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Get FundedDebt consolidation loans allow you to combine multiple debts, like credit cards and other loans, into a single monthly payment. Depending on your credit, you could qualify for a much lower interest rate than the combined rates on your current debts.
Compare Best Debt Consolidation Loans
What we researchedHow We Picked
We reviewed over 20 lenders and debt consolidation loans to find the best one based on several scenarios which include poor credit, flexibility, debt consolidation, short or no credit history, cosigned loans, and more.
Our methodology
AmONE conducted an audit of over 30 loan companies to find which ones offer personal loans.
Once we narrowed down the options, we analyzed the personal loans offered by 20 lenders and looked at more than 10 data points, including credit score requirements, fees, accessibility, customer experience, APR rates, loan amounts, length of time to pay, the application process, and more. We picked the best personal loans by scoring loans based on those features.
AmONE will continue to spot-check and ensure the most recent loan information is included here as needed and update our list annually.
Top Lenders
The best debt consolidation loans come with flexible terms, low to no fees, and low annual percentage rates (APRs). Knowing what to look for in a debt consolidation loan will help you compare lenders to find the right loan for you.
The lenders below represent the very best options for personal loans for debt consolidation.
Payoff: Best for credit card consolidation
Why it’s the best: Most borrowers can qualify for much lower interest rates than assigned by credit card companies.
Loan amount: $5,000 to $40,000
Availability and restrictions: Payoff loans aren’t available in Massachusetts or Nevada currently.
Happy Money pros and cons for debt consolidation
Read the Review: Learn More About Payoff
Upstart: Best for bad or no credit
Why it’s the best: You can qualify for a loan through Upstart with a minimum credit score as low as 300 in some cases. Other factors they consider include adverse marks on your credit history, employment status, and more.
Loan amount: $1,000 to $50,000
Availability and restrictions: Most applicants can apply at 18 years of age. Applicants from Alabama and Nebraska must be at least 19 years old.
Upstart pros and cons for debt consolidation
Read the Review: Learn More About Upstart
SoFi: Best for no fees
Why it’s the best: SoFi consolidation loans carry no fees, including no origination fees, late fees, or prepayment penalties for paying your loan off early.
Loan amount: $5,000 to $100,000
Availability and restrictions: SoFi personal loans aren’t available in Mississippi. Borrowers must be at least the age of majority in their state to be eligible for a loan.
SoFi pros and cons for debt consolidation
Read the Review: Learn More About SoFi
Avant: Low-to-middle income, fast funding
Why it’s the best: Avant offers some of the fastest funding among private lenders.
In many cases, borrowers have funds deposited as quickly as the next business day after approval. Also, you don’t necessarily have to have excellent credit to qualify for a debt consolidation loan. The majority of Avant customers that receive a loan have credit scores between 600 and 700.
Loan amount: $2,000 to $35,000
Availability and restrictions: Avant personal loans are not currently available in Hawaii, Iowa, New York, Vermont, and West Virginia.
Avant pros and cons for debt consolidation
Read the Review: Learn More About Avant
Lightstream: Large loans
Why it’s the best: Lightstream is one of the few private lenders that offers debt consolidation loans up to $100,000. This lender also offers one of the largest autopay discounts around, which can lower how much you have to pay in interest charges on your loan.
Loan Amount: $5,000 to $100,000
Availability and restrictions: none, serves all 50 states
Lightstream pros and cons for debt consolidation
Read the Review: Learn More About Lightstream
How Does a Debt Consolidation Loan Work?
You can apply for a debt consolidation loan through banks or other lenders.
1. Many lenders allow you to check rates or prequalify for a loan before applying without negatively affecting your credit score.
2. Once you apply for a personal loan, the lender will perform a hard credit inquiry to determine your creditworthiness.
3. Once you’re approved, your new lender will either directly send payments to your creditors or provide you with the funds necessary to pay them yourself.
4. Then, you’ll receive a new loan with a new interest rate and loan terms.
Debt consolidation loans also help to streamline your finances with a single monthly payment.
Debt Consolidation or Credit Card Balance Transfer: What’s the Difference?
Another popular option for consolidating credit card debt is a balance transfer. The best balance transfer credit cards offer 0% APR for an extended period, sometimes as long as 12 to 24 months or beyond.
The better option between a debt consolidation loan vs a balance transfer depends on your circumstances including your total debt balance. If your debt is low enough to pay off within a card’s promotional period, doing a balance transfer might be a viable option, especially if you can find a credit card with a low balance transfer fee.
A personal loan for debt consolidation may offer longer payment terms with manageable monthly payments if your debt is more considerable. With either option, consider your total debt balance, how long you think you’ll need to pay it off, and any associated fees.
How to Compare Debt Consolidation Loans
Finding the right loan can help you eliminate your debt with affordable monthly payments to fit your budget. When comparing lenders, consider these factors.
APR
A loan’s annual percentage rate (APR) is the total cost paid to borrow money, including all fees, expressed as a percentage. Lenders charge APR each month on top of your loan’s principal amount.
Lenders use your credit score, income, debt-to-income ratio, and other factors to determine rates. Having good to excellent credit opens the door to lower interest rates, potentially cutting down on interest charges paid over the life of your loan.
Origination Fees
Many personal loans come with origination fees attached. Origination fees are one-time upfront fees charged by lenders to cover loan processing costs.
Fees can range from 2% to 30% of the loan amount or higher. Some lenders deduct the fee from your loan proceeds, while others add it to your loan balance. If your lender deducts the origination fee from the loan total, you’ll need to factor that into your loan amount request.
