Why are Americans consolidating their debt? National American debt hit a record high in 2024 — household debt rose $184 million to $17.7 trillion. Because of this, many Americans are looking for ways to consolidate or simplify their debt.
Summary of the Best Debt Consolidation Loans
We researched the loan industry and found eight strong lenders that offer debt consolidation loans. These providers can help you lower your interest rate, your monthly payments or both — and leave you with just one monthly payment.
To determine our star ratings for each lender, we focused on four key categories: affordability, loan features, customer experience and customer reputation. In our reviews, we considered factors including rates, repayment terms, discounts and minimum and maximum loan amounts. To learn more, read our full personal loans methodology.
If you’re searching for the best debt consolidation loan, consider one of the companies below:
- LightStream: 4.5 stars, Our Top Pick
- SoFi: 4.4 stars, Best Customer Service
- PenFed: 4.3 stars, Best for Small Loans
- Discover: 4.1 stars, Best for Low Rates
- Upstart: 4.0 stars, Best for Bad Credit
- U.S. Bank: 4.0 stars, Best for Loyal Customers
- Wells Fargo: 4.0 stars, Best for In-Person Service
- Upgrade: 3.9 stars, Best Discounts
8 Best Debt Consolidation Loan Companies Reviewed
Lightstream
Our Top Pick
4.4
APR Range6.99% to 24.99%Loan Amounts$5,000 to $100,000Minimum Credit ScoreNot disclosed
Why We Picked LightStream
Why we picked LightStream: LightStream offers debt consolidation loan rates of 6.99% to 24.99% APR. APR measures the true cost of a loan, both interest rates and fees. Note that these rates factor in the 0.50% autopay discount. Your rate will be higher if you don’t set up autopay.
LightStream guarantees that it will beat any competitor’s rate for an unsecured loan with the same terms by 0.10%. The company also offers a generous maximum loan amount of $100,000 and doesn’t charge prepayment penalties or origination fees.
Pros and Cons
Pros Guaranteed lowest rates: LightStream says it will beat a competitor’s rate offer by 0.10% on eligible loans. It’s the only lender on our list that offers this guarantee. Fast money: Your personal loan can be funded on the same day you apply. LightStream is one of only two featured lenders with such fast funding. No fees: There are no prepayment penalties or origination fees. Discounted rates: Borrowers can receive a 0.50% point discount for automatic payments. That’s the highest autopay discount offered by the lenders we picked. Long repayment terms: LightStream offers a maximum repayment term of seven years, which ties for the longest on this list. Cons High credit requirements: Borrowers must have good or excellent credit (typically at least 670) to qualify for a loan from LightStream. No prequalification: This is the only lender on our list to not offer prequalification, so learning what your rate would be would require a hard pull on your credit. No direct pay to creditors: LightStream won’t pay your creditors directly, so you have to pay them off with your loan funds.
Who Is LightStream Best For?
- People with good credit scores: If your FICO credit score falls in the range of good to excellent (670 to 850), LightStream could be a good choice.
- People with co-applicants: LightStream allows you to add a co-applicant, such as a partner or spouse, to the loan. Half of our other lenders don’t allow co-applicants.
What Reviewers Say About LightStream
Most Praised Features
Ease of loan application process: Reviewers praised Lightstream’s straightforward, fast loan application process. Reviews stated Lightstream’s platform is user-friendly, with approvals sometimes happening within a day.
Competitive interest rates: Multiple reviews highlighted LightStream’s competitive interest rates, especially for those with excellent credit scores.
Most Common Complaints
Customer service issues: Many negative reviews mentioned long wait times, unhelpful representatives and challenges in resolving issues related to loan terms or payments.
Loan denial despite good credit: A large number of reviewers were frustrated with unexpected loan denials despite having excellent credit scores. Reviewers felt misled by initial pre-approval offers that did not result in final loan approval.
High-interest rates after approval: Some reviewers reported their offered rate was significantly higher than the advertised rates, even for those with strong credit scores.
Delayed fund disbursem*nt: Reviewers were dissatisfied with fund disbursem*nt delays after loan approval.
*To provide these insights, we compiled and analyzed 8,049 reviews from user-review sites such as Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company. Read our customer review methodology to learn more.
SoFi
Best Customer Service
4.4
APR Range8.99% to 29.49%Loan Amount$5,000 to $100,000Minimum Credit Score680
Why We Picked SoFi
Why we picked SoFi: SoFi’s personal loan lets you borrow up to $100,000, tying LightStream and Wells Fargo for the highest loan amount among our featured lenders. The company offers low interest rates, starting at 8.99% APR, as well as services such as loan forbearance and financial planning.
Pros and Cons
Pros Discounts: SoFi’s advertised rates include a 0.25% discount for letting SoFi pay creditors directly and 0.25% off for receiving at least $1,000 in direct deposits in a SoFi checking/savings account each month. Fast prequalification: Potential customers can get prequalified to see their rates in a minute. That’s the fastest out of any lender on our list. Fee-free: There are no required origination fees, prepayment penalties or late fees. But to get the lowest rates, you’ll need to accept a loan with up to 7% in origination fees. Co-borrower option: Customers can add a co-borrower to help qualify or get a lower interest rate, a perk only half of the providers on our list offer. Cons High minimum loan: SoFi ties LightStream for the highest minimum loan amount out of our recommended lenders — $5,000 compared to as little as $600 or $1,000 for most of the other lenders. Origination fees for lowest rates: To get the lowest interest rates, you’ll have origination fees up to 7%, which are taken out of your loan funds.
