Debt consolidation is one avenue for consumers to get out of debt. While there are no guarantees, especially when you have bad credit, debt consolidation can provide a pathway to a better future.

Let’s examine how well debt consolidation can work with bad credit.

Talk to a Credit Counselor about Your Options

When you’re struggling with debt and have bad credit, talking to a credit counselor should be one of your first moves. Many credit-counseling services are non-profit organizations, meaning they aren’t going to try any predatory tactics on you. Working with a credit counselor can have several advantages.

First, you can review all your finances with them. In so doing, the credit counselor will identify areas in need of work, and give you advice for how to make improvements. Having a professional parse through your financial statements can help you better understand whether or not debt consolidation is a good option for you.

Depending on the situation, the counselor might recommend a debt management plan (DMP). This sort of consolidation doesn’t involve a loan. The agency works with you to determine how much you’re able to pay each month. You will then pay the credit counselor directly, which, in turn, dispenses payments to your creditors. For people with bad credit, this can be a good way to get your financial life back on track.

Look into Credit Card Balance Transfers

Credit card balance transfers are another way to consolidate debt. A balance transfer involves moving your various credit card balances onto a new account with a low introductory interest rate. This can be an effective way of chipping away at your debt while not accumulating more interest.

There are a few catches here though. First, it’s going to be difficult to get approved for a credit card balance transfer if you have bad credit. Further, doing this can actually make your debt worse if you don’t make any progress.

You Have to Qualify for a Consolidation Loan

Some people will find certain forms of consolidation difficult because they can’t qualify for a loan. Lenders are generally less willing to extend credit to people who they aren’t sure can/will pay it back. However, some companies will do credit card debt consolidation with bad credit, like Bills.com.

It’s important to pay attention to the details when evaluating a loan like this. Make sure you’re actually getting a benefit on interest rates. Sometimes, people spend a lot of time and effort consolidating, only to end up making their situations worse. Look at the reviews of the lending company or organization online. Lots of negative feedback is a clear sign you should look somewhere else.

Determine if You Need Another Kind of Debt Relief

Some people will need more than consolidation to pay off their loans. If you’re in this situation, it doesn’t make sense to spend any time messing around with consolidating, as this is just prolonging the inevitable.

Debt settlement might be a better option. This is a more intense kind of debt relief, which requires you to stop paying your bills and instead send money to a debt relief agency. The agency then uses those funds to work out a lone time payment in full with your creditors. It’s important to note this doesn’t always work, and can harm your credit score. But if you already have a bad score, that might not be your top concern. 

Consider Getting a Co-Signer

While co-signers are mostly known for helping people get a lease, they can also be used on consolidation loan applications. Having a co-signer can help you get a more competitive rate when you have bad credit. You should know, however, there are negatives associated with having a co-signer as well.

That person is going to be on the hook for your debt if you don’t pay it. This can potentially be devastating for someone already in a tough spot financially. While having a co-signer can work out great, it can also ruin your relationship with that person if things go the wrong way.

Things are always going to be harder when you have bad credit. But this doesn’t mean they’re impossible. Debt consolidation can still work even if you have a bad credit score.