How can I get a credit card consolidation loan with bad credit?

Secured debt consolidation loans are loans that require collateral and are used to pay off other existing debts. Once the old debts are consolidated, the borrower still owes the same amount of money but will only have to make one monthly payment. Interest may accrue slower, too. The collateral will make it easier to get a bigger loan with a lower interest rate than your credit standing and income would normally permit. The tradeoff that comes with secured debt consolidation loans is that you could lose whatever collateral you put up if you don’t pay the bills on time.… read full answer

Most debt consolidation loans are just unsecured personal loans (which you can use for any purpose). But some lenders will let you secure a loan with an auto title, stocks, real estate, collectible items, or other valuable property. This can make sense for debt consolidation if you have something of value that you’d prefer not to sell outright for debt repayment money but are comfortable putting at risk. If you’re not at all prepared to lose your collateral in the event you default, it may not be worth getting a secured loan. In addition, if you’re not able to get an APR that’s significantly lower than the rates on your existing debts, it’s likely not worth it either.

There’s one other type of loan that could be considered a secured debt consolidation loan – a home equity loan. You can use a home equity loan for nearly anything you want, including debt consolidation. And a home equity loan is secured by your house, so the lender can foreclose if you don’t pay them back. The amount that you can borrow is a percentage of your home’s equity, which is the value of your house minus how much you still owe on your mortgage. Home equity loans typically require a credit score of at least 680, according to the credit bureau Experian. That’s toward the top of the fair credit range.

Yes, you can get a personal loan with a credit score of 550. You could consider getting a secured personal loan, applying for an unsecured personal loan with a co-signer, borrowing from family and friends, and checking with local credit unions which usually have a lower requirement over credit score.

It’s very difficult to get an unsecured personal loan with a credit score under 550 on your own, without the help of a co-signer whose credit score is higher. Even the loans with the most lenient approval standards require a credit score of 580. The personal loans with the lowest minimum credit score requirements are from LendingPoint (580+ score required) and Avant (600+).

So pursuing one of these alternative methods can help increase your chances of getting the funding you need.

How to Get Personal Loans for a Credit Score Under 550

Get a secured personal loan

A secured personal loan requires collateral. So you’ll have to put something of value on the line – money in an account or certificate of deposit, for example – that the lender can keep if you default. But your odds of approval will be high, since there’s little risk to the lender.

Apply for an unsecured personal loan with a co-signer

Applying for an unsecured personal loan with a co-signer lets you use someone else’s high credit score to boost your approval chances. The co-signer promises to pay the loan back if you can’t. Only some personal loan providers offer a co-signer option. Some examples are Citizens Bank, PNC and SoFi.

Borrow from family/friends

These people will likely be more sympathetic to your situation and will not care as much what your credit score is. They also won’t be able to do a hard pull of your credit and damage your score further. Depending on the person from whom you borrow, you might get much better terms than you would from a traditional lender.

See if local credit unions will consider you

According to the credit bureau Experian, some credit unions will offer unsecured personal loans even to people with bad credit. That’s due to credit unions having a more personal connection with their customers and being not-for-profit organizations.

One non-loan way to finance purchases with bad credit is through a credit card. However, credit cards for bad credit are not ideal. Secured credit cards require a security deposit that becomes your credit limit, so that essentially means you’re not borrowing (or at least you’re borrowing from yourself). And unsecured cards for bad credit have high rates and fees.

You can see your odds of getting approved for a personal loan without hurting your credit score by using WalletHub’s free pre-qualification tool. But if your expense isn’t especially urgent, it may be worth waiting a few months to improve your credit score.