Paying off your debt with a low-interest debt consolidation loan is easier and faster than making minimum payments on credit cards. One of these loans could come in handy if you need to consolidate credit card debt or other bills accumulated during the coronavirus crisis.
This guide to the best debt consolidation loans explains the borrowing process and how to pick the right personal loan for your needs.
What Is the Best Debt Consolidation Loan Company?
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Lender |
Learn More |
APR |
Max. Loan Amount |
Min. Credit Score |
|---|---|---|---|---|
 |
2.49% to 19.99% | $100,000 | 660 | |
 |
6.49% to 17.99% | $20,000 | Not disclosed | |
 |
8.69% to 35.99% | $50,000 | 620 | |
 |
5.99% to 24.99% | $40,000 | 640 | |
 |
7.16% to 29.99% | $45,000 | Not disclosed | |
 |
9.95% to 35.95% | $35,000 | 550 | |
 |
6.99% to 19.99% | $40,000 | 660 | |
 |
5.99% to 18.28% | $100,000 | 680 | |
 |
4.99% to 29.99% | $50,000 | 640 | |
 |
10.68% to 35.89% | $40,000 | 600 | |
 |
5.99% to 29.99% | $25,000 | 600 | |
 |
7.99% to 35.97% | $50,000 | Not disclosed | |
 |
9.99% to 35.99% | $25,000 | 600 | |
 |
6.99% to 24.99% | $35,000 | 660 | |
 |
6.49% to 29.99% | $35,000 | 720 | |
 |
7.99% to 29.99% | $40,000 | 620 | |
 |
7.95% to 35.99% | $40,000 | 640 |
Before You Apply
- Minimum FICO credit score: 660
- Loan amounts: $5,000 to $100,000
- Repayment terms: 24 to 144 months
- Better Business Bureau rating: A+
Best Features
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A variety of loan uses are available.
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Loans of up to $100,000 are available.
Best for low minimum loan amounts
Before You Apply
- Minimum FICO credit score: undisclosed
- Loan amounts: $500 to $20,000
- Repayment terms: up to 60 months
- Better Business Bureau rating: A+
Best Features
-
Terms of up to 60 months.
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There are no origination fees.
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Borrowers can get access to funds as early as the day after approval.
Best for borrowers with no credit or poor credit
Before You Apply
- Minimum FICO credit score: 620
- Loan amounts: $1,000 to $50,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: A+
Best Features
-
Upstart may accept applicants with fair credit or even those with no credit history, using artificial intelligence to quantify risk.
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Upstart loans as low as $1,000 are available in most states.
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The lender’s credit dashboard allows borrowers to see the impact of loan repayments and to modify payment dates.
Payoff is not a bank; instead, it works with lending partners that originate loans. The company, which considers itself a financial wellness firm, is based in California.
In 2017, Payoff launched a sister company called Happy Money, which takes a psychological approach to money matters. Today, Payoff is a service under the Happy Money umbrella.
Before You Apply
- Minimum FICO credit score: 640
- Loan amounts: $5,000 to $40,000
- Repayment terms: 24 to 60 months
- Better Business Bureau rating: A+
Best Features
-
Borrowers don’t face prepayment or late fees.
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Borrowers can get preapproved with no hard credit check.
-
Some borrowers with fair credit may be eligible.
Best for digital customer care
Before You Apply
- Minimum FICO credit score: undisclosed
- Loan amounts: $2,000 to $45,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: A+
Best Features
-
Same-day loan funding is available in some cases.
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No prepayment penalties apply.
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An online application process is available.
Before You Apply
- Minimum FICO credit score: 550
- Loan amounts: $2,000 to $35,000
- Repayment terms: 24 to 60 months
- Better Business Bureau rating: A
Best Features
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Loans as low as $2,000 are available.
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Funding can happen as early as the next business day after approval.
