Most people have several different kinds of debt, such as multiple credit cards, lines of credit (perhaps through your home equity), car loans, students loans, mortgages, and personal loans. Each separate account comes with a different interest rate, time frame, monthly due date, and monthly payment amount.

And if you have credit card debt or loans with a variable rate, you might find your monthly payment creeping higher and higher due to rising interest rates. You may feel like you’re losing track of what you owe and when, making it almost impossible to put a noticeable dent in your accumulating debt.

That’s where a debt consolidation loan comes in. You can greatly ease the burden of managing multiple payments while ideally saving money along the way. Even if you have bad credit, there are debt consolidation lenders who could likely make you a loan offer.

Keep reading to find out what is a debt consolidation loan and what the best lenders are to work with when you have a poor credit score.

How Does a Debt Consolidation Loan Work?

A debt consolidation loan is when you take out a personal loan to payoff some or all of your existing debt. The idea is that you take several loans or credit card balances and roll them into a single, easy to manage monthly payment. In most cases, you’ll get a fixed interest rate with payments spread out over a predetermined period of time.

That’s good for you because it means that you’ll never have to wonder how much you owe each month. The payment amount stays the same and you have a concrete plan for getting out of debt and moving forward.

Plus, you could ideally save money if you get a better interest rate than your existing credit accounts. Whether you have a high interest car payment, credit card, or payday loan, a debt consolidation loan may well be more affordable. That’s one of the most important things to consider when comparing loan offers: are you actually going to save money in the long run?

A debt consolidation loan can also help keep you organized. If you’re constantly making late payments because you can’t keep track of multiple due dates, you could benefit greatly from consolidating your debt. In addition to avoiding constant late payment fees, you might also see your credit score start to rise if you get better about making loan payments on time.

Why Consolidate Your Credit Card Debt?

Credit card debt is one of the most popular types of debt to consolidate for borrowers today. There are a couple of reasons for this. First, interest rates are typically higher than what you find with loans, even with bad credit.

Second, a debt consolidation loan spreads your debt payoff out over a set period of time. With a credit card, you’re using revolving credit. You just have to make a minimum balance each month, but in the meantime, your interest is accumulating more and more each month. Even if you don’t add any more debt to your credit card, your balance would still get higher each month if you only make the minimum payment.

And if you keep spending more with your credit card, your debt could quickly spiral out of control. By consolidating, you can curb your spending and future debt accumulation compared to paying off your credit card little by little each month.

You may also see an improvement in your credit score, because installment loans (which include debt consolidation loans) are viewed more favorably than revolving debt like credit cards. Pair that with committing to making your payments on time each month and you could quickly see your credit score increase.

While you ideally want to pay off your credit cards each month, it’s not always possible, especially if you’re just starting to get your finances back on track. Be sure to weigh the potential savings with the true cost of a debt consolidation loan, including origination fees and interest rates. Once you know you won’t be paying extra to consolidate, you can quickly get yourself on an effective repayment schedule that doesn’t involve an ongoing cycle of minimum payments.

Why Consolidate Your Student Loans?

In addition to credit card debt, student loans are one of the most burdensome types of debt today, especially for young adults. But even older borrowers who helped finance their children’s college educations may be feeling the pull of too many payments each month.

How can a debt consolidation loan alleviate your student loan debt?

There are a few different ways you can find relief. If you have multiple student loans out, you may still appreciate consolidating them all into a single loan. This can really simplify your monthly bills and help you avoid costly fees and a worsening credit score.

On top of that, many private student loans have variable rates. Depending on your loan agreement, your payment amount could change every month or every quarter, even if the repayment term is fixed. As interest rates rise, you could be surprised by how much you end up owing on one or more student loans.

One important thing to remember is that while you could consolidate your federal student loans for a potentially better interest rate, you will lose all the unique protections that come with these loans. That includes things like income based repayment plans, loan forgiveness, and more.

It’s best to weigh all of your options carefully. In addition to the numbers, also look at the benefits you could lose with debt consolidation and figure out option makes the most sense for you.

5 Best Debt Consolidation Loan Companies

Ready to find the perfect fit for your debt consolidation loan? Here are the top five lenders available to borrowers with less than perfect credit.

Avant

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Avant specializes in debt consolidation loans; in fact, more than half of Avant’s borrowers use their loan funds to consolidate debt. Plus, they’re an actual lender, not just a matching service. With monthly Vantage Score updates and a high likelihood of seeing your credit score increase, Avant is a definitely an industry leader when it comes the debt consolidation. Here’s what you can expect.

Features and Requirements

  • $1,000 to $35,000 loan range
  • 2 to 5 year loan term
  • Minimum credit score of 600
  • Free access to ReadyforZero app to help your debt payoff process
  • 95% customer satisfaction rate
  • Over 600,000 borrowers have used Avant
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BadCreditLoans.com

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BadCreditLoans.com is a matching service that allows you to receive multiple offers from lenders by submitting just one debt consolidation loan application. To qualify, you do need to have a steady income for at least the last three consecutive months. Here’s everything else BadCreditLoans.com has to offer.

Features and Requirements

  • $500 to $5,000 loan range
  • 3 to 60 month loan terms
  • No minimum credit score required
  • Must be 18 years old and U.S. citizen
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PersonalLoans.com

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PersonalLoans.com is another option for an online loan marketplace with the potential to receive offers from several lenders. They also work with different types of lenders, including peer to peer lenders, installment lenders, and bank lenders. You can expect some general guidelines and requirements for any loan type, including debt consolidation loans.

Features and Requirements

  • $500 to $35,000 loan range
  • 6 to 72 month loan terms
  • Minimum credit score of 600
  • Can’t have a recent bankruptcy or late payment longer than 60 days on your credit report
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NetCredit

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NetCredit is a direct lender, so you’ll receive just one offer when you apply for a debt consolidation loan through their website. They do guarantee that your loan payments will be reported to two credit unions, Experian and TransUnion, so you can be confident in building your credit score.

Features and Requirements

  • $1,000 to $10,000 loan range
  • Varied loan terms
  • Customize your loan amount and repayment terms with the My RightFit Tool
  • My Choice Guarantee allows you to return the loan funds after one day if you’re not satisfied
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OneMain Financial

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OneMain Financial offers bad credit debt consolidation loans both online and in their physical branches. Once approved, you can take advantage of flexible payment options each month. There’s an app you can use, or you can pay at a branch, at a Walmart Service Desk, or through the mail. OneMain Financial debt consolidation loans have some other beneficial features as well.

Features and Requirements

  • $1,500 to $25,000 loan range
  • Up to 60 month loan terms
  • Minimum credit score of 550
  • Must bring documents to a branch to finalize approval
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Getting a Debt Consolidation Loan with Bad Credit

As you can see, there is a wide range of debt consolidation lenders available to borrowers with bad credit. You can still expect, however, higher interest rates than if you had a good credit score. That means it’s especially important for you to make sure you’re benefitting from a debt consolidation loan.

For starters, check to see if you’ll save money over the life of the loan compared to your current payoff schedule for your debt. Maybe you get a slightly lower interest rate but will you have to pay a heavy origination fee or have a much longer loan term? Both of those factors can affect the cost of your loan.

If you’re considering debt consolidation because you can’t meet your financial obligations each month, then the total cost of the loan may be less important to you. Perhaps extending the loan term to lighten your monthly load is worth it, even if you end up paying more over time.

Like all things, deciding the best way to payoff your debt is extremely personal. For many people, however, a debt consolidation loan can be an excellent solution.