How do I consolidate my debt if I have bad credit?

Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
Our authors
, updated on July 27th, 2023       

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Having bad credit limits your financial reach such as having access to credit cards that help with consolidating debt. However, there are other ways in which you can consolidate while you are still in the process of repairing your credit report. Here are five ways in which someone with bad credit can consolidate their debt without digging a deeper hole.

A debt consolidation loan

There are 2.1 million of Australians that default on their credit card repayments, but some fall into the red which results in having a bad credit report. However, a bad credit report is not the be all and end all of your financial freedom. You can repair it by consolidating your debt with a debt consolidation loan.

However, you need to check the features of a debt consolidation loan to see if it works for your financial situation. The chances of you being denied a debt consolidation loan decrease versus applying for a credit card that will consolidate your loan.

You can use the equity in your home

If your home has a strong equity value, you can consolidate your debt. However, if you decide to consolidate your debt through a home loan you need to make the monthly repayments every month or your lender will have the right to foreclose the property that you own.

Bad credit personal loans

Still looking beyond the credit card method to consolidate debt you might consider a personal loan. Comparing personal loans can help you come across single digit interest rates, unlike credit card rates that can be as high as 17%.

People with bad credit are limited to a fixed personal loan which means that you won’t be able to save when the interest rates are cut to lower rates. Taking out a bad credit personal loan can help you rebuild your credit worthiness if you stick to meeting your payments on time. You need to wary of long-term loans that have that have lower repayments as this amount accumulates into a large amount over the term of the loan

Debit cards

Debit cards are more flexible in the sense that it uses whatever money you put on it and you do not have to worry about missing out on monthly payments. It is also a perfect way for people who want to learn to self-discipline themselves when it comes to how they use money. Basically, it is a good way to steer away from debt since it only allows you to spend what you have. However, you need to note that Debit cards will not affect your credit report by rebuilding it.

Learning from past mistakes

Sometimes the financial going is good at other times you find yourself slowly digging yourself into debt to the point where you have bad credit. You can’t erase your bad credit marks off your credit report, but thankfully you can rebuild your credit worthiness by being financially savvy. The first step is to look at your credit report to see where you made your mistakes and what you still owe. That way you will be able to choose a debt consolidating method that is affordable and works together with your current financial situation.

You can speak to a financial advisor or broker who will be able to tell you what option will best work for your financial situation. Finding a balance initially might be hard, but once you get in the hang of it and being frugal about how you use your finances you will find that you are able to better manage your financial commitments.

Compare personal loans today

We’re here to help you find the most affordable options, so there’s no better way to compare personal loans and rates than right here, all in one place.