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Debt consolidation loans

Debt consolidation loans for bad credit

If you have a 'bad' credit score, getting a debt consolidation loan can look like the easiest way to get on top of your debt. But it is not for everyone. The amount of interest you pay can skyrocket if your credit score is low. Our guide explains how these loans work and what to do if you are stuck in the cycle of debt.

We can help you if you have a bad credit score and are thinking about consolidating your debt. There are other ways to deal with debt that you might not know about.

Quickly find what you are looking for


  1. Can I consolidate my debt if I have bad credit?
  2. I have been rejected for a loan. What do I do now?
  3. How do debt consolidation loans work?
  4. Types of bad credit consolidation loans
  5. Government debt consolidation loans
  6. How can I improve my credit score?
  7. Is debt consolidation right for me?

Can I consolidate my debt if I have ‘bad credit’?

You can, but is it worth it? Some companies advertise their debt consolidation services by calling them ‘bad credit loans’. But they often come with a price. Literally. If you have a low credit score, lenders are more likely to charge you higher interest rates and may not let you borrow as much as you need.

Poor credit scores mean interest rates could be higher than 30%. They have even been known to skyrocket to over 1,000%. If you need the loan to last for a few years, the cost can become too much.

If you borrow £2,000 for five years and the interest rate is 99%, you will pay an extra £5,317 interest.

If you borrow the same for 10 years, you will pay an extra £12,180 interest.

You can see how this can lead to taking on a lot more debt than you started with and make your situation worse. We often hear from people who have spiralled into financial difficulty because of consolidation loans.

Use our debt consolidation calculator to find out if debt consolidation will help you deal with your debt.

I have been rejected for a consolidation loan. What do I do now?

There are lots of reasons why lenders reject consolidation loan applications. It could be:


  • A lot of your monthly income goes towards paying existing debt
  • A low credit score or poor credit history
  • Financially linked to someone with bad credit, like a joint account
  • Using a lot of existing credit or ‘maxing out’ credit cards
  • Too many credit applications in a short time

Not knowing where to turn next can be frustrating. But we are here to help you deal with your debt in a way that makes your life easier, not harder.

Get free debt advice online to find the best solution to deal with your debt. We will help you every step of the way.

Be cautious of companies offering ‘no credit score check’ loans. They might not be acting in your best interests. Borrowing with huge interest rates could make your situation worse.

How do debt consolidation loans work?

Debt consolidation joins all your debts together so you can repay them with one monthly payment. A debt consolidation loan means taking out new credit and using the money to pay back the people you owe. Then you start paying back the loan, plus the added interest.

Here is what a loan could look like if you borrow £5,000 for five years with 30% as an example interest charge:


  • You owe £5,000 to the loan lender
  • Plus £4,076 interest
  • That is 60 monthly payments of £151

It will take five years to pay off the loan. And the amount of interest in this example is nearly as much as the loan itself.

A debt management solution like a debt management plan (DMP) also helps you pay back debt with one monthly payment. But it is based on what you can afford right now rather than signing up for more credit.

Read our guide to debt consolidation or debt management to see how both options can work.

Debt jargon can be hard to understand. Our glossary explains over 250 debt and credit related words in simple terms.

Types of ‘bad credit’ debt consolidation loans

There are different types of debt consolidation loans, each with their own pros and cons.

Secured debt consolidation loans

Secured loans mean the money you borrow is financially linked to your home. You can borrow a higher amount and get a lower interest rate. But if you cannot keep up with the payments, you could lose your home.

This type of loan is sometimes offered if you have a lower credit score because it gives the lender more security if you cannot pay it back.

Unsecured debt consolidation loans

Unsecured loans are not financially linked to your home. Lenders will look at your credit history and affordability to check if they should lend to you. If you have a ‘bad’ credit score, you will struggle to get the best loan offers.

Find out more about secured and unsecured loans.

Be aware of loan sharks offering consolidation loans

Loan sharks are people who charge you interest and fees to borrow money, but they are not regulated by the Financial Conduct Authority (FCA).

They might use trust or friendship to trap you in loans you cannot afford. They may be friendly when you first meet them but will start asking for interest or want to keep something of yours until the debt is paid.

Not every friend who lends you money is a loan shark. But there are some warning signs to look out for.

Read more about owing money to loan sharks.

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Government debt consolidation loans. What are they?

In short, they don’t exist. But some companies suggest they do to try and convince you to sign up to their service. The UK government does not offer debt consolidation loans. But there are some government-backed ways to deal with debt.

Read more about what government debt consolidation really means.

How can I improve my credit score?

Boosting your credit score can help open up better consolidation loan options. But consolidating in the first place might not be the best option for your situation.

Poor credit does not last forever. It can take time, but it is possible to repair it.

Read our guide to improving your credit score.

Is debt consolidation right for me?

Other options are out there that could improve your situation more than taking out extra credit.

Free debt advice is just a tap away. You can start, pause and pick it back up at your own pace.

Getting advice will not affect your credit file or impact your credit score.

Get advice now

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"Help make your monthly outgoings easy to manage."

“The process of establishing a DMP is very straightforward. They make you budget properly. And then arrange a very manageable amount each month to pay your creditors off.”

Jason, Feefo Review