Who Is SoFi Best For?
- Someone who wants creditors paid directly: SoFi is the top lender on our list that offers direct payment to creditors. This can help make the debt consolidation process easier and help you reduce the temptation to spend your loan money elsewhere.
- People who want rate discounts: If you have SoFi pay the creditor directly, you get a 0.25% discount. And if you opt for autopay, you get an additional 0.25% discount.
- People who prioritize customer service: Out of more than 8,600 reviews, SoFi has 4.5 out of 5 stars on Trustpilot, indicating it has excellent customer service.
What Reviewers Say About SoFi
Most Praised Features
Quick funding: A large portion of reviewers were pleased with the quick funding of their loans, noting that the money was available soon after approval.
Customer service: Many positive reviews mentioned helpful and friendly SoFi representatives.
Ease of application process: Reviewers appreciated the simplicity and speed of SoFi’s application process.
Most Common Complaints
Miscommunication and delays: A large number of reviewers expressed frustration over slow response times and unclear communication, especially when fixing important issues.
Problems with account management: Negative reviews highlighted difficulties with account closures, funds being held or problems related to the management of loans post-approval.
Customer service issues: Many reviewers mentioned poor customer service, especially when it came to resolving disputes or handling account issues.
*Reviews aggregated from Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company. Read our customer review methodology to learn more.
PenFed Credit Union
Best Rates
4.3
APR Range 8.99% to 17.99%Loan Amount $600 to $50,000Minimum Credit Score Not disclosed
Why We Picked PenFed
Why we picked PenFed:PenFedCredit Unionoffers one of the lowest minimum rates (8.99% APR) and the lowest maximum rate(17.99%) of any lender on this list. Its maximum loan amount of $50,000 is about half that of our toptwolenders, but if you need less than that to consolidate your debt,you can get prequalifiedonline without any impact on your credit. If youqualify for a loan, PenFed will automatically create a membership for you with a $5 deposit into a savings account.
PenFed is the only credit union (a nonprofit financial institution owned by its members) on this list, and itoffers low rates andnodoesn’t chargeorigination fees. But unlike other credit unions, PenFed is national andletsanyonebecome a member.
Pros & Cons
Pros Great rates: PenFed offers one of the lowest minimum rates (8.99% APR) and the lowest maximum rate (17.99%) out of our top debt consolidation lenders. Few fees: There are no origination fees or prepayment penalties. Flexible terms: Borrowers can pay debt off quickly or take their time with terms from one to five years. Cons Low max: PenFed has one of the lowest maximum loan amounts on our list at $50,000. Slower funding: It may take up to two business days to receive money. Late fees: There is a $29 late fee if your payment is five days late or more.
Who PenFed Is Best For
- Someone with minimal debt:If you have a small amount of debt to consolidate, PenFed may be the best choice since its personal loans have a minimum of just $600. That’s the lowest limit from providers on this list.
- People with bad credit:If you have trouble qualifying for a loan by yourself, PenFed allows you to add a co-borrower to your application.
What Reviewers Say About PenFed
Most Praised Features
Ease of loan applications:Reviewers praised PenFed’s user-friendly, quick application process for personal loans, auto loans and credit cards. Many noted fast approvals with minimal documentation.
Customer service experience: A significant number of reviews mentioned helpful and professional customer service, both in-person and online.
Competitive rates:PenFed’s competitive interest rates on loans and credit products, especially for veterans, were well-received by reviewers.
Most Common Complaints
Account issues and technical problems:Many reviewers were frustrated with PenFed’s website and mobile app, experiencing difficulties with account access, failed transactions and unresolved technical issues.
Slow processing times:A large portion of reviews mentioned delays in loan processing, especially for mortgages and auto loans.
Fraud and security concerns:Quite a few reviewers complained about PenFed’s handling of fraud cases, including slow responses and complications with card replacements.
*Reviews aggregated fromTrustpilot, theBetter Business Bureau(BBB),Consumer Affairs,WalletHubandBest Company. Read ourcustomer review methodologyto learn more.
U.S. Bank
Best for Loyal Customers
APR Range8.74% to 24.99%Loan Amount$1,000 to $50,000Minimum Credit ScoreNot disclosed
Why We Picked U.S. Bank
Why we picked U.S. Bank:We chose U.S. Bank because it has an extensive branch network for in-person services and because it rewards loyalty. If you need money quickly and you’re a U.S. Bank customer, you can apply for a personal loan of up to $50,000. Current U.S. Bank customers can receive loan funds within a few hours of applying, and terms range from one to seven years for them.
If you aren’t a U.S. Bank customer, the terms aren’t as friendly — you can only borrow up to $25,000, and the longest loan term is five years. U.S. Bank’s advertised rates for all borrowers include a 0.50% discount for making automatic payments.
