A debt consolidation loan for bad credit is a personal loan that you use to roll (or consolidate) many debts into one. These are typically unsecured loans.Free credit counseling and debt consolidation programs to qualified Illinois residents. Nonprofit help available on the phone or online. These options include securing a debt consolidation loan, entering into a debt management plan, and filing for Chapter 7 bankruptcy. Secured loans require collateral, are typically easier to qualify for and could be a good choice if you have bad credit. If you're interested in less than perfect credit financing solutions, fill out our secure financing application directly from our website! How secured debt works (in a nutshell). When a borrower takes out a secured loan, they agree to put up an asset as collateral. In the second loan, where there is no collateral backing it, the bank has no collateral to seize to pay back the outstanding debt.