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What are debt consolidation loans for bad credit?

While debt doesn’t have to be a dirty word, it’s still not something that you want on your books for very long. If you’re dealing with multiple debts and you’re finding it a challenge to make your payments every month, debt consolidation could be a solution. But what happens if you or your business has a bad credit history? Can you get loans for debt consolidation for bad credit? Learn about debt consolidation loans for bad credit in the UK with our helpful guide.

Debt consolidation loans explained

First off, let’s explore the concept of “debt consolidation” in a little more detail. If you have lots of debts and you’re finding it difficult to keep up with your payments, a debt consolidation loan allows you to merge them together into one monthly loan to lower your payments. Essentially, you’ll simply borrow enough money to pay off all of your existing debts, meaning that you’ll only owe money to one vendor. This can provide you with more breathing room with which to pay your debts, thereby keeping the debt collection process at bay.

Can you get debt consolidation loans for bad credit in the UK?

Yes, even if you have a poor credit record, debt consolidation loans for bad credit are available. While potential lenders will check your credit record, it’s not necessarily a clincher when it comes to their decision about whether or not to offer you a loan. Having said that, “bad credit” means different things to different people, and your ability to get a loan will depend on the specifics of your credit report. Lenders are much more likely to overlook one missed credit repayment a year or two ago than a County Court Judgement (CCJ) within the past month.

Can you get a debt consolidation loan for bad credit with no guarantor?

Again, debt consolidation loans for bad credit with no guarantor are available. That being said, it will narrow down your options even further. Lenders may be willing to overlook a bad credit history if the loan is backed by a guarantor, so if you don’t have anyone who can step up to the plate, you’re likely to have a more difficult time securing a debt consolidation loan. But that doesn’t mean there isn’t anything out there for you. Bottom line: debt consolidation loans for bad credit with no guarantor are relatively thin on the ground, but they do exist.

How to consolidate my debt with bad credit

Once you’ve decided to take out a debt consolidation loan, you need to work out how to consolidate debt with bad credit. It’s important to find the debt consolidation loan for bad credit that’s best suited to your needs. There are many different factors that you should take into consideration, including:

  • The amount you can afford to pay – First, you should consider the amount of money that you can actually afford to pay each month. It’s very important not to take out a loan you won’t be capable of meeting the repayments for, as it could do further damage to your credit rating.

  • Interest rates – Then, you should think about the rates that are offered with the loan. Ideally, you should be looking for the lowest rate possible so that your repayments are more affordable.

  • Secured vs. unsecured – Finally, you need to think about whether you’re able to get a secured loan (backed by assets, usually a house) or an unsecured loan. While secured loans allow you to borrow more money, it puts the assets that you’re backing the loan with at risk.

There are a broad range of debt consolidation for bad credit comparison services that you can use to quickly compare loans from a range of providers, so you don’t need to trawl through their websites yourself.

Is debt consolidation a bad idea?

As we all know, keeping a business operational and well financed with bad credit can be a challenge. But there are a wide range of solutions to deal with financial hardship, and debt consolidation for bad credit might not be the salve you’re looking for. So, is debt consolidation a bad idea?

Probably not. As long as you can afford the repayments, the consolidation loan has a lower interest rate than your current loans, and it won’t take you a significantly longer period of time to pay off your debts, a debt consolidation loan for bad credit could be a good idea.

However, there are some circumstances where debt consolidation may not be the answer. If it won’t clear all of your current loans, you end up paying a greater overall amount (due to a longer-term agreement), or you aren’t able to keep up with monthly repayments, you’re better off finding another solution.

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GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services. GoCardless SAS (23-25 Avenue Mac-Mahon, Paris, 75017, France), an affiliate of GoCardless Ltd (company registration number 834 422 180, R.C.S. PARIS), is authorised by the ACPR (French Prudential Supervision and Resolution Authority), Bank Code (CIB) 17118, for the provision of payment services.