*AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.
Looking for the best debt consolidation loans to manage your debts more effectively? Check out loan offers from SoFi and Upgrade.
Managing multiple streams of debt can be overwhelming and stressful. Between credit cards, retail card balances, medical bills, and other expenses, it can be difficult to keep up with payments and stay on top of your financial obligations. If you're considering a debt consolidation loan, it's crucial to do your research and find the best option for your needs. The wrong loan can actually worsen your financial situation, while the right one can provide much-needed relief.
A debt consolidation loan is a type of loan that allows you to combine all of your existing debts into one single loan with a lower interest rate. This can make it easier to manage your debt and save you money on interest payments in the long run. Check out our list of the best debt consolidation loans available, so you can make an informed decision and achieve your financial goals.
Quick Look: Top Lenders for the Best Debt Consolidation Loans
- Best for No Origination Fees: SoFi
- Best for Credit Card Consolidation: Happy Money
- Best for Joint Loans: Prosper
- Best for Consolidating Debt: Upstart
- Best for Home Improvement Loans: Upgrade
- Best for Emergency Loans: Avant
- Best for Longer Repayment Terms: LightStream
- Best for Good Credit: Discover
Best Debt Consolidation Loans
With numerous lenders and loan options available, you might be wondering, "what is the best debt consolidation company out there?" Take a look at our top picks for the best debt consolidation loans to help you simplify your finances and save money in the long run.
1. Best for No Origination Fees: SoFi
- Best For:No origination feesVIEW PROS & CONS:securely through SoFi Personal Loans's website
Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-7%, which will be deducted from any loan proceeds you receive.
Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.
Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.
SoFi is a popular online lender that offers a variety of financial products, including debt consolidation loans. One of the key benefits of taking out a loan with SoFi is that they do not charge origination fees. This means that you can borrow money without having to worry about any additional fees eating into your loan amount.
SoFi's loans are also known for their competitive interest rates and flexible repayment terms. Borrowers can choose from fixed or variable interest rates, and repayment terms ranging from 2 to 7 years. This flexibility allows borrowers to tailor their loan to fit their individual financial situation. Loan amounts range from $5,000 to $100,000.
Pros
- Simplified application process
- Ability to borrow up to $100,000
- No origination fees or prepayment penalties
Cons
- Interest rates may be higher for certain individuals
2. Best for Credit Card Consolidation: Happy Money
The Payoff Loan program from Happy Money is designed to help pay off credit card debt, which is often the first big hurdle for those who wish to reduce their overall debt. Competitive rates and flexible loan terms make it simpler for you to get the loan you’re looking for, and you will have extra money left over that you can use for other purposes.
Think of this as a personal loan that frees up your budget instead of giving you quick cash, allowing you to make much better financial decisions in the future.
Pros
- Competitive rates will help you save money over time if you cannot pay off the loan quickly while still reducing your credit card debt
- Rates as low as 12.45% APR
- Loan values between $5,000 - $40,000
- Loan terms of 2-5 years
Cons
- While loan terms and rates can be flexible, you may find it difficult to customize the loan to meet extremely specific needs
2. Best for Joint Loans: Prosper
Prosper’s personal loans are simple to manage and allow you to choose how much you need, how to use that money, check your rate and get the info you want without impacting your credit. Choose from 3 or 5-year terms depending on how much you think you can pay every month, but remember that there is no prepayment fee, allowing you to pay off the loan whenever you prefer.
You can consolidate debt with these loans and gain some money back in your monthly budget. Plus, rates can get as low as 6.99%, meaning that you’re not putting all your money into interest payments.
