Paying off high-interest debt, like credit card debt, with a debt consolidation loan can save you a lot of money and help you become debt free quicker.

But how do you get a debt consolidation loan with bad credit?

We asked the experts to determine the best types of loans for consolidating debt for people with poor credit.

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What is Debt Consolidation Loans

A debt consolidation loan is a personal loan that pays off multiple debts, such as credit cards and student loans. The loan is paid back with a single monthly payment at a fixed rate for a period of 24-60 months.

If you have debt with high-interest rates, you know that a large amount of your monthly payment goes towards interest. Making it difficult to get out of debt. Debt consolidation loans are a great way for people to get a low-interest loan to pay off high-interest debt.

You will be able to pay your high-interest credit cards, payday loans, and other types of debt. By paying off all of those high-interest debts with a single low-interest loan, you can get out of debt much quicker and cheaper.

Debt Consolidation Loans for Bad Credit

If you have average to bad credit (below 660 credit score), you may still qualify for a debt consolidation loan, but the interest rate will be high. Rates can be as high as 30% in some cases, defeating the purpose of a debt consolidation loan.

Many people choose to consolidate debt because of the high-interest rates, making it hard to pay down the principal balance. Getting a consolidation loan with a high rate doesn’t make much sense. So, if you have bad credit, what are your options for consolidating your debt?

Check with your Credit Union

Credit Unions are pillars of the community. Transactions are not always black and white; relationships play a big part in a credit union. If you have been with the same credit union for a long time, the likelihood of getting approved for a debt consolidation loan with poor credit is increased.

Pros to Debt Consolidation Loans

  • Pay off high-interest debt with a lower interest loan
  • If you fall behind on a payment, a personal loan can be discharged in a bankruptcy
  • Quick and easy loan application
  • Much lower fees than a home equity loan

Cons to Debt Consolidation Loans

  • Requires good credit
  • Shorter terms than home equity loans mean higher payments
  • Higher rates than home equity loans

7 Debt Consolidation Loan for Bad Credit Alternative Options

Debt consolidation loans for bad credit are either not possible or come with high interest rates. You should know all of your options before doing anything.

There are other ways to get out of debt besides a debt consolidation loan, which is great news for people with bad credit who have trouble getting approved.

Debt Consolidation Loan Alternatives

  • Debt Management Plan (DMP)
  • Home Equity Loan
  • Cash-out Refinance
  • Balance Transfer
  • Debt Settlement
  • Bankruptcy

Debt Management Plan (DMP)

A debt management plan, or DMP, is offered by credit card debt consolidation companies. Often referred to as non-profit credit counseling. What happens in a DMP is your cards will all be closed. The company you choose to work with will negotiate your interest rate and set up a repayment plan. They do this with all of your accounts. You will pay one fixed monthly payment to the consolidation company that is then dispersed to your creditors, minus their fees.

One of the advantages of this debt relief program is that you don’t need perfect credit. In fact, your credit score doesn’t matter at all; everyone is accepted. All of the accounts enrolled will show that you’re in a DMP on your credit report. You will not be able to get any new credit until you complete the program.

While a debt consolidation company is a great option to consolidate debt with bad credit, this is something you can do yourself. You will have to call each creditor to close your account, explain your financial situation, negotiate the rate down, and set up a monthly repayment plan.

Pros of Debt Management Plans

  • Consolidate debt even with poor credit
  • Lower your interest rates
  • Have just one monthly payment

Cons of Debt Management Plans

  • Comes with monthly fees
  • You could set up a DMP on your own
  • Black marks added to your report
  • Unable to attain new credit while in the program

Home Equity Loans and HELOC

If you own your own home and have built up equity, you can use that equity as collateral for a loan. A home equity loan is also called a second mortgage. HELOC stands for a home equity line of credit and works like a credit card. Your home equity will be converted into cash.

A home equity loan will have lower rates than a debt consolidation program. However, these loans will require good credit history; usually, at least a 660 FICO score or higher is required. But this is one of the cheaper debt relief options because it’s a low-interest loan. Many people use the money from a home equity loan to pay off credit card debt.

Pros of Home Equity/ HELOC Loans

  • Lower rates than debt consolidation loans
  • Long terms between 5-7 years
  • Interest may be tax-deductible
  • Pay off high-interest accounts with a low-interest loan
  • Longer repayment terms mean low monthly payments

Cons of Home Equity/ HELOC Loans

  • Turning unsecured debt into debt secured by your home
  • If you fall behind on payments, your home is at risk of foreclosure
  • Credit cards debts are eligible for bankruptcy; home equity loans are not

Cash-Out Refinance

A cash-out refinance is similar to a home equity loan; however, instead of having two mortgage payments, both loans are combined so you have a single mortgage payment. A lender will refinance your primary mortgage and give you up to 80% of your home’s value in cash.

One of the great benefits of a cash-out refinance is that the credit requirements are lower than home equity loans. You may be able to qualify for a cash-out refinance with bad credit as low as 620.

Pros to a Cash-Out Refinance

  • Low rates
  • Can qualify with scores as low as 620
  • Interest paid may be tax-deductible
  • May get a lower rate on your original mortgage

Cons to a Cash-Out Refinance

  • High upfront costs
  • Unsecured debt can be discharged in a bankruptcy; your home cannot.
  • If you fall behind on payments, your home is at risk of foreclosure

Balance Transfer to a 0% Interest Card

There are several credit cards out there that offer a 0% initial interest rate between 12-24 months. You can transfer the balances of the high-interest accounts to the no-interest card. This will help you pay off the debts much faster and save a lot of money in interest.

To qualify for the balance transfer cards, you typically need to have an average credit rating. If you have bad credit, this may not be an option for you.

Pros of a Balance Transfer

  • Move high-interest debt to a low or no-interest card.
  • Pay off debt faster and cheaper.
  • May qualify for 0% interest for a period of 12-24 months.

Cons of a Balance Transfer

  • Good credit needed for no or low-interest rate
  • After the initial period rate will increase
  • Most cards have a max of $10,000

Debt Settlement

Debt settlement is a process that requires the debt to be charged off. Obviously, your credit score will take a signif