Debt Consolidation Loans for Bad Credit

Taking out debt consolidation can ultimately be a good way to improve your credit report. However, your rating will usually initially worsen as you’re taking out a new line of credit. Eventually though, your credit score should improve as you make regular payments on time. Furthermore, as your credit utilization ratio decreases and the number of creditors shrinks, you should also start to see improvements in your credit rating.

If you want to find out more information, we’ve written a useful guide on the matter – How does debt consolidation affect credit scores.

Understandably, if you have a history of poor credit, you might get a bit nervous about making an application. It’s worth noting that once you apply for debt consolidation, your credit score will eventually be checked. Still – even if you have a very bad credit score – all ratings are considered.

Although you cannot secure a loan without a credit check, having a poor history – in itself – may not cause your application to fail. In fact, you have nothing to lose by applying for a debt consolidation loan.

We’re a broker so the price of a loan is dependent on your provider. However, because we want to ensure you’re getting a fair deal – and that consolidation is the best option for you – we’ll be clear about the costs involved.

Although life would be easier if this was a straightforward question, it unfortunately isn’t. As there is no universal rating system in the UK, it’s a little difficult to actually answer what a bad credit rating really is. For example, credit agencies Experian and Equifax both use different criteria to assess a person’s history.

In the case of the former, the firm details credit scores out of 999. Anything between 0 and 720 is generally regarded as being ‘poor’ or ‘very poor’. Equifax, on the other hand, classifies scores out of 700 and will detail ratings under 379 as being poor or lower.

Therefore, to assess whether you have a bad credit score, you should contact one of these organisations and see what figure they give you. If you fall into one of the above categories, however, then this number may prevent you from obtaining certain financial products or favourable interest rates.

APR stands for annual percentage rate. It is the official term used to help you understand the interest rate and the ultimate cost of borrowing. All lenders must disclose their APR before providing a financial product. In our case, the lenders on our panel offer loans between 12 and 120 months, with rates from 4.4% APR to 49.9% APR.

The details of your repayments can be found in the policy documents issued by your consolidation loan provider. If you can’t find these, contact the organisation.

You could get the money you need within 24 hours. However, the exact timescales depend on your consolidation loan provider.

Once you have the money you need, you use the funds to close accounts with your creditors one by one. We’ve covered this in more detail in our guide ‘How to consolidate debt’.