Inquire about origination fees before taking out a loan. Finding a personal loan without origination fees could cut down on added costs. Compare loan fees and APRs to find the best value.
Special features
While rates and fees should be your primary focus, it’s also important to look at other features as well. Some lenders provide other benefits that can make your life easier.
One popular feature is direct payments to creditors, which means that paying off creditors is automatically done for you once the loan closes. Other perks can include hardship programs, credit monitoring, and automatic payments.
Repayment period and terms
Some lenders may offer better repayment options than others. Because you’re consolidating debt, chances are your repayment period will be longer than previous terms (if consolidating existing loans).
Depending on the lender, you may be able to lower your monthly payments by choosing an extended repayment period. Find out what options are available from lenders before applying for a loan.
Funding time
If you need loan funds fast, some lenders offer to fund as quickly as the same day or the next business day after approval. Other lenders take several business days or longer to process funds, especially for larger loans. Consider how quickly you need loan funds when considering lenders.
How to Consolidate Debt
Understanding debt consolidation will help simplify the process and more likely lead you to the right lender. Follow the steps below to consolidate your debt.
1. Learn about and compare debt solutions
We’ve walked through debt consolidation loans and balance transfer credit cards already, but there are several other debt solutions to consider. Knowing what’s available is the first step in determining the best course of action. Take time to understand all of your debt management and solution options so you can choose the best path based on your situation.
2. Understand debt consolidation loans
Debt consolidation loans and personal loans have some similarities. However, there are specific nuances to debt consolidation loans before you apply. Knowing the inner workings of this type of loan will help guide you to the right option.
3. Narrow down your options
Once you’ve spent time gathering information on debt consolidation options, it’s time to look specifically at your financial situation and how it fits into the equation. Write down all of your debts, interest rates, repayment terms, monthly payment amounts, and any other pertinent details to determine if a personal loan for debt consolidation is your best option. If so, move forward with finding a lender.
4. Application and approval
After finding a lender that’s a good fit, start the application process. Have all your personal and financial information on hand before applying.
The lender will perform a hard credit inquiry during the application process to determine eligibility for a loan and set your interest rate. If approved, you can accept the loan rate and terms and finalize the loan.
5. Pay off high-interest debt
Either your lender will pay off creditors directly or they will disburse funds to you to pay them off yourself to complete the debt consolidation. You’ll also receive information regarding your new monthly loan payments and options available to you.
6. Be careful of debt consolidation mistakes
Sometimes, the best steps are the ones you don’t take. Do your best to avoid debt consolidation missteps. Common mistakes include choosing a loan with a high interest rate, adding more debt during repayment, and working with a less-than-reputable debt consolidation company.
Don’t rush into debt consolidation without considering all of your options. Also, consider your goals for debt consolidation and find a lender that addresses your needs.
How AmONE Can Help You Consolidate Your Debt
With so many lenders and options out there, it’s hard to know which one is best for you. AmONE can help. Our free service does the work for you and matches you with the best debt consolidation loan for your unique situation.
You’re free to explore the options we provide, or you can reach out to one of our loan specialists who can help walk you through the process.
Let AmONE help you find a debt consolidation loan that will enable you to pay down your debt faster and possibly save money in the process.
Debt Consolidation Loans Pros and Cons
While a debt consolidation loan offers several advantages for paying off debt, they are far from a perfect solution. Depending on your situation, taking out a personal loan for debt consolidation also poses some unique challenges. Consider the following pros and cons when deciding whether a debt consolidation loan is right for you.
Frequently Asked Questions
Do debt consolidation loans affect your credit score?
Your lender will perform a hard credit inquiry when you apply for a loan which could cause your credit score to temporarily drop a few points. Taking out a loan itself won’t affect your credit. Making on-time monthly loan payments can help improve your credit score. Alternatively, missing or late payments can hurt your credit score and lead to costly late fees.
What are the risks of a debt consolidation loan?
A debt consolidation loan doesn’t address underlying financial habits that lead to being in debt in the first place. One of the biggest risks of taking out a debt consolidation loan is that it could lead to increased spending, especially if it frees up money each month. Also, combining several debts could lead to a higher monthly payment that becomes unmanageable.
Do I have to consolidate all my debt?
No, you can choose which debts to consolidate. It might be more beneficial to keep some debts separate, especially if they already have a low interest rate. Other debts, like federal student loans, aren’t eligible to be consolidated through a debt consolidation loan.
How does debt consolidation affect my monthly payments?
Consolidating your debts into one loan means you’ll have a single monthly payment with one assigned due date. Depending on your debt and loan terms, you could end up with a higher monthly payment than you were paying in total previously. Your lender will share your new monthly payment amount with you before the loan is finalized.
How do I qualify for a debt consolidation loan?
Each lender sets its own eligibility and underwriting standards to qualify for a debt consolidation loan. Typically, you need to be a U.S. citizen or legal resident, 18 years of age or older, and meet specific credit and income requirements. Your credit score, income, and other financial information, like debt-to-income ratio (DTI), are also used by lenders to determine your interest rate and how much money you’re eligible to borrow.
How much can I save with a debt consolidation loan?
How much you can save depends on your new loan interest rate and terms compared to what you previously paid through individual creditors. Scoring a lower rate could lead to increased savings in interest charges over the life of your loan. You could also end up paying more if you choose longer loan terms, increasing how much interest you pay overall.
How long does it take to get approved for a debt consolidation loan?
Approval times often depend on the lender. How quickly they can verify your personal and financial information also plays a role in determining turnaround times. Some lenders may approve a loan request in minutes, while others may take up to a week or longer to process. Loan funding also depends on the lender, which could happen as quickly as 24 hours or up to a week.
