How to Get Debt Consolidation Loans with Bad Credit

You need a credit score of 660 or higher to consolidate your debt with a personal loan that has no origination fee and a low APR. In general, the higher your credit score is, the lower your interest rate will be on a debt consolidation loan or a balance transfer credit card.

Many lenders disclose a credit score requirement for debt consolidation loans. For your convenience, below is a list of credit score requirements from major lenders. You can check your credit score for free on WalletHub.

Credit Score Needed for a Debt Consolidation Loan by Lender

Note: These requirements are directly from the lenders or according to multiple third-party sources.

To read more about the top-ranked offers, check out WalletHub's picks for the best debt consolidation loans and the best balance transfer credit cards. If you think a debt consolidation loan is right for you, you can estimate your potential rates with our free pre-qualification tool.

The four main ways to consolidate credit card debt are: 1) using a personal loan; 2) borrowing against your home equity; 3) transferring your balances to one credit card; and 4) joining a debt consolidation program. Those are actually the options for consolidating all types of debt, not just credit card debt. The option that is best will depend on what interest rates you can qualify for, how much debt you need to consolidate, what your credit rating is and more.

Credit card consolidation is when you borrow money to repay balances owed on multiple credit cards. As a result, you owe one just lender and make a single payment each month. Credit card debt consolidation can also help you save money on interest and pay off what you owe faster. But you need to qualify for a big enough loan or line of credit with a low enough APR for it to be worthwhile. The higher your credit score is and the more income you have, the better your chances will be.

Debt consolidation does not reduce your starting balance, though – in fact, it might increase it because of origination fees or balance transfer fees. If you're trying reduce what you owe, you need to look into debt settlement instead.

How to Consolidate Credit Card Debt: Popular Methods

• Personal loan: Take out a loan for the amount of your existing debts and use the loan to pay them off. Ideally, the new loan should have a lower interest rate than your existing balances. But getting a big loan with a low interest rate is difficult without good or excellent credit. The average 24-month personal loan has an APR of about 10%, according to the Federal Reserve. But interest rates on personal loans for fair-to-good credit range between 6% and 36%.

• Home Equity: Home equity loans and home equity lines of credit use your home's value (minus the amount left on your mortgage) as collateral. This can get you the money needed to consolidate your credit card balances at a low rate (4% to 8%). But you also risk losing your house if you default.
• Credit card balance transfer: A balance transfer allows you to move your credit card balances to a new credit card. You can't transfer more than the card's credit limit. There's often a balance transfer fee of 3% to 5%, too. Balance transfer cards for people with good or excellent credit typically offer a 0% APR for a certain number of months, which lets you pay down the balance without accruing new interest.
• Debt consolidation program: With a debt consolidation program, you make one monthly payment to a company, which then distributes that money to your creditors. The company also negotiates with your creditors to lower your rates. In return for the negotiating power and the convenience of making only one payment, you will need to pay a setup fee and monthly fees. Some programs are nonprofit and their fees are minimal.

Consolidating Credit Card Debt with a Credit Card

While personal loans and home equity loans can be effective ways to consolidate credit card debt, using a balance transfer credit card provides a lot of value both right away and into the future. Many balance transfer credit cards have 0% introductory APRs, for starters. Plus, even after you pay off all your debts, you still have the card's credit line to draw on any time you need it. And while loans build credit until they are fully paid, a credit card builds credit indefinitely as long as you keep it open.

To consolidate credit card debt with a credit card, first make a list of all the debts you need to consolidate. Then, check your credit score to see which balance transfer cards you're eligible for. Next, compare the cards, apply for the one whose terms best fit your needs, and give the issuer the account numbers of your original balances along with the amounts to transfer. You can either request the transfers on the card's application or after you're approved. Finally, wait up to 3 weeks for the transfers to process, continuing to make payments to your old issuers as you wait.

Keep in mind that if you request balance transfers on your account application and the amount ends up exceeding your available credit, the issuer will typically process as much as will fit on the card. But it's possible they might give you a call to ask which balances you want them to prioritize.

Once the balances get transferred, you'll have to make at least a minimum monthly payment to the new credit card's issuer. But if your card has a 0% introductory APR, you won't owe any interest until that period expires, as long as you pay the minimum by each due date along the way.

