You've looked up "debt consolidation loans" and seen the fine print. 670+ credit score. Low debt-to-income ratio. Stable income history.
But your credit isn't there. Maybe you're sitting at 580 and you're wondering if consolidating debt is even possible without a good score.
It is possible. Your options look different, and you'll need to be more careful about which path you take. But you're not stuck.
Here are five ways to consolidate debt with bad credit, plus the traps you need to avoid.
Can You Actually Consolidate Debt with Bad Credit?
Let's be real: traditional consolidation loans are tough to get if your score is under 620.
Most banks and online lenders will either reject you outright or offer rates so high (25-36% APR) that consolidation makes no financial sense. Why trade 22% credit card debt for a 30% personal loan?
But "tough" isn't the same as "impossible" , and some paths don't involve traditional lending at all.
What Counts as Bad Credit?
Depends on the scoring model, but generally:
Score Range
Rating: 300-579
Poor: 580-669
Fair: 670-739
Good: 740+Excellent
Below 620? Traditional consolidation is mostly off the table. Between 620-669? You have more options, but expect to pay higher rates.
Option 1: Secured Personal Loans
A secured loan uses something you own as collateral. Because the lender takes on less risk, they're more willing to approve people with lower credit scores.
How It Works
You put up an asset as security:
- Car title
- Savings account
- Certificate of deposit
- Investment account
If you stop paying, the lender takes the collateral which is the tradeoff for getting approved despite bad credit.
Where to Look
- Credit unions often offer secured loans to members
- Banks where you already have accounts
- Online lenders with secured loan products
The Good
- Easier to get approved with bad credit
- Lower rates than unsecured bad-credit loans
- Helps rebuild your credit if you pay on time
The Bad
- You could lose your car, savings, or whatever you select as collateral
- Loan amount is capped by your collateral value
- Not everyone has assets to put up
Best For
People who have assets they're comfortable risking and want a lower rate than unsecured options offer.
Option 2: Credit Union Loans
Credit unions are non-profit financial institutions owned by their members. They tend to be way more flexible than banks when it comes to credit requirements.
Why Credit Unions Are Different
Banks exist to maximize profit. Credit unions exist to serve members. That means:
- More relaxed credit standards
- Interest rates often 5-10% lower than banks
- They'll look at your whole financial picture, not just a three-digit score
Payday Alternative Loans (PALs)
Federal credit unions offer something called Payday Alternative Loans. These exist specifically to give people a better option than predatory payday lenders.
PAL requirements:
- Be a credit union member for at least one month
- Borrow $200-$1,000 (PAL I) or up to $2,000 (PAL II)
- Maximum 28% APR (compared to 400%+ at payday lenders)
- 1-6 month repayment terms
They're small loans, but they can help with immediate emergencies without making your situation worse.
How to Join a Credit Union
Most have simple requirements:
- Live or work in a certain area
- Work for a specific employer
- Be related to an existing member
- Join an affiliated organization (sometimes just a $5-10 donation)
Search "credit unions near me" or check MyCreditUnion.gov.
Best For
Anyone willing to become a credit union member who wants more flexible lending criteria.
Option 3: Debt Management Plans
A debt management plan isn't a loan. It's a structured repayment program run through a nonprofit credit counseling agency.
How It Works
- Meet with a certified credit counselor (usually free)
- They negotiate with your creditors for lower rates and waived fees
- You make one monthly payment to the agency
- They distribute it to your creditors
The Upside
No credit check. Your score doesn't matter for eligibility.
Lower rates. Creditors often drop rates to 6-10% for DMP participants.
Fees get waived. Late fees and over-limit charges usually get eliminated.
One payment. You write one check each month and the agency handles distribution.
Professional support. A counselor helps you build a budget that actually works.
The Downside
Your cards may get closed. Creditors often require you to close enrolled accounts.
It takes a while. Most DMPs run 3-5 years.
Monthly fees. Agencies typically charge $25-50 per month.
You have to stay committed. Miss payments and you could void the negotiated terms.
