Can your debt consolidation loan get approved with bad credit?

So, you have a bad credit rating? Firstly, don’t panic (we know, easier said than done, right?). You’re among many Brits who’ve somehow made a misstep (or many) with their finances, and in all but the most serious of instances there will be a debt solution out there.

Read on to find out how you can still secure a debt consolidation loan with bad credit.

Debt consolidation loans for bad credit

Before we work through some tips for the best possible chance of securing a debt consolidation loan for bad credit, let’s first make sure that this financial manoeuvre is right for you.

The pros of debt consolidation for bad credit

  • All of your debts will be rolled into one – allowing for easier financial management.
  • Your credit rating could improve if it helps you keep up with all your repayments.
  • You may receive a lower interest rate than what you’re currently paying.
  • You could avoid paying ongoing late or missed payment fees.

The cons of debt consolidation for bad credit

  • There’s no guarantee that you’ll secure a better interest rate.
  • You may also face early repayment fees, depending on the types of credit products that you’ll be consolidating.
  • You may end up paying more if you choose a loan that runs for a longer time period than your current arrangements.

Debt consolidation for bad credit – Our top tips

Debt consolidation loans are designed to restructure your finances, so it should come as no surprise that there are certain providers of such loans that willingly accept people with a less than perfect credit history. Nevertheless, you’re going to be on the backfoot and you’ll need to be careful with the next moves you make. Here are some tips for the road ahead.

  1. Know what you’re up against

Before doing anything else you need to gain a clear understanding of what you’re up against. This begins by accessing and understanding your credit report.

There are numerous providers of free credit tools that can offer insight into what lenders see when you apply for a product, these include: ClearScore, Noddle and Experian Credit Score.

  1. Do what you can to lift your credit score up in the short term

The second step should be to take some simple steps to see whether you can make some quick wins for your credit score (we’ve written a blog on this precise topic: 5 easy ways to get a loan with bad credit).

  1. Research the market

Use a product finding tool, such as MyMoneySuperMarket, to learn about what debt consolidation loans for bad credit are out there. Websites such as these will also provide some insight into the lending criteria of each credit provider, as well as offering information on fees and interest rates.

  1. Be fully aware of your situation

Before approaching a lender you’re going to have to have a long sit down to crunch the numbers. Here’s what you’ll need to work out…

  • How much you owe in total and to whom
  • What your income and expenditure is – down to the penny
  • How much you can reasonably afford to repay per month
  1. Always use a pre-approval tool that won’t harm your credit rating

When you apply for any credit product a credit search is undertaken. This will leave a marker on your file. If you apply for multiple credit products in a short space of time, this can temporarily worsen your credit score. For this reason, it’s imperative that you always use a pre-approval tool before applying in an official sense, as this will provide you with an idea as to whether you’re likely to be accepted without harming your credit score.

  1. Consider whether you could apply for a secured a loan

A secured loan, such as equity release secured against your home, almost always provides a better chance of approval as the lender has some form of insurance should you fail to meet your repayments. However you should take this decision seriously and commit to reforming your finances and expenditure if you pursue this course of action.

  1. Find out about alternatives to a debt consolidation loan

Some potential alternative options may include:

  • Negotiating with your current lenders
  • An insolvency debt solution – learn more about what your options may be on our debt solutions page
  • Switching credit card debt to a new credit card with a zero-balance transfer offer
  • Increasing your income and reducing your outgoings

Refused a debt consolidation loan with bad credit?

All is not lost. We want you to know right here and now that there is a debt solution out there for you. Start by exploring our debt solutions page to learn more about insolvency solutions – including IVAs, Debt Management Plans and Debt Relief Orders. You can also talk with our friendly team, who’ll be able to explain whether an IVA could be right for you, and how much of your debt could be written off. Call them on 0800 002 9051 or send them a message here.





*An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Monthly IVA payments include fees and may differ to the example provided, based on the assessment made of your own personal circumstances – these fees will be clearly explained to you in writing by your IVA company. Debt write off amounts are subject to creditor acceptance and vary by individual customer based on their own financial circumstances, and are applied upon successful IVA completion.

Substantiation example, Someone owes £60,000, they pay £100 over 60 months which equals £6000, write off amount would be £54,000 which is 90% of total debt level. Upon submitting your details on this website we will pass your details to one of our approved partners as this website does not give any advice.

Free debt counseling, debt adjusting and credit information services are available from the Money Advice Service.

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