Deciding How to Consolidate Your Credit Card Debt

If your credit card debts are on the smaller side, a balance transfer is probably your best bet. If you need a larger amount than you think you'd get with a balance transfer card, try a personal loan.

Many of the best balance transfer cards have minimum credit limits of $500 - $1,000. While it's absolutely possible to get higher limits if your credit and income exceed the card's requirements, it's not guaranteed. So if you need a large sum of money, it might be better to request a loan for the specific amount you need, assuming your credit is good enough to qualify for that amount. Home equity should probably be your last resort because of the risk.

Check out WalletHub's article on debt consolidation for even more in-depth information.

The best way to consolidate debt is to take out a new loan or credit card that has a lower APR than all of the original debts and then use it to pay off the original debts. This turns multiple monthly payments into one and reduces the cost of the total amount owed, allowing the borrower to get debt-free sooner. The best debt consolidation options will not charge any fees to complete this move, either.

4 Ways to Consolidate Debt

Credit card

Doing a balance transfer to a credit card is the best way to consolidate debt when you owe a relatively small amount and will be able to pay it off within a year or two. Balance transfer credit cards typically have credit limits of $500+, and introductory 0% APRs on balance transfers tend to last for 12-20 months.

Personal loan

A personal loan is the best way to consolidate debt for people who can't or won't use a home as collateral but still need more funding than a credit card might provide. Plus, personal loan APRs are often lower than the regular APRs on credit cards, so they're also good for balances that can't be repaid quickly. Personal loans usually take only about a week to get, too, so you can consolidate sooner than with a home equity loan or HELOC.

Home equity loan

A home equity loan is the best way to consolidate debt if you're a homeowner who owes a lot and needs a long time to pay it off. It's also a good choice if you want to score the lowest APRs possible for multiple years. Home equity loans are much cheaper than personal loans, on average, but they require the borrower's house as collateral. So you have to be confident in your ability to repay a home equity loan.

Home equity line of credit (HELOC)

A HELOC is the best way to consolidate debt for people who want to borrow multiple times without applying for a new loan. HELOCs have a draw period during which the user can borrow, up to their available credit, at any time. HELOCs also require a house as collateral, which means there's a lot of risk for borrowers.

Best Ways to Consolidate Debt Compared

Best Way to Consolidate Debt Without Hurting Your Credit

The only way to consolidate debt without any credit score damage is having a friend or family member pay it off for you, then owing the debt to that person. That said, debt consolidation doesn't usually affect your credit much.

Applying for a loan or line of credit should only drop your credit score by 5 to 10 points. And even if debt consolidation hurts your credit in the short term, it can lead to large long-term gains. You'll be able to reduce your debt load more quickly and build up a good payment history, both of which will help your score.

Other Ways to Consolidate Debt

There are a few other ways to consolidate debt, but they're not ideal. The first is to use a debt consolidation program. With this option, you don't take out a loan. Instead, you make one payment per month to a company, which distributes the funds to your creditors. The company also negotiates on your behalf to try to get lower rates. But you'll have to pay fees to the company, and you may suffer credit score damage because the program might not negotiate with creditors until you have missed a few payments.

Another option is to borrow from your retirement account. But you'll end up having to pay interest into your account to make up for the time the money wasn't invested. In addition, you'll need to pay the loan back in 5 years or face an early withdrawal penalty. The timeline moves up if you lose your job, too. In that case, you'd need to pay the money back by the tax day for the year in which you lost your job.

Ultimately, the best way to consolidate debt for most people will be a personal loan because it provides decent funding amounts and APRs without requiring any collateral. To check your chances of getting approved for a personal loan, along with what rates you might qualify for, use WalletHub's free pre-qualification tool.

Discover offers three good debt consolidation options: personal loans, home equity loans and credit cards. With Discover's personal loans and home equity loans, the borrower receives a lump sum of money that they can use to pay off their existing debts, combining them into a single balance that accrues interest at a lower rate (hopefully). The main difference between the two is that personal loans are unsecured, while home equity loans are secured by the borrower's house. Plus, Discover will pay off existing creditors directly with a personal loan.