Before You Apply
- Minimum FICO credit score: 660
- Loan amounts: $3,500 to $40,000
- Repayment terms: 36 to 72 months
- Better Business Bureau rating: A+
Best Features
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Marcus does not charge any fees on its personal loans.
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Borrowers can adjust their payment due date.
Best for loans of up to $100,000 with no fees
Before You Apply
- Minimum FICO credit score: 680
- Loan amounts: $5,000 to $100,000
- Repayment terms: 24 to 84 months
- Better Business Bureau rating: A
Best Features
-
SoFi offers no-fee loans, including no late fees.
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Loans of up to $100,000 are available.
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Co-borrowers are accepted.
Before You Apply
- Minimum FICO credit score: 640
- Loan amounts: $2,000 to $50,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: A+
Best Features
-
Loan funding typically takes one to three business days upon approval.
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The minimum loan amount is $2,000 in most states.
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Borrowers incur no prepayment penalty.
Before You Apply
- Minimum FICO credit score: 600
- Loan amounts: $1,000 to $40,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: not rated
Best Features
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Loans of $1,000 or more are available.
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Joint applications are accepted.
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Borrowers can qualify with fair to excellent credit.
What Is the Best Interest Rate on a Debt Consolidation Loan?
When you shop around for the best personal loan interest rate, you can save. Compare your personal loan offers with national average trends for personal loans to know if you’ve found a good deal.
*Rate as of May. 21, 2021
Personal Loan Finder
U.S. News Survey: Debt Consolidation Can Slash Debt Payments, but Many Consumers Don’t Shop for Loans
Many consumers surveyed said they were able to use a debt consolidation loan to lower or eliminate debt, lower monthly payments or improve their credit score.
A majority of consumers consolidated less than $20,000 of debt.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
Interest charges are a big challenge for borrowers.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
The ability to combine monthly payments was the top reason those surveyed named for their decision to get a debt consolidation loan.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
Lowering or eliminating debt was the top outcome of debt consolidation for the largest proportion of consumers.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
Many people changed their credit card use after consolidating debt.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
More than a quarter of consumers didn’t spend any time researching debt consolidation loans.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
Many people didn’t get preapprovals.
(CONDUCTED USING GOOGLE SURVEYS – FEBRUARY 2020)
- U.S. News ran a nationwide survey through Google Surveys in February 2020.
- The survey sample came from the general American population, and the survey was configured to be representative of this sample.
- The survey asked 10 questions related to debt consolidation loans.
What Are Debt Consolidation Loans and How Do They Work?
A debt consolidation loan is a type of personal loan that combines high-interest debts and allows for one low-interest monthly payment. Debt consolidation loans can be used to pay unsecured debts, which may include:
Interest on debt consolidation loans, unlike credit cards, isn’t compounded – compound interest is interest charged on interest. The rate typically stays the same for the life of the loan.
Unsecured personal loans for debt consolidation are widely available through banks, credit unions and online lenders. Some debt consolidation companies offer instant prequalification and approval online. Prequalifying can make comparing loan offers and closing costs easy, as lenders estimate your terms using a soft credit check that doesn’t affect your credit score.
Because collateral is not required for these loans, you must meet the lender’s credit and debt-to-income ratio requirements. Your actual rate when you apply depends on your creditworthiness, and the better your credit score, the more likely that you will get a low interest rate.
Are Debt Consolidation Loans a Good Idea?
Debt consolidation loans can be a good idea if they help you save money on interest, lower your monthly payments or potentially increase your credit score. These are some of the ways debt consolidation can help:
- Interest savings. If you have high-interest debt, a debt consolidation loan can help you save money with a low interest rate. You will save money on interest, for example, if you combine two credit card balances with annual percentage rates of 16.24% and 23.99%, respectively, into a debt consolidation loan with a 15% APR. “Rates can be considerably lower than credit card rates,” says John Ulzheimer, a credit expert who has worked at Equifax and Experian. Also, loans have to be paid off in a designated period of time, which gives you an end date for your debt. “You can’t say the same about credit cards,” he adds.