Pros & Cons
Pros Super fast funding for customers: Borrowers can get funding within hours if they’re already U.S. Bank customers. Fee-free: There are no origination fees, prepayment penalties or late fees. Branch network: U.S. Bank is one of the few lenders on this list with physical branches, which means you may be able to get in-person service depending on where you live. Cons Low max loan for non-customers: Non-U.S. Bank customers only qualify for up to $25,000, and need a higher credit score for approval.
Who U.S. Bank Is Best For
- Existing U.S. Bank customers:If you’re a member, you could get a higher max loan, faster funding and longer repayment term. Non-customers have a maximum loan repayment term of five years, compared to seven years for U.S. Bank customers.
- People who value in-person service:U.S. Bank is one of the few lenders on our list that has branches (over 2,200 in 28 states).
What Reviewers Say About U.S. Bank
Most Praised Features
Ethical practices: Several reviewers mentioned that U.S. Bank’s policies seemed fair and transparent, particularly in comparison with other banks, which they perceived as trying to trick customers into paying more fees.
Customer service at branches:Some reviewers praised customer service, specifically at branches, noting quick service and helpfulness.
Most Common Complaints
Appraisal and mortgage issues: A large portion of negative reviews reported delays and discrepancies in property valuations related to mortgage and loan appraisals.
Poor customer service: A significant number of negative reviews mentioned unhelpful behavior, long wait times and a lack of resolution for issues, especially over the phone.
Loan and credit card approvals: Some reviewers cited unexpected denials or terms that changed after initial approval with U.S. Bank’s loan and credit card approval process.
*Reviews aggregated fromTrustpilot, theBetter Business Bureau(BBB),Consumer Affairs,WalletHubandBest Company. Read ourcustomer review methodologyto learn more.
Wells Fargo
Best for In-Person Service
4.0
APR Range7.49% to 24.99%Loan Amount$3,000 to $100,000Minimum Credit ScoreNot disclosed
Why We Picked Wells Fargo
Why we picked Wells Fargo:Wells Fargo offers debt consolidation loans with repayment terms from one to seven years and a liberal maximum loan amount of $100,000. There are no origination fees or prepayment penalties, and the bank’s advertised rates include a 0.25% interest rate discount for qualifying Wells Fargo customers. The bank allows you to apply for a personal loan at one of more than 4,200 branches in 40 states.
Pros & Cons
Pros Lowest rate: Well Fargo offers the lowest minimum APR out of the lenders on our list (7.49%). Few fees: There are no prepayment penalties or origination fees on Wells Fargo’s debt consolidation loans. High maximum: This lender has a $100,000 maximum loan amount, which is the highest of our recommended lenders. Fast approval: Potential borrowers can find out the same day if they’re approved. Cons Limited availability: Applicants must have a Wells Fargo account for at least 12 months to be eligible for a personal loan. Discounts limited to customers: Borrowers can only qualify for a 0.25% interest rate discount if you have a Wells Fargo account. No direct pay to creditors: The bank won’t send payments to creditors on your behalf. High late fee: There’s a $39 fee if a payment is late.
Who Wells Fargo Is Best For
- Existing Wells Fargo customers: You must be a Wells Fargo checking or savings customer for at least 12 months to be eligible for loans or the 0.25% relationship discount. You’ll also be able to visit branches near you for in-person service.
- Borrowers looking for more than $5,000: If you borrow more than $5,000, you could get up to seven years to pay your loan off. Smaller loans can only have terms up to three years.
What Reviewers Say About Wells Fargo
Most Praised Features
Customer service at branches: Several reviewers praised branch employees for their helpfulness, specifically when assisting with complex issues such as legal paperwork and notary services.
Most Common Complaints
Customer service inconsistency: A significant portion of reviewers were frustrated with unhelpful or rude behavior, long wait times and difficulty resolving issues with customer service — particularly with the call center.
Account and fund access issues: Many complaints involved accounts being frozen or blocked without clear explanations, leaving reviewers unable to access their funds for extended periods. This often led to significant inconvenience and financial stress.
Loan and credit card issues: Reviewers reported experiencing unexpected denials, changes in terms after approval and difficulties in making payments during the loan and credit card process.
Online and mobile banking problems: Numerous reviews mentioned glitches, difficulty accessing accounts and poor functionality with the online and mobile banking platforms.
*Reviews aggregated fromTrustpilot, theBetter Business Bureau(BBB),Consumer Affairs,WalletHubandBest Company. Read ourcustomer review methodologyto learn more.
Upgrade
Best Discounts
3.9
APR Range9.99% to 35.99%Loan Amount$1,000 to $50,000Minimum Credit ScoreNot disclosed
Why We Picked Upgrade
Why we picked Upgrade: Upgrade is a lender that’s friendly to borrowers with bad credit. But you may pay extra: Upgrade’s highest APR is 35.99%, tied with Upstart for the highest on our list, and Upgrade charges origination fees of 1.85% to 9.99%.
However, Upgrade offers two rate discounts you may qualify for: choosing autopay or paying creditors off directly. The company’s discount rates aren’t disclosed online, so we contacted customer service to ask about them. The representative said the discount rates vary by applicant.
