Most people have several 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 and this can make it almost impossible to put a noticeable dent in your accumulating debt.
That’s where a debt consolidation loan comes in. You can significantly ease the burden of managing multiple monthly payments while ideally saving money along the way. Some lenders could likely make you a loan offer even if you have bad credit.
5 Best Debt Consolidation Loan Companies
Here are the top five lenders available to people with bad credit.
DebtConsolidation.com is a site that provides users with information and tools related to consolidation loans. Their goal is to help people and families get out of debt – and stay out of debt.
They provide guides about bankruptcy, budgeting, credit debt, and debt management. All of their guides and resources focus on their mission to help ease the growing debt burden in the US.
Features and Benefits
- See if you qualify with no obligation to sign-up
- High-level of company transparency
- Matches you with 4 trusted in-house partners
- Includes a multitude of free debt management tools and resources
$500 - $35,000
3 to 72 months
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.
Features and Benefits
- Multiple loan types available
- Fast loan decision
- Funds deposited as soon as you accept offer
- Nationwide availability
$500 - $5,000
3 to 60 months
BadCreditLoans.com is a matching service that allows you to receive multiple offers from lenders by submitting just one application. To qualify, you do need to have a steady income for at least the last three consecutive months. Here’s everything else they have to offer.
Features and Benefits
- No obligation or fee to check loan approval
- High approval rate despite credit history
- Funds available as soon as next business day
- Assisting people with bad credit since 1998
$250 - $5,000
CreditLoan is a central resource for those looking to get out of debt. In addition to a variety of guides and lender reviews, CreditLoan connects consumers with consumers who are in need of cash.
Whether you are looking to consolidate existing loans or you need money for a new purchase, this site has all the resources you need. They work with a network of lenders to find the right loan for your needs.
Features and Benefits
- Over 750,000 loans lent since 1998
- Money deposited as early as next business day
- Will work with any credit score
- Get qualified within minutes
$2,000 - $35,000
24 to 60 months
As low as 9.95%
More than half of Avant’s borrowers use their loan funds to consolidate debt. With monthly Vantage Score updates and a high likelihood of seeing your credit score increase, they are definitely an industry leader when it comes to debt consolidation. Here’s what you can expect.
Features and Benefits
- Trusted by over 600,000 satisfied customers
- No prepayment fees
- Fast approval
- Funds available next business day
How do debt consolidation loans work?
Debt consolidation is combining high-interest debts into one personal loan with a lower interest rate. 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 cards, or payday loans, consolidating them may be more affordable. That’s one of the most important things to consider when comparing loan offers: are you actually saving money in the long run?
A loan used to consolidate your debt 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.
Credit Card Consolidation
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 payments out. 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.
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.
It may also improve your credit score because installment loans are viewed more favorably on your credit report than revolving debt like credit cards. Pair that with committing to making your monthly payments on time and you could quickly see your credit scores 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 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.
Student Loans Consolidation
More young Americans are burdened by student loans today than ever before. But even parents who helped finance their children’s college educations may be feeling the pull of too many payments each month.
How can debt consolidation 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.
Moreover, 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.
Getting a Debt Consolidation Loan with Bad Credit
As you can see, there is a wide range of lenders available to borrowers with poor 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 debt consolidation.
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 term? Both of those factors can affect the cost of your loan.
If you’re considering a loan because you can’t meet your financial obligations each month, then the total cost of the loan may be less significant to you. Perhaps extending the term of the loan 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 pay off your debt is extremely personal. For many people, however, an unsecured personal loan can be an excellent solution.