Pros
- Taking out a loan like this allows you to snowball payments on other debts
- Loan values as low as $2,000 allow you to take out what amounts to a short-term loan for an emergency, if needed
- Funds generally come in in 1 business day
Cons
- You may need to adjust your loan options to meet your monthly payment needs
4. Best for Consolidating Debt: Upstart
Upstart is focused on information and education, providing you with a full page of content that will help you learn more about their offerings and how these loans work. No minimum credit score is required, helping those who are trying to get out from under quite a bit of debt. Because this can act as a one-stop debt management plan, you can try one of several values and terms, along with:
- No prepayment penalties
- Soft credit checks
- Flexible repayment options
- Low fixed rates of 7.8% - 35.99% APR
- Options for personal loans or auto refinancing
Loans can get as high as $50,000, but please remember that your credit will impact how much you can borrow. So, someone with a lower credit score will not be able to borrow as much. Although, you can simply return to the platform over time to get more loans that will further your debt consolidation efforts.
Pros
- Over 80% of all loans are fully automated
- Almost all funds will be sent the next business day, so users should look at their schedule and how that would occur
Cons
- While Upstart offers several pages of content on differing types of personal loans, remember that you are not bound to just those purposes when taking out a loan
5. Best for Home Improvement Loans: Upgrade
Upgrade prefers to mix quick approval with extra information and a simple application. However, this platform doesn’t lend to you—it connects you with the lenders that can help you. As you look through the lenders with whom you’ve been connected, you can decide which spot is the best place to consolidate your debt, all with more affordable rates.
You can borrow for any purpose, and you can delve into each lending partner thoroughly before making a final decision. This also means that you don’t need to involve your home loan while engaging in a new debt management plan. If you need additional support, however, you can always reach back out to Upgrade for help.
Pros
- You let the platform know you are planning to consolidate debt, allowing it to give you the best loan offers
- You can even customize your loans to match up a with a payoff date that you can plan for
Cons
- The wide range of loan options may make it difficult to decide what you want to do, especially because you may not prefer the lender from which you receive an offer
6. Best for Emergency Loans: Avant
When you reach out to Avant, you will find that they specialize in emergency loans, but it’s also interesting to note that the platform will loan for any purposes, meaning that you can turn a debt emergency into a solution. You can choose from debt relief plans that require no collateral, borrow up to $35,000 and choose from several loan types that will match up with your needs.
You can manage the loan from their mobile app, set up autopay (or adjust it) at any time and secure a fixed payment amount that you can rely on—which is often much lower than your combined debts.
Pros
- Loan terms of 12-60 months
- Use the online eligibility calculator so that you can get a better idea of the type of loan you can obtain
Cons
- If you happen to make a late payment, the late fees can vary depending on the product you’ve chosen
7. Best for Longer Repayment Terms: LightStream
LightStream specializes in offering loans with competitive interest rates and flexible repayment terms. They provide personal loans for a variety of purposes, including debt consolidation, home improvement and major purchases.
One of the main benefits of borrowing from LightStream is their longer repayment terms. While many lenders offer loans with repayment terms of up to five years, LightStream offers repayment terms of up to seven years for certain loan products. This gives you more flexibility in managing your monthly payments and allows you to spread out the cost of your loan over a longer period of time.
Pros
- No collateral required
- No fees or prepayment penalties
- Potential same day funding
Cons
- Interest rates may be higher for those with poor credit
9. Best for Good Credit: Discover
Best suited for individuals with good to excellent credit scores (typically 660 or higher), Discover offers debt consolidation loans ranging between $2,500 and $40,000, with flexible repayment terms of 36 to 84 months.
Another advantage of choosing Discover is their quick and easy online application process. You can apply for a loan online in minutes and receive a decision within seconds. Funding is also fast, with money deposited into your account as soon as the next business day after approval.
Pros
- Competitive interest rates
- Quick and easy application process
- Flexible repayment terms
Cons
- Potential fees for late payments
- Loan approval is based on creditworthiness
How Do Debt Consolidation Loans Work?
Debt consolidation loans allow you to consolidate all your debt into a single monthly payment. Essentially, the borrower takes out a new loan to pay off their existing debts, and then they are left with just one loan to repay. A longer loan term can help lower your monthly payments with just one origination fee, but you will end up paying more in interest.
Debt consolidation loans are available from online lenders, banks and credit unions, most offering a limit of 5 years for the loan terms. You’ll never know what kind of rates you’ll qualify for until you reach out to lenders. It’s a good idea to talk to several lenders and shop around for different rates before you agree to take out a loan.
