Debt consolidation is a financial strategy that can help individuals manage their debt more effectively by combining multiple loans into one, potentially lowering interest rates and simplifying repayment. As more people seek ways to handle their debt, the search for the best debt consolidation loans for bad credit has grown significantly.
Debt consolidation loans are increasingly popular as they can offer borrowers a way to reduce the stress of multiple payments and possibly save money. In this article, we’ll dive into the best debt consolidation loan options available in 2025, with a particular focus on Upstart and Upgrade, two of the top lenders for consolidating debt.
What Is Debt Consolidation?
Debt consolidation is the process of combining several debts, such as credit cards, personal loans, or medical bills, into one single loan. Instead of keeping track of multiple due dates and payment amounts, you make just one fixed monthly payment. The idea behind debt consolidation is to reduce your overall debt burden and simplify repayment by getting a loan with a lower APR (annual percentage rate).
Debt consolidation loans allow individuals to streamline their finances by consolidating their debts into a single loan with a fixed monthly payment. By doing so, you could lower your interest rates, reduce your monthly payments, and even pay off your debts faster.
In this article, we’ll focus on Upstart and Upgrade—two of the best debt consolidation companies offering flexible loan terms and competitive debt consolidation loan rates.
How Debt Consolidation Works?
Debt consolidation works by taking out a new loan to pay off existing debts. Once the new loan is issued, the old debts are cleared, leaving you with one loan to pay off. This can help streamline your finances by reducing the number of payments you need to keep track of.
The key advantage of debt consolidation loans is that they often offer a lower interest rate than many credit cards, making it easier to pay down your debt more quickly.
Lowering Interest Rates
One of the primary reasons people use debt consolidation loans is to secure a lower APR. Many credit cards and loans come with high-interest rates, and consolidating them into a loan with a lower rate can save you money over time.
For example, if you have three credit cards with an average APR of 28%, consolidating those debts into a loan with a 15% APR could save you thousands in interest.
Fixed Monthly Payments
Most debt consolidation loans come with fixed interest rates, which means your monthly payment will remain the same throughout the term of the loan. This makes it easier to budget and plan your finances, since you won’t have to worry about fluctuating payments.
Example Scenario
Let’s say you have three credit cards, each with a $3,000 balance. If the APR on each card is around 28%, your total monthly payments could be high, with a significant portion going toward interest. By consolidating these debts into a debt consolidation loan with a 15% APR, you could lower your interest rate, reduce your monthly payments, and save money in the long run.
Best Debt Consolidation Loan Options: Upstart vs. Upgrade
There are many debt consolidation options available in the market, but two of the best debt consolidation loans for bad credit in 2025 are Upstart and Upgrade. Both of these lenders offer competitive debt consolidation loan rates, flexible loan amounts, and easy online application processes.
Upstart and Upgrade are highly recommended because they offer fast funding, flexible repayment terms, and the ability to borrow varying amounts. They are also known for their competitive APR ranges and customer service.
Upstart: Best for Borrowers with Bad Credit or Limited Credit History
Upstart is an excellent choice for borrowers with limited credit history or lower credit scores. Unlike traditional lenders, Upstart uses artificial intelligence to evaluate other factors like education and employment history when determining loan eligibility. This makes it a good fit for people who may have been overlooked by other lenders.
Loan Terms
- Loan Amounts: $1,000 to $50,000.
- APR Range: 6.6% to 35.99%.
- Repayment Terms: 36 to 60 months.
Pros
- No Prepayment Penalties: You can pay off your loan early without any extra fees.
- Fast Approval and Funding: Most borrowers are approved within minutes and can receive funds within one business day.
- Minimal Paperwork: Upstart offers an easy application process with minimal documentation required for most applicants.
Cons
- Origination Fees: Upstart charges origination fees ranging from 0% to 12%, depending on the loan.
- Higher APR for Bad Credit: Borrowers with poor credit may still face relatively high APR rates.
Why Choose Upstart?
Upstart is ideal for borrowers who have bad credit or little credit history. Its use of non-traditional factors like education and employment allows individuals who may not have the best credit scores to qualify for loans with competitive rates.
Upgrade: Best for Overall Debt Consolidation Loans
Upgrade is a great option for anyone seeking a flexible and affordable debt consolidation loan. With Upgrade, you can get a loan that fits your budget and offers clear repayment terms.
Loan Terms
- Loan Amounts: $1,000 to $50,000.
- APR Range: 7.99% to 35.99% (with autopay discounts).
- Repayment Terms: 24 to 84 months.
Pros
- No Prepayment Fees: You can pay off your loan early without incurring extra charges.
- Fast Funding: If approved, funds can be sent within one business day.
- Flexible Repayment Terms: Choose a loan term that works for you, from 24 to 84 months.
Cons
- Origination Fees: Ranging from 1.85% to 9.99%.
