Debt consolidation with bad credit

Debt consolidation means combining multiple debts into one, so you only have to pay off one single sum.

That can - potentially - reduce your monthly payments and make it easier for you to manage your debts.

Debt consolidation loans come in two forms: 

• a secured loan, linked to an asset such as a property
• an unsecured loan, which isn’t connected with anything you own, but often carries higher interest rates

It’s worth pointing out debt consolidation loans don’t cover all debts, but can be used for non-priority debts such as:

• credit cards
• payday loans
• store cards
• overdrafts
• personal loans

Yes, you might be able to get a debt consolidation loan if you have a bad credit rating.

Your credit rating might have taken a hit for many reasons, such as:

• Missed payments and defaults
• CCJs
• bankruptcy

As a result, lenders may see you as a higher risk.

That means you may be offered higher interest rates, and some lenders who specialise in unsecured debt consolidation loans for bad credit may impose strict terms.

For example, you may only be approved a loan if you can name a guarantor - someone who agrees to repay if you can’t.

Debt consolidation loans might be a popular option among people who are trying to get on top of their debts, particularly those with bad credit.

But it’s not the only one, so it’s well worth getting specialist debt advice so you can see what other alternatives are open to you.

We can explore all your options and find a way forward that’s right for you and your wider situation.

As part of the process, we’ll review your budget, so you can see where possible savings can be made and free up money to pay down debts.

We can also find out what benefits you might be eligible for, as you might be entitled to help with various costs and expenses.

Depending on your circumstances, that could put you in a position where you’re able to manage your debts without needing a debt solution.

At the same time, it could be worth exploring ways to improve your credit score.

A guarantor must usually:

• be over 18
• have a good credit history
• be a UK resident
• be able to afford the repayments if needed
• not be struggling with their own debts
• not be financially linked to you (eg: a joint mortgage holder)

Suitable people to fill this role can include: 

• family members, such as parents or siblings
• a close, trusted friend
• a partner or spouse

But it’s worth remembering that some lenders will be stricter than others when it comes to accepting possible guarantors, so not everyone on this list might be approved.

Debt consolidation can have some advantages, depending on your situation.

For example: 

• you’ll only have to think about one payment, not several
• you’ll be less likely to miss payments
• you might get a lower interest rate with a single monthly payment
• you could improve your credit score if you make your repayments on time

But at the same time, it can be a costly option, as:

• you could pay more in interest if the loan term is longer
• you could be charged more in interest if you have a low credit score
• secured loans can put your assets at risk
• personal loans often have early repayment charges

And if you have a poor credit history, debt consolidation might not even be an option open to you at all.

So before making any decisions, ask yourself: 

• can I afford the new loan repayments?
• how does the total amount payable compare to what I currently owe?
• can I afford fees for early repayment of personal loans?
• am I committed to managing my spending and not taking on more debt?

Ultimately, it might not be the right solution if: 

• you have a very poor credit rating
• you can’t afford to pay anything towards your debts
• you don’t qualify for a loan that covers your existing debts

Use our budget calculator to check how affordable a debt consolidation loan could be for you.