- Lower monthly payment. A debt consolidation loan may make it easier to achieve on-time payments by spreading out your debt payments over several years. A history of on-time payments can help your credit score.
- Improved credit score. By taking out a new loan and leaving consolidated accounts open but unused, you will have more total available credit. This results in a lower credit utilization ratio, which can increase your credit score.
Do Debt Consolidation Loans Hurt Your Credit Score?
Debt consolidation loans generally offer a boost to your credit score as long as you make your payments on time. But that’s only if you use them as intended: to pay off your debt and not to add to it.
“You’ll be converting score-damaging revolving debt into practically benign installment debt. As long as you don’t charge up your cards again, you’ll be happy with your new scores,” Ulzheimer says.
Still, consider these dangers of debt consolidation loans:
- You may end up paying more interest. There’s no guarantee that your debt consolidation loan will have a lower interest rate than your credit card rates or other types of debt. And if you extend the repayment term length, you might pay more interest in the long run.
- You may end up adding more debt. Consolidating credit card debt leaves cards free to use again and add to your debt.
- Other options may offer better savings. A 0% balance transfer credit card or home equity loan could offer a lower interest rate option.
Who Can Get a Debt Consolidation Loan?
Before you shop around for a debt consolidation loan, consider whether you’re likely to be approved. Most lenders look at:
- Your credit score. Debt consolidation loan companies typically have a minimum credit score requirement of at least fair or good credit. To get a low interest rate, you’ll need a higher credit score. A fair credit score signals that you are a greater risk to lenders, and you will be quoted a higher interest rate than another customer with good credit. With very good or excellent credit, you could qualify for a lender’s lowest consolidation loan rate. You might not meet a lender’s minimum credit score to qualify for a debt consolidation loan with bad credit.
- Your income. Lenders may require a minimum annual income and will consider your debt-to-income ratio. A debt-to-income ratio is the percentage of your gross monthly income that goes toward paying your debts. A lower ratio is better because it shows that you don’t spend too much of your income paying debts. Some debt consolidation loan companies allow debt-to-income ratios as high as 50%, meaning your monthly debt obligations should add up to no more than half of your gross monthly income.
- Your credit history. Most lenders look for a credit history free of bankruptcies, tax liens, repossessions or foreclosures. Some lenders allow co-signed or joint applications because they can reduce the risk of lending. But if you use a co-signer, proceed with caution. If you use a co-signer to help you qualify for a loan and you default, you may damage your relationship as well as your co-signer’s creditworthiness.
How to Choose the Best Debt Consolidation Loans for You
The best debt consolidation loan company for you is one that will approve your loan at a low interest rate, with terms and services that meets your needs.
Evaluate debt consolidation loan companies based on these features to find the best fit:
- Interest rates. A lower interest rate makes your loan cheaper, so this should be the primary factor when comparing debt consolidation loan companies. Most lenders offer fixed-rate personal loans, while others offer both fixed- and variable-rate loans. Use prequalification or rate-check tools from debt consolidation loan companies to compare rates and terms to expect based on your creditworthiness. Because prequalification should trigger just a soft credit check, you can shop around for consolidation loan rates without hurting your credit score.
- Loan terms. Loan terms vary by lender but include loan amount, repayment term length and details on disbursement. Prequalification can estimate how much you might be able to borrow and for how long. Lenders may place restrictions on how you can use the loan.
- Fees and penalties. Fees and penalties can increase the cost of your loan. You may pay origination, prepayment and late payment fees. Origination fees are charged by many, but not all, lenders for loan processing. Sometimes, lenders allow grace periods before they charge fees for late payments, if they charge them at all. Typical late fees range from $15 to $39. Your lender could also charge a returned payment fee or check processing fee, which might cost about $15 each.