Pros and Cons
Pros Long repayment terms: Upgrade offers repayment terms from two to seven years. Fast funding: Borrowers can receive loan funds within one business day after they’re approved. Secured loans: This is the only lender on our list to offer a secured personal loan option. Some loan offers may have lower rates for borrowers who use their paid-off car as collateral. Cons High fees: Origination fees with this lender are 1.85% to 9.99%. Highest max APR: The maximum APR you may be charged, 35.99%, is tied for the highest offered by our recommended lenders. Lack of transparency: Upgrade doesn’t advertise the amount of its discounts on its website.
Who Is Upgrade Best For?
- People with poor credit: Upgrade accepts applicants with low credit scores, so it could be a good option if you have trouble qualifying for a debt consolidation loan. It also offers secured loans that could come with lower interest rates.
- People who want long repayment terms: Upgrade offers longer repayment terms than its competitor Upstart — up to seven years instead of three or five. This gives you longer to pay off your loan.
- People who want rate discounts: Upgrade could give you one discount for setting up autopay and another for paying your creditors directly.
What Reviewers Say About Upgrade
Most Praised Features
Ease of application and approval process: Upgrade reviewers appreciated its quick application process, mentioning they received approvals rapidly.
Customer service: Reviewers were pleased with Upgrade’s customer service, noting helpful and responsive interactions.
Speed of fund disbursem*nt: A large number of customer reviews praised the fast turnaround time in receiving funds.’
Most Common Complaints
Communication and transparency issues: Reviewers expressed frustration over poor communication and lack of transparency, especially regarding terms and unexpected fees.
Technical and account management issues: Reviewers had difficulty managing their accounts due to technical glitches or unexplained account suspensions.
*Reviews aggregated from Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company. Read our customer review methodology to learn more.
Discover
Best for Credit Score Checkers
4.1
APR Range7.99% to 24.99%Loan Amount$2,500 to $40,000Minimum Credit Score660
Why We Picked Discover
Why we picked Discover: Discover’s debt consolidation loans offer a wide range of repayment terms, and they don’t have origination fees or prepayment penalties. The minimum and maximum APRs (7.99% and 24.99% APR) are lower than most of our other featured lenders’ rates. Plus, the bank has fast, U.S.-based customer service. Discover also offers free monthly access to your FICO score with online banking or its mobile app, making it easy to see if your credit score improves as you pay your loan off.
Pros and Cons
Pros Variety of repayment terms: Discover offers a range of three to seven years to pay off your loan. Fast funding: This bank is one of our faster lenders, with funds deposited as soon as the next business day. Few fees: There are no origination fees or prepayment penalties. Direct pay: Borrowers can have their creditors paid directly, but Discover doesn’t give a discount for doing so. Cons Small maximum loan: At $40,000, Discover’s maximum loan amount is the lowest from any provider on our list. Limited fund use: Borrowers can’t use Discover personal loans to pay off Discover credit card debt. High late payment fee: There’s a $39 charge if your payment is late, which is the highest late fee among the lenders on our list.
Who Is Discover Best For?
- People with debt from other credit card issuers: Discover can be a great choice if you have a lot of credit card debt, but Discover credit cards aren’t eligible. When a MarketWatch guides team member prequalified, Discover informed them that you’re required to use at least 70% of your loan to pay creditors directly.
- People who value U.S.-based customer service: Discover’s customer service reps are all based in the U.S.
What Reviewers Say About Discover
Most Praised Features
Digital banking services: A large portion of positive reviews praised Discover’s mobile app and online banking platform, mentioning easy transfers and account management.
Customer service: Reviewers were pleased with the responsiveness and helpfulness of Discover’s customer service, particularly liking that it is U.S.-based and available 24/7.
Security features: Reviews praised Discover’s security measures, such as fraud alerts and the ability to freeze cards instantly.
Most Common Complaints
Customer service inconsistency: Some Discover reviewers reported inconsistencies in service quality, especially when dealing with disputes or account closures.
Account and card issues: A significant number of reviewers complained about accounts being frozen without an explanation, which left them unable to access their funds for extended periods.
Loan and credit card approvals: A large number of reviews complained about the loan and credit card approval process. Reviewers experienced unexpected denials despite strong credit scores.
*Reviews aggregated from Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company. Read our customer review methodology to learn more.
Upstart
Best for Bad or No Credit
4.0
APR Range7.80% to 35.99%Loan Amount$1,000 to $50,000 (higher minimum in some states)Minimum Credit Score300
Why We Picked Upstart
Why we picked Upstart: Upstart caters to people with poor credit, accepting a minimum credit score of 300. That’s the lowest among the providers on our list. The lowest rate available, 7.80% APR, is also among the lowest from these providers, but the maximum rate, 35.99% APR, ties Upgrade for the highest.
While most of the other lenders on this list provide debt consolidation loans directly, Upstart is more of a lending middleman. When you complete a loan application with Upstart, you may receive offers from multiple lenders, and you’re more likely to receive offers even if your credit is not the best. But beware of origination fees of up to 12%, which are taken from your loan funds.
Pros and Cons
Pros Low-credit friendly: Upstart’s website says it accepts credit scores as low as 300. Flexible approval: This lending marketplace makes approval decisions based on more criteria than just credit scores — including the borrower’s education level and income. Fast money: Borrowers can get funds as soon as the next business day. Cons Limited options for loan term: Borrowers can only receive a three- or five-year repayment term. High fees: Origination fees are 0% to 12%, depending on the lender you choose.
