- Loan amount: £500 – £15.000
- Representative APR: 59.9%
- Loan term: 1-3 years
- Rating: 9/10
- Loan type: Unsecured
- Loan amount: £1000 – £15.000
- Representative APR: 99.9%
- Loan term: 2-5 years
- Rating: 8.7/10
What Is a Debt Consolidation Loan?
A debt consolidation loan is a type of loan that combines all of your existing debts together.
This type of loan makes it easier to keep track of your debts, as well as manage your cash flow when making repayments, and you could potentially save money on costs related to your monthly payments.
Can You Get a Debt Consolidation Loan If You Have Bad Credit?
While qualifying for a debt consolidation loan with a bad credit score can be challenging with traditional lenders, there are specialised lenders that offer debt consolidation loans for UK citizens with bad credit.
However, you’ll probably have to pay a higher interest rate and the amount you’ll be able to borrow will be limited.
If you need to borrow a smaller amount, Creditspring and Likely Loans offer unsecured debt consolidation loans for people with bad credit in the UK of up to £5.000.
For larger amounts, you can apply for a debt consolidation loan with TSB Loan, where you can borrow up to £50.000 if you’re an existing customer. Consolidation Express, on the other hand, offers bad credit debt consolidation loans for UK citizens of up to £75.000.
How Does a Debt Consolidation Loan Work?
A debt consolidation loan essentially consolidates different existing debts into one. These can be credit card borrowings, overdrafts, or regular loans.
Thus, instead of having to make multiple smaller monthly payments to different loan providers and creditors, you’ll have one, fixed repayment to one lender to make every month.
Most lenders have the following eligibility requirements:
- Be at least 18 years old.
- Be a UK resident.
- Have verifiable income.
Some lenders might require candidates to provide more information to qualify.
What Types Of Consolidation Loans Are There?
There are two different types of poor credit debt consolidation loans you can choose from, including:
Secured loan
These types of loans require collateral. You’ll essentially need to pledge an asset, like a car, against the loan, which your lender will take if you fail to repay what you owe. Getting a secured consolidation loan with poor credit is easier because it provides the lender with a certain level of security.
If that sounds like something you would want to look into, Consolidation Express is one of the few lenders that offer secured consolidation loans for people with poor credit.
Unsecured loan
If you’re looking for a debt consolidation loan designed for people with poor credit where none of your assets is at risk, then you can opt for an unsecured loan. The downside is that these loans come with higher interest rates, but you won’t lose your home if you fail to make payments.
Lenders like Everyday Loans provide affordable rates and larger loan amounts of up to £15,000.
Pros and Cons Of Debt Consolidation Loans
Here are some of the benefits and drawbacks of taking out a debt consolidation loan:
Pros
- You have only one monthly payment.
- You get a fixed schedule.
- You can get a debt consolidation loan with a bad credit score.
- You might get lower interest rates.
- You may repay your debt sooner.
Cons
- You may have to pay some upfront costs.
- You might pay a higher rate.
- Missing payments can set you back even further.
Things To Consider When Taking Out a Poor Credit Consolidation Loan
Opting for a poor credit consolidation loan might be a convenient solution, but it’s not the best option for everyone.
Here’s what you should consider before applying for a debt consolidation loan.
Will it save you money?
You might not always be able to find a lower interest rate, compared to your existing debts. But, if you can find a deal with a lower APR, you should be able to cut down on your monthly costs.
Can you afford to keep up payments?
When looking for poor credit loans for debt consolidation options, you should make sure that you can afford the monthly repayments. Missing repayments will bring your credit score down and could potentially put you in a worse position than before.
Are there any early repayment charges if you pay back your existing debts early?
Most lenders don’t charge an early repayment fee, but they may charge you interest.
For example, if you pay back your loan earlier with Likely Loans, you’ll pay a maximum of 58 days’ worth of interest.
Before taking out a debt consolidation loan with poor credit, you should ensure that your potential savings won’t be wiped out by any additional fees.
Is a Consolidation Loan a Good Idea If You Have Poor Credit?
Bad credit debt consolidation loans are generally a good idea only if you can find a deal that you can afford which will clear all of your debts and won’t cost you more in the long run.
Keep in mind that taking out a debt consolidation loan would mean taking on more debt, which may cost you more in the long run.
Looking for a different type of loan? See our top 8 list of the best bad credit lenders.
How To Find The Right Debt Consolidation Loan With Bad Credit in the UK
Many lenders offer debt consolidation loans to borrowers with bad credit.
To find the best bad credit debt consolidation loans deals, you’ll need to shop around and compare offers from different lenders.
You can also try to prequalify, which is free and involves a soft credit check, which won’t hurt your credit score, regardless of whether you’re applying for consolidation loans with poor credit or any other loan products.
How Does a Debt Consolidation Loan Affect Your Credit Score?
Like any other form of credit, applying for a debt consolidation loan may temporarily lower your credit score, due to the ‘hard check’ that lenders perform once you accept their offer.
However, if you keep up with your repayments, your credit score will eventually improve.
Also, if you want to, there are things you can do to boost your credit score further.
What Debts Can You Resolve With Bad Credit Consolidation Loans?
Poor credit debt consolidation loans can help you pay back most forms of debt, including payday loans, credit cards, personal loans, and even store cards debt.
You may be interested in: What happens when you can’t pay your credit card debt in the UK?
Alternatives To Debt Consolidation Loans
If you can’t find a deal that ticks all the boxes for your situation, then you might consider some alternatives.
- 0% balance transfer credit card: A 0% balance transfer credit card allows you to shift what you owe onto the card for a certain period (usually up to two years) interest-free while you pay off your debt.
- CCash-out refinance: If you own a home, you can replace your existing mortgage with a new one and withdraw the difference between the two balances to consolidate debt.
- Debt Management Plans (DMP): A DMP is a good option if you have non-priority debt. Your DPM provider will essentially arrange a plan for you where you’ll make a single monthly payment to them and they pay your creditors.
Bottom Line
Bad credit debt consolidation loans are worth considering if you have multiple high-interest debts you want to pay off.
Picking the right debt consolidation loan can help you get on top of your debts and save you some money in the long run, so make sure to shop around and only agree to a deal that you can afford to pay.
Frequently Asked Questions And Their Answers
Do I have to pay all my debts with the loan?
When taking out a debt consolidation loan, you choose which debts you want to pay off with it.
What happens if I can’t keep up with my repayments?
If you miss your repayments, you’ll likely be charged a fee and your credit score will take a hit. You might also face a county court judgement (CCJ). Thus, if you think you’re likely to miss a payment you should contact your lender and see if they can find a better solution.
Can I qualify for a debt consolidation loan with poor credit?
Yes, there are lenders in the UK that offer debt consolidation loans for bad credit, but you’ll likely have to pay higher interest rates.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.