- Repayment options. Make sure it’s easy to pay. Look for a lender that offers flexible payment options that work for you, whether that’s payment by phone, mail, wire transfer, app and online. Some lenders have flexible repayment options that allow you to change your due date or offer discounts if you sign up to make automatic payments each month from your bank account.
- Customer satisfaction ratings. Good customer service is important when you need help. Read personal loan reviews to find out what other consumers think of a lender you’re considering. Check the Better Business Bureau for lender ratings, reviews and complaints.
How Do You Get a Debt Consolidation Loan?
Getting a debt consolidation loan requires a few steps: prequalifying, choosing your loan terms, finalizing your application and closing.
1. Prequalify. Prequalifying uses a soft credit check to produce a rate quote, which will estimate the minimum loan amount you’re approved for and the interest rate.
2. Choose your loan terms. Your loan terms set the repayment schedule, loan amount and other features. Typical loan amounts range from $1,000 to $40,000, depending on your creditworthiness.
Most borrowers have between two and five years to repay their loans. You will confirm your interest rate and any origination fees – typically 1% to 5% of your loan.
3. Finalize your application. You’ll confirm the details of the loan and verify your identity, annual income and other qualifying information. Some lenders allow you to apply on a secure website.
The lender will pull your credit report to verify creditworthiness, which will result in a hard inquiry on your credit. Be certain of your choice when you apply because too many hard inquiries in a short period of time could pull down your credit score.
4. Get approved and close. Once approved, the loan will go through the closing process, and you will receive funds. Most debt consolidation loans provide wire transfers, but some offer direct payment to creditors or send a check to you for deposit in a bank account. You may receive funds as soon as the next business day.
What Are the Alternatives to Debt Consolidation Loans?
Debt consolidation loans are a good option for many people with debt, but they aren’t the only option. Debt consolidation comes in many forms. If you can’t qualify for the best personal loan with good repayment terms, alternatives include:
Home equity loans. They generally have better interest rates than unsecured personal loans because using your home as collateral makes these loans less risky for lenders. And you can get lower monthly payments, as loan repayment term lengths can be 10 years or longer.
But you could lose your home to foreclosure if you can’t make your payments, and if you face bankruptcy, discharging a home equity loan compared with unsecured debt is much harder.
Balance transfer credit cards. You can move credit card debt to a card with a 0% balance transfer APR and make interest-free payments on the new balance for up to 21 months. Though, you’ll pay a fee of 3% to 5% of the balance you transfer.
By comparison, personal loans for debt consolidation could offer term lengths as long as 60 months, though you’ll have to pay interest.
Debt relief services. Certified nonprofit credit counselors can help you strategize how to pay off your debt and negotiate with creditors to lower your interest rates and fees. A counselor may recommend a debt management plan to pay your creditors. The plan may require fees, such as a setup fee and a monthly fee.
Debt settlement. Usually, for-profit debt settlement companies negotiate with creditors to settle your debt. But debt settlement companies charge high fees and penalties and even higher interest rates. And you can damage your credit history if you stop paying your bills.
Consider debt settlement companies as alternatives to bankruptcy because the damaging effects to your credit report can be long lasting.
Bankruptcy. Declaring bankruptcy is a last resort if you can’t pay your debts.
Bankruptcy will hurt your credit and may remain on your credit report for up to 10 years. You will lose all of your credit cards, some or all of your luxury possessions – such as designer clothes or multiple vehicles – and any property that is not exempt from sale.
But if you have serious debt and are being sued by creditors or have a pending foreclosure or repossession, bankruptcy can be a lifeline.
What Should You Do Before You Apply for a Debt Consolidation Loan?
Getting a debt consolidation loan is a financial decision not to be taken lightly. Before you apply, do a little homework to avoid missteps and find the best deal.
These four moves can help:
1. Consider alternatives. You may pay less in interest with debt consolidation loan alternatives, such as a credit card balance transfer.