Pros and Cons of Debt Consolidation Loans
While consolidating your debt may seem like a smart move, it's essential to thoroughly evaluate the pros and cons. Making an informed decision can save you from potential pitfalls and help you regain control of your finances.
Pros
- Can simplify and consolidate multiple debts into one monthly payment
- May result in lower interest rates and monthly payments
- Can help to improve credit score if used responsibly
- Provides a clear financial plan and timeline for paying off debt
Cons
- Can potentially accrue more debt if not used responsibly
- May require collateral or a co-signer, putting assets at risk
- Can result in higher overall interest paid if loan term is extended
- May have fees and additional costs associated with taking out the loan
How to Compare Debt Consolidation Loans
Finding the best debt consolidation loans for your needs can be challenging. Here are some key factors to consider before you start applying for one.
- Interest Rate: Before selecting a loan, compare the interest rates offered by different lenders. A lower interest rate can save you money in the long run, so it's important to find the most favorable rate available.
- Loan Terms: Consider the duration of the loan and the monthly repayment amount. Longer loan terms may result in lower monthly payments, but it could also mean paying more interest over time. Shorter loan terms may have higher monthly payments but can save you money in interest payments.
- Fees and Charges: Take note of any fees or charges associated with the debt consolidation loan. Common fees include origination fees, late payment fees, and prepayment penalties. Be sure to understand all the costs involved to avoid any surprises.
- Repayment Flexibility: Check if the loan offers flexibility in repayment options. Some lenders may allow for early repayment without penalties or offer a grace period for missed payments.
- Lender Reputation: Before choosing a lender, research their reputation and customer reviews. Look for feedback on their customer service, reliability and transparency. A reputable lender will provide clear terms and conditions and have a track record of satisfying customers.
- Financial Stability: Assess your own financial stability before committing to a debt consolidation loan. Make sure you have a steady income and budgeted expenses to avoid falling into further debt.
How to Qualify for a Debt Consolidation Loan
Debt consolidation loans work best if you are struggling with credit card debt, medical bills, retail credit cards, payday loans or other personal loans. The interest rate, time frame and other terms you receive will depend on your personal financial information. Your credit report is a major influence on the type of loan you will be offered.
If you have fair or poor credit, you’ll have to accept higher interest-rates than someone who has good or excellent credit. If your credit is poor or if you have no credit history, it’s possible to be denied altogether. If this happens, don’t be discouraged and keep trying out different lenders. It might also be a good idea to look into credit builder loans.
While your credit score is important, it’s not the only factor that influences your ability to qualify for a personal loan. There are other components lenders look into to understand your overall financial health. Your chances of getting approved and receiving more favorable terms are better if you’re doing well in one of the following areas:
- Steady income
- Debt-to-income ratio
- Payment history
- U.S. citizen or legal resident
- Minimum age (usually 18 but varies in different states)
How to Get a Debt Consolidation Loan
To get a debt consolidation loan, the process may vary by lender. However, there are general steps that may be similar for most of the lending companies.
1. Assess your debts: Take stock of all of your outstanding debts. This includes credit card debt, personal loans, medical bills, and any other debts you may have. Make a list of each debt, including the total amount owed, interest rates and monthly payments.
2. Research lenders: There are many traditional banks, credit unions and online lenders that offer debt consolidation loans. Research different lenders to find one that offers favorable terms and interest rates. Make sure to compare loan terms, fees and customer reviews before selecting a lender.
3. Check your credit score: Your credit score will play a large role in determining whether or not you qualify for a debt consolidation loan and what interest rate you will receive. Check your credit score before applying for a loan to ensure it is in good standing. If your credit score is low, you may want to take steps to improve it before applying for a loan.
4. Gather necessary documents: Lenders will require certain documents in order to process your loan application. These may include proof of income, bank statements, tax returns, and information on your outstanding debts. Make sure to gather all necessary documents before applying for a loan.
