Can I get a debt consolidation loan without collateral?

Debt consolidation loans are available for people with and without collateral. If you don’t have an asset like a home to offer as security, or don’t want to put your property at risk, you might qualify for an unsecured loan. However, as this poses a higher risk to the lender, you may require a good credit score to be eligible.

6 min read

What is debt consolidation?

Debt consolidation is the process of merging multiple debts into a new loan with one manageable monthly repayment. Depending on your eligibility, you may be able to secure a debt consolidation loan with a lower interest rate or a longer loan term (with lower repayments) than your existing debts.

Debt consolidation could reduce the stress of having to deal with several different lenders, payment amounts, interest rates, and due dates. It could even reduce how much you pay each month, but extending the term may increase how much you pay overall.

What is a secured debt consolidation loan?

A secured debt consolidation loan requires you to use an asset such as your home as collateral. This asset provides security to the lender, as it may be repossessed by them if you default on the loan. This additional reassurance means that you may be able to get a loan with a low interest rate and qualify even if you have a bad credit score.

What is an unsecured debt consolidation loan?

An unsecured debt consolidation loan doesn’t require that an asset be put up as collateral. This means your property won’t be at risk if you miss payments on the loan, but action can still be taken against you if you default. As personal loans represent more risk for lenders than secured loans, the interest rate offered can be higher and you may not qualify if you have a poor credit score.

Should I choose an unsecured or secured debt consolidation loan?

The best loan option for you will depend on several factors, including:

Your individual circumstances
Your credit score
The total loan amount
The loan term

Unsecured loan	Secured loan
Your property will not be at risk if you default on the loan.	Your collateral will be at risk if you fall behind on your loan repayments.
You may need a good credit score to qualify.	You may be eligible for a loan even if you have a poor credit history.
The loan interest rate may be higher than a secured loan.	The loan interest rate may be lower than an unsecured loan.
You may not be able to borrow a large sum or have a long loan term.	You may qualify for a larger loan amount or longer loan term.

Can I qualify for a debt consolidation loan without collateral?

Each debt consolidation loan provider has different eligibility criteria that they use to assess whether you can qualify for a loan without collateral.

To apply for a loan, you will likely need to supply:

Your personal details – full name, date of birth, and address history
Employment information – name of employer, occupation, and income
Amount you want to borrow
Reason for applying

Required documentation may include:

Proof of ID – such as a passport or driving licence
Proof of address – such as utility bills
Proof of income – such as recent payslips or bank statements

Using this information, the lender will usually review your individual circumstances and perform a credit check. A soft credit check might be carried out first to assess your initial eligibility, followed by a hard credit check at the application stage. Only the hard credit check will leave a mark on your report that other lenders can see.

To qualify for a debt consolidation loan without collateral, the lender may also look at your debt-to-income ratio (DTI) to determine how much you currently owe compared to your monthly income.

While it can be more difficult to qualify for an unsecured debt consolidation loan if you have a poor credit score, an irregular income, or a history of missed credit repayments, it’s not impossible. In fact, some lenders specialise in helping people with bad credit get debt consolidation loans.

How can I improve my chances of qualifying for debt consolidation with no collateral?

While there is no set credit score or list of individual circumstances that can guarantee you’ll qualify for a debt consolidation loan with no collateral, there are several steps you can take to improve your chances:

Improve your credit score – making payments on time, registering on the electoral roll, and limiting the number of new loans you apply for in a short period can help to boost your score.
Make a budget and cut unnecessary costs – implementing a workable budget that covers your essential expenses and allows room for some small luxuries could help you get on top of your finances and improve your affordability.
Look for lenders or brokers that specialise in poor credit loans – every lender has different eligibility requirements, and some accept those with a limited or poor credit history.

Can I consolidate my debt without a loan?

If you’re concerned you won’t qualify for a debt consolidation loan without collateral or a guarantor, there are other options available:

Balance transfer credit card – you can consolidate multiple credit card debts by transferring the balance onto a credit card with a low or 0% APR. A good credit score may be required to qualify.
Contact your creditors – if you’re struggling to keep up with your debt repayments, your creditors could be willing to help. You can try to negotiate a new rate, change the payment date so that it coincides with your payday, or ask them to temporarily pause your repayments. Keep in mind that interest (and potentially other charges) will likely continue to accrue during payment breaks.
Use any available cash savings – paying down your debts in priority order – either focusing on the smallest amounts first or tackling those with the highest APR - can make the remaining payments more manageable.
Explore debt management solutions – if you’re struggling to make repayments, an expert debt adviser could help you find a formal debt management solution that’s tailored to your circumstances. These options could include an Individual Voluntary Arrangement (IVA), a Debt Management Plan (DMP), or bankruptcy.

Can I consolidate my debt with bad credit?

Yes, if you have bad credit due to having missed payments in the past, being in an IVA, or having a County Court Judgment (CCJ) against you, it might still be possible to consolidate your debt.

You may need to pay a higher APR, apply for a smaller loan amount, or have a guarantor to qualify. If you’re a homeowner, you may be eligible for a secured loan or able to remortgage and release equity in your property to consolidate your debts.

If you’re struggling with debt, you can access free financial advice and support from a professional debt specialist. Visit Money Wellness, StepChange, Citizens Advice, National Debtline, or Money Helper to find out more.

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Intelligent Lending Ltd is credit broker, working with a panel of lenders. Homeowner loans are secured against your home.

Disclaimer: All information and links are correct at the time of publishing.

In a nutshell

Both unsecured and secured debt consolidation loans are used to merge multiple debts into one monthly repayment.
Unsecured loans, also known as personal loans, don’t require collateral, while secured loans will need you to put up an asset like your home.
An unsecured debt consolidation loan poses more of a risk for a lender, so it may come with a higher interest rate or be available only to borrowers who have a good credit score.
Having a strong credit score, low debt-to-income ratio, and small loan amount could increase your chances of being approved for a loan without collateral.
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