The other way to pursue debt consolidation with Discover is to make a balance transfer to a credit card. The best credit cards for debt consolidation are ones that offer 0% introductory APRs on balance transfers. Below, you can see how all of Discover's debt consolidation methods stack up against one another.

Discover Debt Consolidation Options Compared

Each of Discover's debt consolidation options is best for a different group of people. Credit cards are best for people who can pay off the full amount within the card's 0% introductory period. Personal loans are best for people who need larger amounts of money but still don't want to provide collateral. And home equity loans are best for people who need above $35,000 in funding and have a home that they are willing to use as collateral.

The fact that Discover offers all three options puts them at an advantage compared to many other banks – in fact, only 5 of the top 10 banks by asset size offer all three.

Debt consolidation is a good idea for borrowers with high-interest debts owed to multiple lenders. Whether or not debt consolidation is wise depends largely on if you can get a new loan or credit card that will save you money compared to the current cost of your debts. The simplicity of a single payment can be helpful, too.

How Much You Can Save With Debt Consolidation

* Interest rates are from WalletHub data and total interest is calculated on a 2-year basis.

When Debt Consolidation Is a Good Idea

When it gets you lower rates

If you're able to qualify for a new loan or line of credit with a lower APR than your current creditors are charging, consolidating the debts will reduce the overall cost of what you owe by slowing down the rate at which interest accrues. That in turn will help you pay off what you owe more quickly.

When you're having trouble managing your payments

If you find yourself with too many individual debts that are hard to keep track of, and you risk missing monthly due dates as a result, consolidating can help simplify your finances.

When the fees aren't excessive

If you have a credit score of 660+, you should be able to qualify for a personal loan with no origination fee. And some balance transfer credit cards for scores of 700+ have no balance transfer fees. Other loans and cards may charge fees that increase what you owe by 1% to 8%, which might make debt consolidation a bad idea.

When you can get enough funding

Depending on how much you owe and how high your credit score and income are, you might not qualify for a large enough loan or credit limit to accommodate all your existing debts. In that case, you might consider consolidating partially, or you might decide that opening a new account isn't a good idea.

When you're not about to make a major financial decision

In the long run, debt consolidation can help you get debt-free more quickly and raise your credit score. But it will cause short-term credit score damage from the hard inquiry required to open a loan or credit card. This could affect your approval odds or the rates you get for things like auto loans or mortgages for up to a year.

Bottom Line

In conclusion, debt consolidation is a good idea when it helps you get organized and obtain better rates. You can click on the button below to compare the best debt consolidation loan offers on WalletHub.

USAA offers two options for debt consolidation: personal loans and credit cards. Credit cards are better for short-term consolidation of small balances. Personal loans often allow you to borrow more money for longer periods of time.

USAA doesn't offer personal loans specifically for debt consolidation. But their regular personal loans can be used for any expense, including paying off multiple debts in order to consolidate them into one balance.

USAA Debt Consolidation Options

• Personal loan: Borrow $2,500 - $50,000 for 12 - 84 months. APRs range from 6.99% to 17.65%. People of all credit levels are considered, but only people with excellent credit will qualify for the lowest rates. USAA personal loans don't have an origination fee.
• Credit card: USAA offers a variety of credit cards, including ones that are co-branded with military associations. You can transfer existing debts to these cards through a balance transfer. The best cards to transfer balances to are ones that have 0% introductory APRs.

USAA does not let you pre-qualify for their personal loans. But you can use the calculator they offer on their website to estimate your potential rates and see if they're better than the rates you are paying on your existing debts. USAA also offers a tool to help you pick the right credit card.

Though USAA does not disclose a minimum credit score requirement for its personal loans, its website lists rate estimates for all credit ranges, even below fair credit. So people with bad credit may have a shot at approval. You can see the credit score requirements for USAA credit cards on their WalletHub details pages.

To get a loan or credit card from USAA, you also need to be at least 18 years old and have an SSN. In addition, you must qualify for overall USAA membership. It's open to people who have served in the military and their immediate family, as well as family of existing USAA members.

SoFi offers debt consolidation loans of $5,000 to $100,000 for 3 to 7 years with APRs range from 8.99% - 23.43%, assuming an autopay discount of 0.25%. In addition, SoFi charges no origination fee, no late fee and no penalty for paying the loan off early. All of these factors combined make SoFi debt consolidation loans among the best on the market.