Who Is Upstart Best For?
- People who want multiple offers: Unlike most lenders, who usually provide one loan offer, Upstart may find you multiple offers with different rates, costs and terms.
- People with less-than-ideal credit: The company’s minimum credit score is 300, but it will also consider you if you don’t have enough credit history to have a credit score. It uses other factors, such as employment history, to qualify you.
What Reviewers Say About Upstart
Most Praised Features
Quick and easy loan process: A majority of positive reviews applauded Upstart’s fast and simple loan application process. Reviewers mentioned how the entire process took just minutes and that they received approvals and funds within 24 hours.
User-friendly experience: Many reviews highlighted Upstart’s easy-to-navigate online platform, which requires minimal paperwork. The transparency of loan terms and conditions was also frequently mentioned.
Flexible loan options: A significant number of reviews praised the flexible repayment terms and loan amounts offered by Upstart.
Most Common Complaints
Customer service issues: Several reviews mentioned difficulty reaching representatives and resolving issues related to payments or loan terms.
Loan approval denials: A decent number of reviews focused on unexpected loan denials or changes in loan terms after the initial pre-approval.
*Reviews aggregated from Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company. Read our customer review methodology to learn more.
*Rates accurate as of September 12, 2024
Best Debt Consolidation Loans Compared
Filters
Minimum Credit Score
300-680
4.4 Interest Rate (APR)6.99% to 25.49% Origination FeesNone Loan Size Offered$5K to $100K Minimum Credit ScoreN/A |
4.4 Interest Rate (APR)8.99% to 29.49% Origination FeesNot required but for best rates origination fees up to 7% Loan Size Offered$5K to $100K Minimum Credit Score680 |
Interest Rate (APR)8.99% to 17.99% Origination FeesNone Loan Size Offered$600 to $50K Minimum Credit Score550 |
4.1 Interest Rate (APR)7.99% to 24.99% Origination FeesNone Loan Size Offered$2.5K to $40K Minimum Credit Score660 |
4.0 Interest Rate (APR)7.80% to 35.99% Origination Fees0% to 12% Loan Size Offered$1K to $50K Minimum Credit Score300 |
4.0 Interest Rate (APR)8.74% to 24.99% Origination FeesNone Loan Size Offered$1K to $50K Minimum Credit Score660 |
3.9 Interest Rate (APR)9.99% to 35.99% Origination Fees1.85% to 9.99% Loan Size Offered$1K to $50K Minimum Credit Score620 |
4.0 Interest Rate (APR)7.49% to 23.24% Origination FeesNone Loan Size Offered$3K to $100K Minimum Credit ScoreN/A |
| Loan Provider | Interest Rate (APR) | Origination Fees | Loan Size Offered | Minimum Credit Score | Visit Site | See More |
|---|---|---|---|---|---|---|
| 6.99% to 25.49% | None | $5K to $100K | N/A | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.99% to 29.49% | Not required but for best rates origination fees up to 7% | $5K to $100K | 680 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.99% to 17.99% | None | $600 to $50K | 550 | Visit Site | Learn More | |
| 7.99% to 24.99% | None | $2.5K to $40K | 660 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 7.80% to 35.99% | 0% to 12% | $1K to $50K | 300 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.74% to 24.99% | None | $1K to $50K | 660 | Visit Site | Learn More | |
| 9.99% to 35.99% | 1.85% to 9.99% | $1K to $50K | 620 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 7.49% to 23.24% | None | $3K to $100K | N/A | Visit Site | Learn More |
| Loan Provider | Interest Rate (APR) | Origination Fees | Loan Size Offered | Minimum Credit Score | Visit Site | See More |
|---|---|---|---|---|---|---|
| 6.99% to 25.49% | None | $5K to $100K | N/A | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.99% to 29.49% | Not required but for best rates origination fees up to 7% | $5K to $100K | 680 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.99% to 17.99% | None | $600 to $50K | 550 | Visit Site | Learn More | |
| 7.99% to 24.99% | None | $2.5K to $40K | 660 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 7.80% to 35.99% | 0% to 12% | $1K to $50K | 300 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 8.74% to 24.99% | None | $1K to $50K | 660 | Visit Site | Learn More | |
| 9.99% to 35.99% | 1.85% to 9.99% | $1K to $50K | 620 | Visit Site | Get Pre-Qualifiedfrom multiple lenders on Credible’s platform | |
| 7.49% to 23.24% | None | $3K to $100K | N/A | Visit Site | Learn More |
No results were found.
In the News: Debt Consolidation Loan Rates
Fed Rates Remain Steady in July
As expected, the Federal Reserve announced on July 31 that interest rates would hold steady for at least another month. Many industry insiders predict a rate cut will come after the Fed’s next meeting on September 17 and 18.
This likely means rates for debt consolidation loans won’t change much in the immediate future, as lenders aren’t likely to change rates until after the Fed makes the first move. That said, those with credit card debt could still potentially benefit from a debt consolidation loan, depending on the rate and terms.