2. Establish a repayment plan and budget. Planning how you will make the new loan payments is essential, especially if you’ve struggled to keep up in the past. You can:
- Assess your total debt by tallying up your credit card balances, student loans, car loans and other accounts.
- Track your spending to see where your money goes each month, identifying areas to cut back.
- Compare your debts with your expenses to determine how much to allot to paying down debt each month and to create a budget.
Once you know how much you can put toward your debt, make sure your loan terms work with your budget.
3. Shop around for the best quote. Compare options from a few debt consolidation loan companies to ensure that you’re getting the best debt consolidation loan rates and repayment terms you can afford. Most lenders offer rate quotes, which trigger soft credit inquiries that will not harm your credit score.
4. Avoid scams. Red flags include aggressive sales representatives, “guaranteed” approvals and quick-fix promises, as well as requirements such as upfront payments before loan approval.
“No lender should charge you upfront before you get the loan … and you certainly shouldn’t send money with a wire transfer or prepaid card,” cautions Gerri Detweiler, education director of business credit website Nav.
5. Make a plan to avoid new debt. A debt consolidation loan can wipe the slate clean and allow you to start fresh with no credit card balances or other credit commitments. Although it may be tempting, avoid using your newly cleared accounts to shop or manage household expenses unless you can easily pay off the balances each month. You don’t want to create new debt to manage on top of your debt consolidation loan.
View More Best Debt Consolidation Loan Companies
Best for peer-to-peer loans of up to $25,000
Before You Apply
- Minimum FICO credit score: 600
- Loan amounts: $4,000 to $25,000
- Repayment terms: undisclosed
- Better Business Bureau rating: A
Best Features
-
Some borrowers with fair credit may qualify.
-
Borrowers can complete the entire loan process online.
Best for loan amounts of up to $50,000
Lender Highlights
- Minimum FICO credit score: Not disclosed
- Loan amounts: $1,000 to $50,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: A+
Best Features
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Loans and lines of credit are available up to $50,000.
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Borrowers can complete the entire loan process online.
Best for FICO scores between 580 and 669
Before You Apply
- Minimum FICO credit score: 600
- Loan amounts: $2,000 to $25,000
- Repayment terms: 24 to 48 months
- Better Business Bureau rating: A+
Best Features
-
Loan funds are available as soon as one day after approval.
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Borrowers with fair credit may qualify.
Before You Apply
- Minimum FICO credit score: 660
- Loan amounts: $2,500 to $35,000
- Repayment terms: 36 to 84 months
- Better Business Bureau rating: A+
Best Features
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Discover has no fees other than a late fee.
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Customizable loan terms from 36 to 84 months.
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Borrowers get free access to their FICO credit score.
Before You Apply
- Minimum FICO credit score: 720
- Loan amounts: $5,000 to $35,000
- Repayment terms: 12 to 60 months
- Better Business Bureau rating: A+
Best Features
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The loan application process is completely digital because Axos Bank is online only.
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Flexible loan terms are one to five years.
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You can borrow between $5,000 and $35,000.
Before You Apply
- Minimum FICO credit score: 620
- Loan amounts: $7,500 to $40,000
- Repayment terms: 24 to 60 months
- Better Business Bureau rating: A+
Best Features
-
Borrowers with fair credit may qualify for a loan.
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Loans of up to $40,000 are available.
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Same-day approval is available, with loans funded in as little as 48 hours.
Lender Highlights
- Minimum FICO credit score: 640
- Loan amounts: $2,000 to $40,000
- Repayment terms: 36 to 60 months
- Better Business Bureau rating: A+
Best Features
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Prosper offers preapproval with a soft credit check.
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Small-dollar loans of $2,000 or more are available.
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Joint personal loans are available.
Advertising Disclosure: Some of the loan offers on this site are from companies
who are advertising clients of U.S. News. Advertising considerations may impact
where offers appear on the site but do not affect any editorial decisions,
such as which loan products we write about and how we evaluate them. This site
does not include all loan companies or all loan offers available in the marketplace.
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