Still, it is worth noting that these terms are no different than those offered with SoFi's other personal-use loans. Even though SoFi's website has a page specifically for debt consolidation loans, they don't actually seem to be a fundamentally different product.

Unlike some other lenders, SoFi does not offer any alternative ways to consolidate debt, such as home equity loans or credit cards.

How to Get a SoFi Debt Consolidation Loan

The first step toward consolidating debt with SoFi is to check for pre-qualification online. You'll need to make an account on SoFi's website, but then you'll be able to see your odds of approval and an estimate of what your APR might be if you're approved. That way, you can see if you're likely to get rates that are lower than the ones on your existing debt.

If you're pre-approved for a SoFi debt consolidation loan, you may want to also use WalletHub's pre-qualification tool to check your status with other lenders. That will ensure you get the best deal.

If you decide that SoFi is the best option, you can then submit an application. Keep in mind you will need at least a 680 credit score for final account approval.

You should receive a decision in 2 to 4 business days, though it could take up to 15 business days if you're self-employed. Once you get your money, you can use it to pay off your old debts, consolidating all of them into one loan owed to SoFi.

The biggest pros of debt consolidation include the potential to save a lot of money and the simplicity of having fewer monthly payments to deal with. Notable cons include short-term credit score damage, the possibility of fees, and the risk of actually adding to your debt load in the long run. Plus, it's difficult to get a good deal on debt consolidation without a credit score of 660-700 or higher.

So, the practice of debt consolidation does indeed have both pros and cons. But the pros usually outweigh the cons, especially for people who do their research and borrow responsibly.

Top 4 Pros and Cons of Debt Consolidation

Pros of Debt Consolidation:

1. Lower APR possible. When you consolidate, you may be able to get a lower APR than the ones on your original debts, which can save you money and help you pay off the total amount more quickly.
2. One monthly payment. You will go from having multiple monthly payments to keep track of to having just one.
3. Lower likelihood of default and credit score damage. Accruing interest less quickly and only having to submit one payment help reduce the odds that you will miss payments or default. Thus, you can avoid credit score damage.
4. More time for repayment. Depending on the type of debts you consolidate, you might get a longer payoff period. For example, if you consolidate payday loans, you'll go from owing the money in 2 - 4 weeks to having months or years to pay it off – and at much lower rates, too.
5. Could free up collateral. If you consolidate with an unsecured loan or use a credit card balance transfer to pay off a loan that's currently secured by collateral, you will no longer be in danger of losing that collateral.

Cons of Debt Consolidation:

1. Credit score restrictions. In order to qualify for a personal loan, you'll need a credit score of 585+. You'll need 620+ for a home equity loan or HELOC and 700+ for a good balance transfer credit card. And those are the bare minimums – you'll need good or excellent credit for the best APRs.
2. Lower APRs aren't always available. Not everyone can qualify for a lower APR than they currently have, especially if their credit rating has declined since they took out the original debt.
3. Not all debts are eligible. Not all debt consolidation options support all types of debt. For example, credit card issuers often limit the types of debt that can be moved to a credit card through a balance transfer.
4. Hard inquiries hurt your credit standing. If you open a new loan or credit card, the hard inquiry triggered by the application will cause some temporary credit score damage. It'll take a few months of timely payments to bounce back.
5. Fees could add to your costs. You may need to pay a fee in order to consolidate debt. For example, personal loans sometimes charge origination fees of 1% to 8% of the loan amount, and credit cards often charge balance transfer fees of 3% to 5% of the transferred amount.
6. Consolidation might not solve your problem: If you don't pay the bills on schedule and adjust your everyday spending to ensure it's sustainable, consolidation won't pay off in the long run. That's especially true given that it might be possible to borrow more than the amount being consolidated. Your highest priority should be getting debt-free, so you don't need to keep refinancing over and over.

There are plenty of ways to consolidate debt, each of which has its own pros and cons. You can consolidate by getting a lump sum through a personal loan or home equity loan. Or, you can borrow up to a certain limit any time you want by taking out a home equity line of credit or doing a balance transfer to a credit card.

Advantages & Disadvantages of Popular Debt Consolidation Options:

Personal loans allow you to borrow a lump sum for 12 - 84 months without putting down any collateral. Their funds can be used for anything, including paying off old debts.