“For those interested in loan consolidation rates, the Fed usually lowers rates 0.25% to 0.75% at a time, so if you’re paying 20% [APR] on a credit card — it isn’t a meaningful difference — and you could still benefit from current loan consolidation rates,” said Adam Koprucki, founder of RealWorldInvestor.com.
How Do I Get a Debt Consolidation Loan?
If you think a debt consolidation loan would fit your needs, follow these six steps to get one:
- Confirm your credit score: If you’re adding a co-borrower, check their credit score too. You’ll typically need to meet a minimum credit score threshold, which varies by lender.
- Add up your debts: Calculate the loan amount you need and check lenders’ minimum and maximum funding limits. If a lender deducts an origination fee from loan proceeds, you may want to request a slightly higher loan amount to ensure you get enough money to consolidate your debt.
- Consider your loan repayment needs: Repayment terms for debt consolidation loans are usually between one and seven years. Make sure the lender you’re considering has the repayment term you need.
- Compare lenders: Consider credit score requirements, loan amount limits, repayment terms, fees and interest rates when comparing lenders.
- Apply for the loan: You can usually apply online. You’ll generally need documents for proof of identity, proof of address and income verification (such as a pay stub). The lender will do a hard credit check after you apply.
- Finalize the loan and start payments: Once you’re approved for a loan, you’ll need to start repayments. Some lenders will pay your creditors directly, while others will require you to handle repayments.
>> Related: Learn more about How a Debt Consolidation Loan Works
How To Get the Best Rate
To get the best debt consolidation loan rate, you generally need a FICO credit score in the range of good to exceptional (670 to 850). Some lenders may also require several years of credit history and a low debt-to-income ratio, according to Kyle Enright, president of lending at Achieve Lending. Your DTI ratio measures your monthly gross earnings against your monthly debt payments.
But there are other ways to qualify for a relatively low rate even if your credit score isn’t the best.
- Consider credit unions: Credit unions often have lower credit score and DTI ratio requirements than traditional banks.
- Find a co-borrower with good credit: Some lenders let you add a co-borrower if you can’t qualify for a loan on your own.
- Clean up your credit: Get a free copy of your credit report at AnnualCreditReport.com and check for errors or small amounts of debt you can pay off quickly to reduce your DTI ratio.
Do Debt Consolidation Loans Hurt Your Credit?
The short answer is yes, a debt consolidation loan can lower your credit score at first. This is because when you apply for a new loan, a hard inquiry appears on your credit report. And new debt reduces the average age of your accounts, which can also hurt your credit score. But your score will improve in the long run as you repay your creditors.
If you pay off one or more credit cards with your debt consolidation loan, your credit score will increase because your credit utilization ratio decreases. Consistently making on-time payments toward your new loan will also help your credit score since you’ll improve your payment history.
In our 2024 MarketWatch Guides survey of people who’ve had debt consolidation loans, about 67% of borrowers said their credit score improved after they consolidated their debt. Scores improved by an average of 13% (or nearly 43 points) after survey respondents got their loans.
A debt consolidation loan can be a solid way of handling your debt as long as you can resist running up new debt. More than 77% of our survey respondents were confident or very confident they’d remain debt-free after paying off their debt consolidation loans.
When Can Debt Consolidation Be a Good Idea?
We spoke with Taylor Kovar, CFP, founder of 11 Financial to understand when debt consolidation may be a good idea.
Kovar suggests using a debt consolidation loan if you:
- Want a lower interest rate: Consolidate multiple high-interest debts into a single loan with a lower interest rate. This can reduce overall interest costs and simplify debt management.
- Need to reduce financial stress: Managing multiple debts can be overwhelming. Consolidation streamlines payments into one, making it easier to track and manage finances.
- Want a better credit score: Consolidating debts can potentially improve your credit score by reducing your credit utilization ratio and demonstrating responsible debt management.
- Want to pay off debt quickly: Opt for a debt consolidation plan with a fixed repayment schedule that aligns with your budget and financial goals to avoid extending debt repayment unnecessarily.
You may have other reasons to get a debt consolidation loan, such as paying off a specific type of debt.
“Juggling multiple debt payments can be overwhelming. Consolidation into a single loan streamlines the process, making it easier to track progress and stay motivated.”
Debt Consolidation Loan Rates vs. Credit Card Rates
Another reason a debt consolidation loan may be a good idea is that its rates are often lower than credit card rates. The rates in the graph below compare rates for credit cards and personal loans, which is the category debt consolidation loans fall under.
Our survey found that almost 67% of respondents used their debt consolidation loans to eliminate credit card debt. A debt consolidation loan could be useful if you want to get rid of high-interest debt and your credit is good enough to get you a lower rate from a new lender.
When Is Debt Consolidation a Bad Idea?
A debt consolidation loan may not be the best option for everyone. We spoke with Joe Camberato, CEO of National Business Capital, a lending marketplace for business owners, to get his take on when it may be a bad idea.
Cambaro suggests considering other options in the following instances:
Higher Interest Rates
If the new loan has a higher interest rate than what you're currently paying, it doesn't make sense to consolidate. This can happen if your credit score has dropped or if interest rates have gone up since you took out your original loans. Instead of saving money, you could end up paying more in the long run.