Finding a Legit Agency
Look for:
- Nonprofit status
- Accreditation by NFCC or FCAA
- No high-pressure sales tactics
- Free initial consultation
Run away from any company that wants large upfront fees or promises guaranteed results.
Best For
People with significant credit card debt who can't get approved for loans and want professional guidance.
Option 4: Home Equity (If You Own Property)
If you own a home with equity you might be able to consolidate debt even with poor credit.
Home Equity Loan
Borrow a lump sum with your house as collateral. Credit requirements are lower because the lender can foreclose if you don't pay.
Home Equity Line of Credit (HELOC)
A revolving credit line secured by your home. Draw what you need, pay interest only on what you use.
Why Requirements Are Lower
Your house is the security. The lender has protection even if your credit is bad. Some approve home equity products for scores as low as 620.
The Big Risk
You could lose your home. This is real. If you can't make payments, the lender can foreclose. Only go this route if you're absolutely certain you can handle the payments.
Best For
Homeowners with significant equity who've exhausted other options and are confident in their ability to repay.
Option 5: DIY Debt Payoff
Most people don't realize you don't need a loan to "consolidate" your debt. You can build a structured payoff plan yourself.
How It Works
- List every debt with balance, rate, and minimum payment
- Pick a method: snowball (smallest balance first) or avalanche (highest rate first)
- Pay minimums on everything except your target debt
- Throw every extra dollar at the target
- When it's paid off, roll that payment to the next one
Why This Works with Bad Credit
No approval needed. Your credit score is irrelevant because you're not applying for anything.
You stay in control. No third parties. No fees. No monthly charges.
Credit improves as you go. On-time payments and lower utilization boost your score over time.
Nothing at risk. No collateral means nothing to lose.
The Hard Part
Nobody's forcing you to follow the plan. You have to hold yourself accountable and tools can make this easier.
Relief helps you manage your debt and see your progress. Download free.
Best For
Anyone who wants full control over their debt payoff without involving lenders or agencies.
What to Avoid
When you're desperate to consolidate, predatory lenders smell blood in the water. Watch out for these:
Payday Loans
APRs of 400% or more. A $500 payday loan can cost you $600+ in fees if you can't pay it back immediately. This makes everything worse.
Debt Settlement Companies
These outfits charge 15-25% of your total debt and often fail to deliver. They tell you to stop paying your creditors, which destroys your credit even further. Many are straight-up scams.
Red flags:
- Large upfront fees
- Promises to settle for "pennies on the dollar"
- Pressure to sign up immediately
- No free consultation
Car Title Loans
Same concept as payday loans, but your car is collateral. If you don't pay you lose your vehicle.
"Bad Credit" Loans at 30%+ APR
Some lenders will technically approve you with bad credit but charge rates so high you're better off keeping your current debts. If the new APR is higher than what you're already paying, walk away.
How to Build Credit While Paying Off Debt
Improve your credit while you pay down debt. Better options open up as your score climbs.
Pay On Time. Every Time.
Payment history makes up 35% of your credit score. Set up autopay for at least the minimum on every account.
Lower Your Credit Utilization
Utilization (how much of your available credit you're using) is 30% of your score. As you pay down card balances, utilization drops and your score goes up.
Target: under 30% utilization, under 10% is even better.
Keep Old Accounts Open
Length of credit history matters. Don't close old cards after paying them off, just stop using them.
Check for Errors
Pull your free reports at AnnualCreditReport.com. Dispute anything wrong: incorrect late payments, accounts that aren't yours, wrong balances.
Give It Time
Credit doesn't fix itself overnight. But consistent on-time payments and lower balances can produce meaningful improvement in 6-12 months.
The Bottom Line
Bad credit narrows your options. It doesn't eliminate them.
Your best moves:
- Credit union loans for lower rates and flexible approval
- Debt management plans for professional help without a credit check
- DIY snowball or avalanche for full control and no approval required
Stay away from payday loans, car title loans, and high-fee debt settlement companies. They make bad situations worse.
Whatever route you pick, start making on-time payments and tracking your progress. Your credit will improve and better options will become available. This isn't permanent.
Ready to start?
Download Relief to get out of debt faster.
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