Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 29, 2021

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  • Credit cards can consolidate debt
  • Take advantage of 0% APR specials on credit cards
  • Use a debt consolidation loan to pay off debts with cash
  • If your debt is half of your income, you shouldn’t get a debt consolidation loan

Did you know you can combine all of your debts with a debt consolidation loan? Many people ask how debt consolidation for bad credit works, but it can be difficult to find answers.

Don’t worry — we’re here to help. This guide has everything you need to know about debt consolidation loans and how to simplify your finances by putting all of your personal loans in one place.

After you learn how to consolidate debt, enter your ZIP code in the free comparison tool above to compare multiple lenders in your area.

How to Consolidate My Debt

You can consolidate your debt in two ways:

  • Use a credit card to pay off debt
  • Get a debt consolidation loan or personal loan

When you use your credit card to pay off debts, be sure to take advantage of the 0% annual percentage rate (APR) specials. Credit card companies use 0% APR to get potential customers to sign up.

You can use debt consolidation loans to transfer debts and get lower interest rates.

If you don’t want a credit card, try a debt consolidation loan. You can use cash from the loan to pay off your personal loan, mortgage loan, student loan, or other debts. Continue reading to learn how debt consolidation works.

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Is debt consolidation a good idea?

It depends. Sometimes debt consolidation is a smart move, but it isn’t always worth it. Debt consolidation might be right for you under these conditions:

  • Your debt is less than 40% of your income
  • You can qualify for 0% APR because of good credit
  • Your income consistently goes toward debt repayment

What about instances where debt consolidation isn’t a good idea? Let’s look at the conditions for those who shouldn’t get debt consolidation loans:

  • Your debt is too small
  • You can pay off the debt in six months
  • Your debt is half of your income

Instead of getting a loan to pay off debts, try alternative strategies like the debt snowball or debt avalanche methods. Read on to learn more about alternatives to debt consolidation.

What are some alternatives to debt consolidation?

With the debt snowball method, you can start paying off your debts with the lowest interest rate. Meanwhile, debt avalanche targets debt with the highest interest rates.

If you don’t want to try that, you can use a balance transfer. This method moves all of your debt to a credit line with lower interest rates.

Finally, you should create a budget when all other debt payment strategies are exhausted. Discuss payment arrangements with your lenders if you think your current debts are overwhelming.

How does debt consolidation affect my credit?

Your credit score will drop a few points whenever you file a new application for a debt consolidation loan or credit card. However, your credit score goes back up once you start making payments.

Also, your credit utilization goes up. If you can keep your credit use below 49%, you can maintain a fair to good credit score.

According to the Federal Trade Commission (FTC), lenders consider borrowers with good credit as low risk. Therefore, you can secure lower interest rates from lenders.

Identifying Credit Scores

How do you know if you have a good credit score? Before you get a loan, you should know your current credit score.

There are several ways to get your credit report for free and without affecting your credit.

The list below shows credit scores and how they’re measured from exceptional to very poor.

  • Exceptional – 800 to 850
  • Very Good – 740 to 799
  • Good – 670 to 739
  • Fair – 580 to 669
  • Very Poor – 300 to 579

Finding debt consolidation for bad credit is challenging. Most companies have minimum credit score requirements of 500 or higher.

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Enter your ZIP code below to view lenders with cheap loan rates.

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Should I use a debt consolidation calculator?

If you ever want to preview your debt consolidation loan, use a debt consolidation calculator to see how much you’ll pay per month.

When you finally commit to a debt consolidation loan, your interest rate and the loan amount will vary. Shop around with different lenders to secure the loan you want.

How to Consolidate Debt: What’s the bottom line?

Using a debt consolidation loan can help you pay off a mountain of debt and put it in one place. However, there are specific situations where debt consolidation isn’t ideal.

Avoid debt consolidation if you don’t have a plan or if your debt is more than 50% of your income.

Now that you know more about how to consolidate debt, use our free online quote tool to compare multiple lenders near you.