Specific Debt Repayment Goals
If your goal is to be debt-free by a certain date, consolidating might not be the best move. Consolidation resets your repayment schedule, which means you're essentially starting over.
Unfavorable Loan Terms
Sometimes, consolidation loans come with terms that aren't favorable, such as high fees or strict conditions. For example, some loans have penalties for paying the debt off early, which can be a big drawback if you come into some money and want to clear your debt faster. Even if the interest rate is lower, these additional costs can add up and make the loan more expensive overall.
Consumer Experiences With Debt Consolidation
We spoke with three people who’ve used personal loans to consolidate debt. Each found themselves in thousands of dollars of credit card debt and were concerned about how they would pay it all off.
In each case, a debt consolidation loan helped them pay their credit cards off and get their finances in order. But, of course, they don’t work for everyone.
While the people we spoke to had positive experiences with this method, there can be downsides to it as well. It can be easy to rack up more credit card debt after consolidating. And some debt consolidation loans have large origination fees or high interest rates that can make it hard to afford monthly payments.
Still, when used wisely, a debt consolidation loan can be a powerful tool — as the three people below prove. Here are their stories.
Though he had a good job as a computer technician, before Lorenzo knew it, he was $14,000 in debt and late on many of his payments. He had no clue how to solve his financial problems. His credit score was plummeting, and he was being inundated with phone calls and letters from his creditors.
“I was desperate,” Lorenzo, a 28-year-old living in the Bronx, told MarketWatch Guides. “I wasn’t able to get out of it. Everything was all scattered.”
Then he heard about debt consolidation loans on the community forum website Reddit. He shopped around online for a bit, applying for loans with Upstart, Discover and U.S. Bank.
Upstart offered Lorenzo the lowest APR, so he signed the paperwork online. Soon he had used the money from the Upstart loan to pay off all of his existing accounts, leaving him with a single monthly payment.
“The process was easier than I thought it would be,” he said.
Now with some breathing room, Lorenzo reined in his spending and committed to paying his debt off ahead of schedule. In two years, he was debt free. He told MarketWatch Guides that he now prizes his “fantastic” credit score and will never go back to running up debt. He said he wished more people knew about debt consolidation loans.
“You don’t just have to drown in your debt,” he said. “There are options and tools out there for you.”
Shortly after graduating from college, Jessie Hwang moved to Washington, D.C., and started putting just about every expense she had on her credit card. Utility bills, groceries, travel, you name it — it was charged to the credit account.
When one card got maxed out, Hwang opened up another. And then another. And another.
Eventually, she was $42,000 in debt and it was all she could do to make the minimum payments to cover the interest on each account. Actually paying off the debt felt out of reach.
“I had five or six credit cards open, and they were all maxed out,” Hwang, 35, told MarketWatch Guides. “I felt like nothing was going down. I was just paying the interest.”
She saw an advertisem*nt for debt relief and started researching her options. She grew skeptical of debt settlement programs, but her research soon turned up debt consolidation loans. She quickly knew this type of personal loan was the right thing for her.
Hwang applied with Upstart and LendingClub, and found that Upstart gave her the better deal. Her APR on the Upstart loan was about 17%, compared with 30% or above on her credit cards.
She took out a three-year personal loan to pay off her credit card bills, got a second job and focused on paying off her debt. Hwang was able to repay her Upstart loan ahead of schedule.
“It was taking a toll on my mental health. It felt very hopeless sometimes,” Hwang said about her debt. Now, she said, “I feel a lot better.”
Shortly after getting married, Colt Bradley started racking up credit card debt. While he tried to use cash for most of his purchases, it just seemed like there was always another expense he couldn’t quite meet without credit.
He put trips and gas on his credit card, hoping to earn enough rewards points or cash back to offset his spending.
Within a year or two, Bradley, 38, had about $12,000 in debt and used a debt consolidation loan to help pay it off.
But Bradley’s financial habits hadn’t changed, and over the next few years he found himself in the hole once again.
“The debt just built up on us,” said Bradley, who lives in Nacogdoches, Texas.
This time, though, he was about $40,000 in debt. The interest payments alone ran him $600 or so each month, making it difficult to pay down the principal. Bradley turned to a debt consolidation loan once again.
Borrowing in 2022, Bradley was able to get a loan at an interest rate just under 7% with LendingClub. On a five-year loan, this meant his monthly payment was roughly the same as he’d been making on his credit card accounts, but now he had a clear payoff date.
Bradley ended up paying off the loan in just 2 1/2 years, making the final installment just about a month before speaking with MarketWatch Guides. Starting fresh once again, Bradley said his family has changed spending habits to keep debt in check.
“Debt consolidation is a very good option for getting out of credit card debt,” he said. “It worked.”
Alternatives to Personal Loans for Debt Consolidation
If a debt consolidation loan doesn’t meet your financial needs, there are alternatives, including these:
- 0% balance transfer credit card
- 401(k) loan
- Whole life insurance policy loan
- Home equity loan
- Home equity line of credit
Below, we break down the basics of each alternative, along with their pros and cons. Average interest rates come from the Federal Reserve unless otherwise noted.
