Taking out unsecured debt consolidation loans when you have a bad credit score may allow you lower your monthly payment and the interest rate, and help you stabilize your finances more quickly – if you can find a bank willing to approve your submission, and provide the funding.

You cannot afford to be too fussy.

Getting your application approved will be the biggest challenge. Most lenders will not approve unsecured debt consolidation loans for borrowers with a bad credit history.

You also have to show you have sufficient earnings to handle the combined monthly payments.

Therefore, avoid limiting your options with too many qualifiers such as no credit check, no upfront fee, no interest, direct lenders only, no brokers, fast online decisions, and no cosigner.

Debt Consolidation Loans without Credit Check

People with bad credit scores will find it very difficult to gain approval for a debt consolidation loan containing the standard features. You narrow the odds even further when you place further qualifiers on your searches such as no credit check, no upfront fees, and no interest charges.

Do you qualify for debt relief? If you owe more than $10,000 in unsecured debt (credit cards and personal loans) then a settlement program is a more realistic approach. The company will not perform a credit check to determine eligibility for the program. There is no minimum credit score requirement.

No Interest Charges

A debt consolidation loan with no interest is a second unrealistic expectation for people with a very poor credit history. A record of late payments does not help your cause, and lenders charge a significant interest rate to the most qualified borrowers.

  • A history of late payments combined with a heavy debt burden will scare away most lenders – especially if you are behind at the time of application. They want their money back.
  • Banks do not lend money without charging interest. They impute interest to compensate for the time value of money and to offset default risks.

Payday loans are the only exception to this rule, but they do impose very large origination fees. You do not want to use short-term solutions for a long-term problem. It will only make matters worse.

No Upfront Fees

A bill consolidation loan with no upfront fees is another unrealistic expectation for people with bad credit ratings. Most lenders charge an upfront origination fee to borrowers with the best qualifications. Those with lesser qualifications should not expect to avoid upfront fees.

Origination fees minimize the churn level. Churning occurs when a borrower opens one account, and then quickly pays it off by opening another. Churning hurts the industry, and they want to discourage this behavior.

Unsecured Debt Consolidation Loans for Bad Credit

People with a bad credit score will also find it more difficult to obtain an unsecured debt consolidation loan. Without collateral backing the obligation, the risks and costs of a default are much worse. Therefore, lenders approve unsecured loans less readily or charge higher interest rates to reflect the greater risk level.

  • The risk of default is greater without collateral. Borrowers who fall behind can walk away without immediately losing their home or car.
  • The cost of default is greater without collateral. The lender must sue in court and win a judgment before garnishing wages or attach a lien against real estate.

Request a debt consolidation loan here. Non-homeowners and those who have insufficient home equity or no cosigner face unique challenges.


People with bad credit ratings and large amounts of debt are frequently non-homeowners. They may not qualify for most mortgage programs. They must rent an apartment, townhouse, condominium, or home instead.

Debt consolidation loans for non-homeowners are unsecured by definition, as you cannot use your apartment lease as collateral. Personal loans present the primary option. These installment contracts offer repayment terms up to 5 years.

Non-homeowners can refinance their car if they own the title.

No Home Equity

People with poor credit history and no home equity can only turn to unsecured debt consolidation loans. You may have insufficient home equity because real estate prices dropped, or because your primary mortgage began with a very high loan-to-value (LTV) ratio.

  • Luckily, personal loans do not require the borrower to have sufficient home equity. You do not need to pledge your home as collateral in order to qualify.
  • Unluckily, people with no home equity frequently also have a high debt-to-income ratio. A personal loan will have larger monthly payments because the term is much shorter than a home-equity line of credit typically is.

No Cosigner

Finally, consumers with a very low credit score will find it very difficult to gain approval for an unsecured bill consolidation loan with no cosigner or guarantor. A cosigner or guarantor agrees to make payments in the event that the primary borrower is unable to do so.

Without a cosigner or guarantor, the lender faces a far greater risk of default. If two heads are better than one, then two responsible parties are more reliable. Applying for a debt consolidation loan without a cosigner makes your already weak credentials less appealing.

Debt Consolidation Loans Direct Lenders

You may be looking for a debt consolidation loan with direct lenders only. People with a bad credit score are not in the driver’s seat. You may not be able to dictate terms and limit your search to direct lenders, no broker, or online decisions only.

Free debt consolidation quote. Direct lenders often target individuals with stellar borrowing credentials and a smaller amount of existing obligations. You could wind up submitting multiple applications without an approval. Combine your monthly bills into a settlement fund instead. Attempt to reduce what you owe instead of restructuring terms.

No Brokers

Seeking a debt consolidation loan with no brokers limits approval chances for debtors with bad credit ratings. Captive agents are not brokers. They represent only one company. If that one company does not specialize in sub-prime borrowers with your specific profile, you miss the mark.

Brokers may actually work better for you. Brokers may increase your chances of finding the funding you want. They represent multiple lenders and understand the differences in underwriting philosophies. They can direct your application to a company specializing in consumers with your profile.

Online Decision

Quick and easy online decisions on a debt consolidation loan are another set of unrealistic expectations for people with negative credit history. When you have a history of lateness, gaining a fast online approval is unlikely to happen. A declination is the most likely decision.

  • You must also show sufficient income to cover your combined monthly payment. The underwriter will calculate a debt-to-income (DTI) ratio. The DTI takes your monthly gross income and divides that into your projected monthly amount for all your accounts.
  • You must also demonstrate reliable earnings. The lender needs assurance that your earnings are likely to continue into the future. Having no job or collecting unemployment compensation does not help your qualifications.

You cannot obtain a fast online approval when you have to fax copies of paystubs and other work-related documentation. The underwriter could also ask to verify employment.