- Best Rates Require Autopay and Good Credit: To secure the lowest rates, you’ll need to set up autopay and have a good credit score.
Why Choose Upgrade?
Upgrade is ideal for borrowers looking for flexibility in repayment terms and low fees. It offers quick funding and an easy application process, making it a solid choice for those who need debt consolidation.
Personal Loans for Debt Consolidation
A personal loans for debt consolidation is a loan that is specifically designed to help you pay off multiple debts. It combines several high-interest debts, like credit cards or medical bills, into one single loan, often with a lower interest rate. This can help you save money in interest and simplify your payments.
Why Choose a Personal Loan for Debt Consolidation?
- Fixed Interest Rates: With a personal loan for debt consolidation, you’ll know exactly what your monthly payments will be. This makes budgeting easier and more predictable.
- Lower APR: A personal loan often comes with a lower APR than most credit cards, which can save you money on interest over time.
- Predictable Repayments: Personal loans typically come with fixed repayment schedules, which makes it easier to track your progress and stay on top of your finances.
How Personal Loans Help You Get Out of Debt Faster
By consolidating your debts with a personal loan, you can pay off your debt faster because you’ll have a clear payoff date and a fixed monthly payment. If you consolidate high-interest debt with a low-APR loan, you’ll reduce the overall interest paid and clear your debt more quickly.
Debt Consolidation Loan Rates Comparison
When it comes to debt consolidation loan rates, both Upstart and Upgrade offer competitive options for borrowers.
- Upstart: Offers an APR range from 6.6% to 35.99%.
- Upgrade: Offers an APR range from 7.99% to 35.99% (with autopay discounts).
Both lenders provide flexible loan amounts and repayment terms, making them excellent choices for those who need to consolidate debt.
The Benefits of Debt Consolidation
Simplified Payments
One of the biggest advantages of debt consolidation is that it simplifies your payments. Instead of juggling multiple bills with varying due dates and amounts, you have just one monthly payment to track.
Lower Interest Rates
If your new debt consolidation loan offers a lower APR than your current debts, you can save a significant amount of money on interest over time.
Improved Credit Score
By consolidating your debt and making consistent, on-time payments, you can improve your credit score. This is because your credit utilization rate (the amount of available credit you’re using) will decrease, which can help boost your score.
Alternatives to Debt Consolidation Loans
Balance Transfer Credit Cards
A balance transfer credit card can be a good alternative for consolidating credit card debt, especially if the card offers 0% APR for an introductory period. However, these cards typically require good credit and come with a balance transfer fee.
Home Equity Loans
Using a home equity loan to consolidate debt is another option. These loans often come with lower interest rates, but they require you to use your home as collateral. This means that if you default on the loan, you risk losing your home.
Debt Management Plans
For those who may not qualify for a loan, a debt management plan through a credit counseling agency can help you manage and consolidate your debts without taking out a loan.
Conclusion
In conclusion of best debt consolidation loans for bad credit, consolidating your debt is an effective strategy for simplifying your finances, lowering interest rates, and gaining control over your debt. By consolidating multiple debts into a single loan, you can reduce the number of monthly payments you need to manage and potentially save money on interest over time.
Upstart and Upgrade are two of the best debt consolidation companies for bad credit in 2025, offering flexible loan amounts, competitive debt consolidation loan rates, and fast funding. Whether you have bad credit or excellent credit, both lenders provide options tailored to a variety of financial situations.
Choosing the right debt consolidation loan depends on your specific needs. If you have limited credit history or a low credit score, Upstart can offer you a chance to consolidate debt by considering factors like education and employment, rather than just your credit score.
On the other hand, Upgrade provides a well-rounded solution with flexible repayment terms, low fees, and quick approval. No matter which lender you choose, both offer straightforward application processes and can help you streamline your debt management. Start by checking your rate with Upstart or Upgrade to find the loan terms that best fit your financial situation, and take the first step toward becoming debt-free.
FAQs
Debt consolidation itself does not ruin your credit, but it can temporarily lower your score due to the hard inquiry when applying for the loan. However, making timely payments on the consolidation loan can improve your credit over time.
Debt consolidation can affect your ability to buy a home, as it may temporarily lower your credit score. However, if you make timely payments and reduce your debt-to-income ratio, it can improve your chances of getting a mortgage in the future.
Debt consolidation is not inherently bad for your credit. In fact, it can improve your credit score by reducing your credit utilization rate and simplifying your payments. The key is making on-time payments.
The best places to get a debt consolidation loan are Upstart and Upgrade, as they offer competitive rates, flexible terms, and easy application processes, making them ideal for borrowers with various credit profiles.
Debt consolidation can be a good idea if you have high-interest debt and want to simplify your payments. It can save you money on interest and help you get out of debt faster, but it’s important to avoid accumulating new debt after consolidating.