Description: A teaser rate on a new variable-rate credit card that allows you to transfer other high-interest credit card debt and pay 0% interest for a set length of time
Average Interest Rate: 0% for six to 18 months and 22.76% APR on average after that*
Pros
You pay 0% interest for six to 18 months, depending on the offer.
Cons
The card may charge a balance transfer fee, typically 3% to 5% of your balance.
You’ll pay a high variable interest rate after teaser rate ends.
If you don’t pay the balance off before the teaser rate ends, you may pay deferred interest.
Description: An installment loan on your 401(k) retirement account that you must pay back within five years
Average Interest Rate: Normally 1% to 2%, per our research*
Pros
You’ll pay a low interest rate for the life of the loan.
You won’t be taxed on the loan as long as you stay within your plan’s borrowing limits, make regular payments and repay within five years.
Cons
If you default on the loan, it could be considered a taxable distribution and be subject to a penalty and taxation.
If you switch jobs or lose your job, you may be required to repay the entire loan within a short time frame.
Your investments grow more slowly while you repay the loan.
You repay your loan with after-tax dollars, losing the original tax benefit.
Description: A loan against the cash value of your life insurance policy
Average Interest Rate: Normally 5% to 8%, per our research*
Pros
There’s no fixed repayment schedule so you can pay the loan back when it’s convenient for you.
You generally won’t owe taxes on money you borrow from your policy.
Cons
The cash value in your policy has to reach a certain level before you can take out a loan.
If your loan isn’t paid off when you die, the amount you owe will be subtracted from your death benefit.
If you don’t keep up with your interest payments and they grow to exceed the cash value of your policy, your insurance may be canceled.
Description: A fixed-rate installment loan secured by the equity in your home with a long repayment schedule, usually five to 30 years
Average Interest Rate: 8.52% current average*
Pros
Your interest rate is fixed, and there’s a set repayment schedule.
Cons
With long repayment terms, you’ll often pay more in interest.
You must own your own home and have at least 15% to 20% equity in it.
Description: A loan that's secured by the equity in your home and typically has a variable rate. During the draw period, which may last up to 10 years, you normally pay interest only. You then repay interest and principal during the repayment period, typically over 10 to 20 years.
Average Interest Rate: 9.37% current average*
Pros
During the initial part of the loan, you usually only have to pay interest, not principal.
Cons
With long repayment terms, you’ll often pay way more in interest.
Variable interest rates could rise substantially.
You must own your own home and have at least 15% to 20% equity in it.
*Research and rates accurate as of 9/12/2024
FAQ: Debt Consolidation Loans
Applying for a debt consolidation loan will temporarily lower your credit score due to the hard inquiry by lenders. However, if you make on-time payments and reduce your overall debt by paying down the loan and not adding more debt, you can improve your credit score over time.
Potential disadvantages of a debt consolidation loan include origination fees, a temporary dip in your credit score, the temptation to accumulate additional debt and the risk that you’ll pay more interest by extending your repayment period. You should only consider this type of loan if it fits your needs and you’re able to make on-time payments.
Yes, a debt consolidation loan can lower your monthly payments, especially if you combine multiple debts into a single personal loan with a long repayment period. Keep in mind the longer your repayment period, the more interest you’ll pay over the life of the loan.
Yes, it could be hard to get approved for a debt consolidation loan if you have a credit score lower than 600 and a low income. However, some lenders, such as Upstart and Upgrade, allow easier loan approval for borrowers with low credit scores.
While you can technically still use your credit card after taking out a debt consolidation loan, it defeats the purpose of the loan — to eliminate your high-interest debt. If you’re able to, use a debit card or cash for everyday expenses. Ideally, you’ll save up an emergency fund so you can tap into your cash rather than credit if you’re in a tight spot.
Consider a debt consolidation loan, which is a type of personal loan, to consolidate credit card debt. Debt consolidation loans generally have lower interest rates than credit cards, so they can save you money and help you pay your cards off sooner.
Methodology
Our MarketWatch Guides team analyzed the debt consolidation loans of 33 lenders, giving star ratings to each one based on affordability, loan features, customer experience and company reputation. Our scores are based on a 100-point rating system that is then converted into a 5-star scale.
We regularly collect data on lenders’ loan options and terms, and we use this information to score each provider based on key metrics that matter most to potential borrowers.
We considered critical factors including minimum and maximum loan amounts, repayment terms, APRs, discounts and ratings from the Better Business Bureau to gauge a lender’s standing in the industry. Keep in mind that our top-rated lenders may not be the right fit for your financial situation. To learn more, you can read our full personal loans methodology.
Customer Review Methodology
To provide in-depth perspective on how customers feel overall about banks that offer debt consolidation loans, the MarketWatch Guides team compiled 8,049 reviews from trustworthy, publicly available user-review sites such as Trustpilot, the Better Business Bureau (BBB), Consumer Affairs, WalletHub and Best Company.
We then categorized each review and analyzed the sentiment to determine whether it was positive or negative. With this data, we highlighted the most praised features and most common complaints for each institution and included sample reviews from real customers.
*Data accurate at time of publication
Editor’s Note: Before making significant financial decisions, consider reviewing your options with someoneyou trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
If you have feedback or questions about this article, please email the MarketWatch Guides team at editors@marketwatchguides.com.
