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Last updated: 26 January, 2021
Yes, consolidation loans for bad credit are available. A debt consolidation loan lets you pay off existing debts by paying them off with a single loan. With all your debts paid off, you only have to make one monthly payment to repay the debt consolidation loan instead of several payments to different lenders.
When you apply for debt consolidation loans for bad credit, UK wide, most lenders will check your credit record. The good news is that with consolidation loans, bad credit isn’t always a deal breaker. Some lenders are still willing to offer you a bad credit consolidation loan, even if you’ve had financial problems in the past.
But, with some consolidation loans, bad credit means you’ll have to pay higher interest rates. It could also mean that you’re not able to borrow as much.
It depends. Loans to pay off debt are a good idea if the payments are affordable, the loan has a lower interest rate, and it won’t take you much longer to pay off your debts.
With a debt consolidation loan, bad credit won’t always affect your eligibility. So it can be a good way to help you manage your money if the loan meets the criteria listed above.
Although debt consolidation can lower your monthly payments, and simplify your finance, it doesn't always mean that you'll save money in the long run.
In many cases, the lower monthly payments are achieved by spreading the debt over a longer period, which means you pay more interest in total.
Find out more about whether you should consolidate your debts.
Like most loans, debt consolidation loans come in to different types, secured and unsecured.
The type of loan you choose depends on two main factors:
Whether or not you're a homeowner
The amount that you need to borrow
A secured debt consolidation loan is one in which your loan is secured to any equity you have in a property. These loans are thus only available to those who own a property.
The advantage of a secured loan is that you're more likely to be offered a lower interest rate on your loan and you may be able to borrow a larger amount. The downside is that if you're unable to keep up with repayments, you could risk losing your home.
With unsecured debt consolidation loans, you don't need to be a homeowner to be eligible for the loan. Your eligibility is based mainly on your credit history and whether you can afford to pay back the loan based on your financial circumstances. These are often referred to as personal loans and may be more difficult to be approved for, especially if you have bad credit.
However, that doesn't mean that you can't get unsecured debt consolidation loans with bad credit. You may have to pay a higher interest rate, or the amount you can borrow may be lower.
While there isn't one best consolidation loan for bad credit, the best loans will let you pay off your existing debt for the lowest cost. They’ll also offer affordable monthly payments.
Here’s how to go about finding the best bad debt loans:
Before you look for a bad credit consolidation loan, you need to check if there are any fees if you pay back your existing debts early. You’ll also need to work out the total of your existing debts. Bad credit consolidation loans can usually combine your debts from loans, overdrafts and credit cards.
If you’re looking at debt consolidation loans for bad credit, you should draw up a budget to see how much you can afford to repay every month. It’s even more important to do this if you have bad credit, because you need to avoid further damage to your credit record.
When you start looking for consolidation loans for bad credit, you should try to find the lowest rate possible. Ideally, you’ll want to borrow over the shortest time you can while keeping your monthly payments affordable.
You can use this comparison to search for bad credit debt consolidation loans from regulated lenders.
If you’re looking at credit card consolidation, then a balance transfer credit cards are a good option top pay off credit card debt.
Are you looking for a debt consolidation loan? Bad credit? No guarantor? You could still be in luck. You don’t always need a guarantor for consolidation loans for bad credit.
But if you’re struggling to find a bad credit consolidation loan that works for you, you could think about finding a guarantor. Your guarantor would have to say they’d take responsibility for making your repayments if you couldn’t. This would make lenders more likely to give you a bad credit consolidation loan.
Having a debt consolidation loan on your credit report isn't necessarily bad. It's likely better than having several credit cards and other debt. If a bank or provider does a hard credit check and sees that you've consolidated your debts with a loan, they'll understand your reasons for it.
In fact, what it'll really show is that you were approved for a loan, and if you're keeping up with repayments, it'll only help you improve your credit score going forward. This is why consolidating debts isn't a negative, it shows that you've taken steps to take control of your finances and manage your debt.
Consolidation loans for bad credit are sometimes a good option. But there are alternatives if a bad credit consolidation loan won’t work for you or if you can’t get accepted for one.
You could think about getting a 0% balance transfer credit card. You could still consolidate your debts, and it’d give you around 6-12 months interest-free.
Alternatively, you could consider a second charge mortgage if you’re a homeowner. Although this would put the equity in your home at risk
If you feel your debts are becoming unmanageable, talk to your lenders as early as possible. You might be able to negotiate lower payments over a longer period of time.
There are also various debt charities that you can speak to for support. They might be able to help you devise a debt management plan.
No, you can choose which debts to pay off. However, if you keep any open you have to show you can afford to pay them back alongside any new loan.
No, it is usually paid to you and then you need to pay off each of your debts separately.
It depends on the type of loan you choose and the lender, for example you could borrow more than £100,000 with a secured loan.
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You do not pay any extra and the deal you get is not affected.