Does debt consolidation hurt your credit score?

Checking your rate through a marketplace uses a soft inquiry that does not affect your score. Formally applying triggers a hard inquiry that may lower it a few points temporarily. Most people see their score improve over the following months as their credit utilization drops and they make on-time payments on the new loan.

What credit score do you need for a debt consolidation loan?

Many lenders look for a score around 580 or higher, though the best rates usually go to borrowers above 670. Options exist across the credit spectrum, but a lower score generally means a higher APR.

Is debt consolidation a good idea?

It can be, if the new loan's APR is meaningfully lower than the weighted average rate on your current debts and you avoid running the old balances back up. It is usually not worth it if the rate is similar or if you have not addressed the spending that created the debt.

What is the difference between debt consolidation and debt settlement?

Debt consolidation means taking out a new loan to pay off existing debts, so you still repay the full amount owed but at a lower rate. Debt settlement means negotiating with creditors to pay less than the full balance, which can seriously damage your credit and have tax consequences.

How to Get a Personal Loan With Bad Credit

Needing a personal loan when your credit is not great is far more common than most people think, and it is rarely your fault. This guide explains why bad credit happens to ordinary people, how to tell a genuinely helpful loan from a trap, and how to borrow in a way that gets you out of debt faster instead of keeping you stuck.

Bad credit happens to good people

People with less than ideal, or even genuinely bad, credit who need a personal loan are all around us. It can happen to anyone. A few of the most common reasons are an unforeseen medical expense, a job change or job loss, a divorce, or any large, unexpected cost that lands before you have a chance to prepare for it. None of those are a character flaw. They are life. If your credit took a hit because something expensive happened to you, you are in very ordinary company, and you still have options.

The real danger: getting trapped

Here is what matters most, and what too few people pay attention to: some people stay stuck in a bad financial situation for years at a time because they are trapped by high-interest debt. When most of your monthly payment goes to interest, the balance barely moves, and you can spend year after year paying without ever getting free.

If you find yourself with a pile of debt you cannot instantly pay off, the goal is simple to state: get that debt into the lowest-interest loan you can qualify for, so that more of every payment goes to the balance and less goes to interest. Lowering your rate is not just about saving money, it is about shortening the time you spend in debt.

A good option vs. a bad option

The difference between a good loan and a bad loan when you have bad credit usually comes down to two things: the interest rate and the length of the loan.

As a rule of thumb, if your credit is poor, aim for a loan that is as small and as short as you can comfortably afford. A shorter term means you pay less interest overall and you are out of debt sooner. One honest caveat: a shorter term also means a higher monthly payment, so do not stretch yourself so thin that you risk missing payments. The sweet spot is the shortest term whose payment you can reliably make every month.

Before you borrow, it helps to know exactly where your credit stands. A monitoring tool like SmartCredit lets you track your score and see what is affecting it (we may earn a commission if you sign up through our link, at no extra cost to you).

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Red flags to walk away from

Bad credit attracts expensive and sometimes predatory offers, so knowing what to refuse is half the battle. Be cautious of:

Loans that stretch well beyond a few years. A long term can make the payment look affordable while quietly piling on interest. The longer you borrow, the more the loan costs, even at the same rate.
Any lender that asks for a large payment upfront. Legitimate lenders take their fee out of the loan itself; they do not ask you to pay cash before you receive the money. A demand to wire funds or pay to "unlock" or "guarantee" a loan is a hallmark of an advance-fee scam.
Interest rates above about 20%. For context, the average credit card that carries a balance sits around 21.5% APR. If a personal loan is priced near or above that, it is not a meaningful step up from the debt you are likely trying to escape.
Payday and "guaranteed approval" loans. These can carry rates in the triple digits and are built to be rolled over again and again. They are the trap, not the way out.

How to improve your odds before you apply

A few moves can widen your options and lower the rate you are offered:

Check your credit first. Know your score and report before a lender does, so there are no surprises and you can fix obvious errors.
Bring your utilization down. Paying down card balances, even a little, can nudge your score up before you apply.
Consider a co-signer or a secured loan. A co-signer with stronger credit, or a loan backed by collateral, can unlock a lower rate than your score alone would earn. Just remember a co-signer is on the hook if you cannot pay.
Prequalify with a soft credit check. Many lenders and marketplaces let you see an estimated rate without affecting your score, so you can compare before committing to a hard inquiry.

See how much time and money you could save

The clearest way to understand why a lower rate matters is to run your own numbers. Our savings calculator shows how much interest, and how much time, you could save by moving high-interest debt into a lower-rate loan. Even a few points off your rate can take months off your payoff.

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Frequently asked questions

Can you get a personal loan with bad credit?

Yes. Options exist for lower credit scores, though you should expect a higher rate and may benefit from a co-signer or a secured loan. Focus on getting a rate lower than the debt you are replacing.

What interest rate will I get with bad credit?

It varies by lender and profile, but it will generally be higher than rates offered to strong-credit borrowers. The key test is whether it beats the rate on the debt you are trying to pay off.

Is a personal loan a good way to get out of debt with bad credit?

It can be, if the loan's rate is lower than what you are paying now and the term is not so long that it increases your total interest. The goal is to pay less interest and get out of debt faster.

Should I use a co-signer?

A co-signer with good credit can help you qualify and lower your rate, but they become responsible for the loan if you cannot pay. Only involve someone who understands and accepts that risk.

What should I avoid when borrowing with bad credit?

Avoid any lender that asks for money upfront, loans with rates near or above 20%, very long terms, and payday or guaranteed approval loans.

Sam Johnsen

Sam Johnsen is the founder of Lendifi. He writes about debt consolidation and personal loans to help people compare their options honestly and get out of high-interest debt. Lendifi is not a lender.

Lendifi is operated by Apex Lead Group LLC. Lendifi is not a lender and does not make loans or credit decisions. We are an advertising-supported comparison service, and some links on this page are affiliate links through which we may earn a commission at no cost to you. Any rates or savings figures shown are estimates based on average market data and are not guarantees of approval or financing. Actual rates and terms are determined by the lender based on your full credit profile. See our Ad Disclosure for details.

How to get a personal loan with bad credit