How to Get a Debt Consolidation Loan with Bad Credit

Struggling with bad credit? A debt consolidation loan may be your ticket to rebuilding your finances.

In recent years, median household incomes have dropped 3%, but prices — on everything from a tank of gas to a pound of beef to monthly rent — are at an all-time high. When Americans are faced with higher bills and less money to put toward them, they often turn to credit cards.

Credit card debt in the United States has grown $52 billion in the first half of 2022 to a grand total of $856 billion. More than half of active credit cards carry a balance from month to month, and the average interest rate for a credit card has now reached nearly 20%.

And while credit card debt is potentially the most crushing for the average American, many households are also balancing mortgages, auto loans and student loan debt.

Borrowers can often chart a less rocky course out of debt by opting for a debt consolidation loan. Even borrowers with bad credit can typically qualify for debt consolidation loans with the right banks, credit unions and online lenders.

What Is a Debt Consolidation Loan?

A debt consolidation loan is a personal loan that borrowers use to pay off multiple high-interest debts with various creditors. Because those various loans are paid in full, borrowers can then focus on just their debt consolidation loans with a single monthly payment and, ideally , lower annual percentage rate (APR)

Unliked credit cards, which operate with revolving credit, debt consolidation loans are designed as installment loans. So what’s the difference?

Revolving Credit

Credit cards give borrowers a set amount of money to borrow, called a credit limit. But if you borrow and pay it back, you can continue to borrow that money again and again.

You don’t have to pay off your credit card balance in full in any given month. As long as you make the minimum monthly payment, you can carry that debt from month to month, though you will likely be paying a high interest.. .

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