5. Apply for the loan: Once you have found a lender and gathered all necessary documents, it is time to apply for the loan. Fill out the loan application completely and accurately, providing all required information. Be prepared to answer any additional questions the lender may have about your financial situation.
6. Review loan terms: If you are approved for a debt consolidation loan, carefully review the loan terms and conditions before accepting the loan. Make sure you understand the interest rate, monthly payments and any fees associated with the loan. If you have any questions, don't hesitate to ask the lender for clarification.
Do Consolidation Loans Hurt Your Credit Score?
Consolidation loans can have both positive and negative impacts on your credit score. In the short term, applying for a consolidation loan and having a new account opened can temporarily lower your credit score, as it may be seen as a new form of credit. Additionally, if you close any of the old accounts that were consolidated, it can also have a negative impact on your credit history length and credit utilization ratio.
However, in the long term, debt consolidation loans can potentially help improve your credit score. If you consistently make your loan payments on time and in full, it can demonstrate your financial responsibility and help build a positive payment history. Additionally, consolidating multiple debts into one loan can lower your overall credit utilization ratio, which can positively affect your credit score.
It's important to note that individual credit scores can vary, and the impact of a consolidation loan on your credit score may depend on various factors such as your overall credit history and financial management. Before considering a debt consolidation loan, it's advisable to carefully evaluate your financial situation and weigh the potential pros and cons in relation to your specific credit goals. Seeking guidance from a financial advisor or credit counselor can also help you make an informed decision.
Is It Smart to Get a Personal Loan to Consolidate Debt?
Although personal loans can be a great way to consolidate your debt, they are not for everyone. Most personal loans cap out a couple of tens of thousands of dollars at the most. If you have a high amount of debt or owe more money than you can reasonably pay back, you might not qualify for a personal loan and should look into other options like bankruptcy.
It’s important to verify that your creditors will allow you to consolidate your debt with a personal loan. Some creditors may not allow you to use a personal loan to pay off your debt. Some might even charge you penalties for paying off your debt early. There’s also no guarantee that your monthly payments will be lower. It’s best to consult with your creditors and shop around for different lenders to understand what your options are.
Whatever you do, don’t resort to predatory loans. Predatory loans may seem like an easy way to get cash fast, especially if you don’t have the best credit. These loans exploit borrowers with unfair or abusive terms. In some cases, lenders may try to coerce, force or hide important information from you. You could face high-interest rates, excessive fees and potentially damage your credit score.
In other cases, individuals find themselves dealing with a debt dispute or debt collection lawsuit. When this happens, the thought of hiring an expensive attorney to represent them in court can seem daunting. But services such as SoloSuit can help individuals respond to debt collection lawsuits without breaking the bank. The platform guides users through the process of drafting and filing a response to the lawsuit, helping them avoid default judgments and potentially reaching a settlement with the creditor.
Alternatives to Debt Consolidation Loans
If you are unable to qualify for a traditional debt consolidation loan or are exploring other options, consider alternatives such as:
- Balance transfer credit cards: Transferring balances from high-interest credit cards to a new card with a low or 0% introductory APR can help consolidate debt, save money on interest charges, and simplify payments. It is important to be mindful of transfer fees and pay off the balance before the introductory period ends.
- Home equity loans: Home equity loans use the equity in your home as collateral, allowing for lower interest rates but also carrying the risk of foreclosure if the loan balance is not repaid.
- Home equity line of credit (HELOC): HELOCs are secured by your home's equity and function like a credit card, allowing you to borrow as needed during a draw period. They are best for consolidating large debts over time, but require sufficient income to make payments and carry the risk of losing your home if payments are not made.
Is Debt Consolidation Loan a Good Idea?
Managing multiple debts can be overwhelming and stressful. Debt consolidation loans offer a practical solution to simplify your finances and potentially save money in the long run. By conducting thorough research, you can find the best debt consolidation loan that provides the right terms and conditions for your financial situation.
Remember that a debt consolidation is only the first step. You’ll still need to work hard to make your payments on-time and curtail unnecessary spending. It’s up to you to make long-lasting financial changes. If you find yourself