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Are you drowning in debt, with multiple high-interest loans and credit card balances weighing you down? You’re not alone. Millions of Americans struggle with unmanageable debt. But there is hope. A debt consolidation loan could provide relief – even if you have poor credit.At Delancey Street, we specialize in helping businesses and individuals find solutions to their debt problems. We know it can feel overwhelming and hopeless. But trust us – there ARE options, even with a low credit score. It just takes some strategic planning and the right debt relief partner on your side.So let’s dive in and explore how you can qualify for a debt consolidation loan with bad credit, to finally break free from the chains of debt for good.

What is a Debt Consolidation Loan?

First, let’s define what we mean by a “debt consolidation loan.” In simple terms, it’s a type of loan that allows you to combine multiple debts into a single, more manageable monthly payment.Here’s how it works:

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  1. You take out a new loan, ideally with a lower interest rate than your current debts
  2. You use the funds from this new loan to pay off your existing high-interest debts
  3. You’re left with just one loan and one monthly payment to focus on

The goal is to secure a lower overall interest rate and better loan terms, to save you money and help you get out of debt faster. A debt consolidation loan can be a smart way to simplify your finances and create a clear path out of debt.Common types of debt that can be consolidated include:

  • Credit card balances
  • Medical bills
  • Personal loans
  • Payday loans
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However, it’s important to note that most student loans and mortgages cannot be included in a standard debt consolidation loan. Those require more specialized solutions.

The Challenge of Bad Credit

Now, if you have a good or excellent credit score (690 or higher), qualifying for a debt consolidation loan with a low interest rate is relatively easy. Lenders view you as a low-risk borrower.But what if your credit is less than stellar? Is all hope lost for consolidating your debts? Absolutely not! While having bad credit (a score under 630) does make the process more challenging, it’s still very possible to get a debt consolidation loan. You may just need to get a bit more creative and be open to alternative options.Some common reasons for bad credit include:

  • Late or missed payments
  • Using too much of your available credit
  • Defaulting on loans
  • Having an account sent to collections
  • Bankruptcy or foreclosure

If any of these sound familiar, don’t beat yourself up. Life happens, and credit scores can be rebuilt over time. For now, let’s focus on the actionable steps you can take to secure a debt consolidation loan despite your credit challenges.

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How to Qualify for a Debt Consolidation Loan with Bad Credit

Check Your Credit Reports

The first step is to get a clear picture of where you stand with your credit. You’re entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year. Visit to request yours.Review your reports carefully for any errors or inaccuracies that could be dragging your score down. If you find any, dispute them with the credit bureau. Correcting even a small error can boost your score quickly.

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Consider a Secured Loan

If your credit is really in rough shape, an unsecured debt consolidation loan may be out of reach for now. But you’re not out of options! A secured loan, where you put up collateral like a vehicle or savings account, can increase your chances of approval and may get you a better interest rate.The downside? If you can’t keep up with payments, you risk losing your collateral. Only take this route if you’re confident in your ability to repay the loan as agreed.

Find a Co-Signer

Another option is to find a friend or family member with good credit who is willing to co-sign your debt consolidation loan. This means they agree to take on responsibility for the loan if you can’t make payments.Co-signing can help you qualify for a loan and potentially secure a lower interest rate. But it’s a big ask and a big risk for your co-signer. Have an open, honest conversation about the terms and make sure they fully understand the commitment.

Explore Online Lenders

Don’t limit yourself to just your local bank or credit union. Online lenders often have more flexible lending criteria and may be more willing to work with bad-credit borrowers.Some online lenders to consider for debt consolidation loans include:

Just be sure to do your due diligence and watch out for predatory lenders who offer “guaranteed approval” or charge astronomical interest rates and fees. Stick with reputable lenders who are transparent about their terms.

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Improve Your Credit

If you’ve exhausted all your options and still can’t qualify for a debt consolidation loan, it may be time to focus on improving your credit first. Some ways to boost your score include:

  • Making all your payments on time, every time
  • Paying down credit card balances
  • Keeping old credit accounts open
  • Avoiding new credit applications
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Improving your credit takes time and discipline. But even a small increase in your score can make a big difference in your loan options and interest rates. Be patient and stay focused on your goal.

Alternatives to Debt Consolidation Loans

If a debt consolidation loan isn’t the right fit for you right now, don’t despair. There are other debt relief options to consider, such as:

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Debt Management Plan

Working with a non-profit credit counseling agency, you make one monthly payment to the agency, which then distributes the funds to your creditors. The agency may be able to negotiate lower interest rates and fees on your behalf.

Debt Settlement

With debt settlement, you work with a company that negotiates with your creditors to settle your debts for less than you owe. This can be a risky option, as it requires you to stop making payments on your debts and can have a severe negative impact on your credit score.


As a last resort, bankruptcy can offer a fresh start by discharging some or all of your debts. However, it has serious consequences, including significant damage to your credit that can last for years. Consult with a bankruptcy attorney to understand if this option is right for you.

The Bottom Line

Dealing with debt is stressful, especially when you have bad credit. But you have options – and hope. A debt consolidation loan can be a lifeline to help you take control of your finances and start building a brighter future.At Delancey Street, we’re here to guide you every step of the way. Our experienced team will work with you one-on-one to find the best debt relief solution for your unique situation. We’ll help you explore your options, understand the pros and cons, and make a plan to get you out of debt for good.

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Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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