Benefits of consolidating debt with a personal loan include quick funding and not having to put down collateral (usually).

Drawbacks include APRs as high as 36% and origination fees in some cases.

Home equity loans allow you to borrow a portion of the value of your house minus what's still due on the mortgage. You can use the money for anything.

Benefits of consolidating debt with a home equity loan include potentially large amounts of funding and low APRs.

Drawbacks include using your house as collateral and sometimes having to wait over a month for funding.

Home equity lines of credit (HELOCs) allow you to borrow money multiple times up to a certain credit limit, based on your home's value. Like home equity loans, you can use them to pay off debts.

Benefits of consolidating debt with a HELOC include potentially large amounts of funding, low APRs, and the ability to borrow multiple times.

Drawbacks include using your house as collateral and sometimes having to wait over a month for funding.

Balance transfer credit cards allow you to pay off multiple lenders with the card's credit line, thereby moving the balances so that payments are due to the card's issuer.

Benefits of consolidating debt with a balance transfer credit card include potential 0% APRs for 6 - 24 months and instant funding once you have the card.

Drawbacks include high regular APRs and often low credit limits.

Capital One does not offer debt consolidation loans because Capital One no longer has personal loans as one of their products. The closest thing would be a Capital One credit card with good balance transfer terms or you can consider debt consolidation loans from other lenders.

Most companies that offer debt consolidation loans do so in the form of personal loans that can be used for nearly any type of expenses. But Capital One doesn't have loans specifically for debt consolidation. Nor do they have general-purpose personal loans.

Another common way to consolidate debt is by taking out a home equity loan or home equity line of credit (HELOC). Both of these options allow you to borrow against the equity in your home (home value minus mortgage balance). And both use your house as collateral. Unfortunately, Capital One no longer offers home equity financing, though they did in the past.

So, the best way to consolidate debt with Capital One is to get a Capital One balance transfer credit card. But keep in mind that balance transfer credit cards are only a short-term consolidation solution. If you won't be able to pay in full before any introductory APR ends, or can't get a high enough credit limit, you may want to consider a personal loan with low interest rates from a different issuer.

A debt consolidation loan is a personal loan used to pay off more than one existing debt at the same time. The borrower receives a lump sum of money from the lender and uses that money to pay off their other debts. Those debts thus “consolidate” into one balance owed to the one new lender, with one monthly payment for the borrower. Ideally, the interest rate on the new loan will also be lower than the rates on the old loans that were consolidated. The consolidation loan will usually last for around 12 – 60 months.

With a debt consolidation loan, you should be able to consolidate almost any type of existing debt – whether that's from other personal loans, credit cards, medical bills, or more. That's because in most cases, issuers don't offer loans specifically targeted for debt consolidation, but rather have general-purpose personal loans that you can use for whatever you like. One notable exception is that many issuers will not allow you to pay off student loan debt with a personal loan.

Some lenders may have different terms for debt consolidation loans compared to personal loans for other purposes. For example, LightStream's overall personal loan APRs range from 3.99% to 16.99%. But when it comes to loans for debt consolidation specifically, the minimum is 5.95% and the maximum is 16.79%.

The process of getting and paying off a debt consolidation loan is fairly simple. You apply for a loan for enough money to pay off whatever existing debts you want to combine. To get approved, you'll usually need a credit score of at least 660. There are loans that accept lower scores, but they're less likely to give you interest rates lower than you're currently paying. Once you're approved and receive your funds, you send a check to each existing lender to pay off your balance. You will no longer owe debts to your old lenders; instead, you will owe a new debt that's the size of all the old debts put together.

However, it's important to note that some personal loan providers may charge you an origination fee to open the loan – so your new debt could be larger than the sum of your old debts. In this case, it's important to make sure that the new loan's interest rate is significantly lower than those of your old debts. The main purpose of a debt consolidation loan is to save money, so you don't want to end up paying more in the long run.

Another good way to consolidate debt is to get a balance transfer credit card and move several debts onto it. Balance transfer cards tend to have a 0% APR for 12 – 21 months and then revert to a relatively high regular APR after that. You might also consider consolidating debt through a home equity loan, which lets you use the funds for nearly any purpose.