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Paying off your debts, typically credit cards, with a low-interest debt consolidation loan could be easier and faster than making minimum payments on card balances. Using a personal loan to consolidate debt may help you streamline bills in a single monthly payment.
This guide to the best loans for debt consolidation explains the borrowing process and picking the right personal loan for your needs.
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Lender |
Learn More |
APR |
Max. Loan Amount |
Min. Credit Score |
|---|---|---|---|---|
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6.24% to 10.24% | $50,000 | Not disclosed | |
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6.74% to 17.99% | $50,000 | 650 | |
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5.99% to 24.99% | $35,000 | 660 | |
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3.99% to 19.99% | $100,000 | 670 | |
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6.99% to 22.23% | $100,000 | Not disclosed | |
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6.99% to 19.99% | $40,000 | 660 | |
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Not disclosed | $50,000 | Not disclosed | |
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5.99% to 24.99% | $40,000 | 600 | |
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5.99% to 35.99% | $50,000 | 640 | |
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6.99% to 19.49% | $50,000 | 660 |
If you need money fast, Alliant Credit Union typically makes same-day online personal loans between $1,000 and $50,000. The $14 billion Chicago-based credit union, founded in 1935, is one of the biggest in the nation, with 600,000 members. In addition to personal loans, Alliant offers home and auto loans, credit cards, checking and savings accounts, individual retirement accounts, trust accounts, and insurance policies.
Although PenFed Credit Union – officially Pentagon Federal Credit Union – serves members of the armed forces, military associations, veterans and retirees, and their families, a military connection is not required to become a member. The credit union offers personal loans for eligible members and eligible co-borrowers in all 50 states, as well as in Guam, Puerto Rico and Okinawa, Japan.
Discover is a digital bank and payment services company known for its credit cards. But Discover also offers other products, including fixed-rate personal loans of up to $35,000 to borrowers nationwide. The lender charges no fees as long as you pay on time.
LightStream is the online consumer lending division of Truist, which formed in 2019 from the merger of BB&T and SunTrust. SunTrust acquired the assets of online lender FirstAgain in 2012 and relaunched the business as LightStream. LightStream’s online personal loans range from $5,000 to $100,000 and can be used for nearly any reason. Personal loans are available to borrowers nationwide with good to excellent credit.
SoFi, short for Social Finance, offers personal loans of up to $100,000 to borrowers with very good to excellent credit. The nationwide lender was founded in 2011 and is known for offering loans with no fees. In addition to personal loans, SoFi offers student loans, auto and student loan refinancing, home loans, and small-business financing.
Marcus is the consumer bank and lending arm of investment bank Goldman Sachs. Established in 2016, the lender offers personal loans of up to $40,000.
Upstart is a lending platform that uses artificial intelligence to improve access to affordable credit. Based in California and founded by former Google employees in 2012, Upstart also applies AI to reduce lending risks and costs for its bank partners. The lending intermediary provides unsecured personal loans from $1,000 to $50,000 to borrowers anywhere in the U.S. except West Virginia or Iowa.
Happy Money offers Payoff personal loans designed to consolidate credit card debt. It operates in all but two states and provides loans of up to $40,000. Happy Money is not a bank and instead works with lending partners that originate the loans. The California-based financial wellness company takes a psychological approach to money matters.
Best Egg is an online lender founded in 2014 that financial technology company Marlette Holdings Inc. owns and operates. Best Egg offers personal loans starting at $2,000 that can be used to cover medical bills, home remodeling and a variety of other expenses. Cross River Bank in New Jersey issues Best Egg loans, which can be funded in as little as one business day.
U.S. Bank has physical locations in more than 25 states and offers both short- and long-term personal loans with fixed annual percentage rates. Current customers may qualify to borrow up to $50,000 with a credit score of 660 or above, and options are available for noncustomers willing to open a checking or savings account.
Personal loan interest rates decreased this week, trending slightly lower for three-year and five-year loan terms. Here are the average personal loan rates offered to well-qualified applicants with a credit score of 720 or greater, as of Oct. 31:
- Three-year personal loan term: 17.71% (up from 16.24% a week ago).
- Five-year personal loan term: 18.73% (up from 17.42% a week ago).
Personal loan rates vary widely based on creditworthiness. Borrowers with very good or excellent credit scores will see much lower interest rates than those with fair or poor credit, as seen in the chart below:
Powered by Bankrate
U.S. News Survey
U.S. News Survey: Living Paycheck to Paycheck May Be the Norm if You Have Unsecured Debt
People with unsecured debt are struggling, according to an August 2021 survey by U.S. News. More than 42% of respondents say living paycheck to paycheck is what they want to change most about their financial situation. Almost two-thirds of respondents have at least $10,000 in debt, and a significant 7.3% hold $50,000 or more of debt.
People with unsecured debt are seeing the amount grow, too. Compared with a year ago, 41.7% of respondents have more unsecured debt, even though 38.9% of respondents have decreased their spending.
Unsecured debt is debt that isn’t backed by collateral, such as a house or car. More than half of respondents say their main source of unsecured debt is credit cards, and 20.5% of respondents say it is personal loans.
Additional Survey Insights
To deal with their debt, 25.1% of respondents would consider taking out a debt consolidation loan. Only 5.2% of respondents would consider getting a second mortgage.
Fortunately, few respondents appear to be paying extremely high interest rates. Only 3.5% of respondents say they have debt with an interest rate higher than 30%.
U.S. News Survey Methodology
- U.S. News ran a nationwide survey through PureSpectrum Insights in August 2021 with a sample size of 1,202 people.
- The survey was configured to be representative of the general American population.
- The survey was screened to only include people who held unsecured debt.
- The survey asked nine questions relating to unsecured debt.
Survey Results
A debt consolidation loan is a type of personal loan that combines high-interest debts and allows for one fixed-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. The interest rate is typically fixed, which means it 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 easier, as lenders estimate your interest rate and eligibility using a soft credit check that doesn’t harm your credit score.
Because you don’t need collateral for these loans, you must meet the lender’s credit and debt-to-income ratio requirements. Your rate depends on your creditworthiness when you apply, and the better your credit score, the more likely you will get a low interest rate.
Debt consolidation loans can be a good idea if they help you save on interest, reduce your monthly payments or improve 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 with a lower 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% into a debt consolidation loan with a 15% APR. “Rates can be considerably lower than credit card rates,” says John Ulzheimer, a credit expert formerly of Equifax and FICO. 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.
- Predictable debt repayment. Personal loan interest rates are usually fixed, which means that you’ll make the same monthly payment over a set period of time. You may also be able to streamline many types of unpaid bills, such as credit card balances and medical debt, into a single monthly payment.
- Reduced monthly payment. A debt consolidation loan could help you pay on time by spreading out your debt repayments over several years. A history of on-time payments is the most important factor of your FICO credit score.
- Improved credit score. Taking out a loan and leaving consolidated accounts open but unused will increase your total available credit and decrease your credit utilization ratio, which can boost your credit score.
Consider these downsides of debt consolidation loans:
- You may end up paying more interest. You’re not guaranteed to have a lower interest rate on your debt consolidation loan than on your credit cards or other bills. And if you extend the repayment term, you might pay more interest in the long run.
- You may end up adding more debt. Consolidating credit card debt leaves your cards free to use again and your debt to grow. It’s important not to rack up your credit card balances again while you repay a debt consolidation loan.
- You may find other options with better savings. A 0% balance transfer credit card or home equity loan could offer a lower interest rate option.
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 your loan as intended: to pay off debt and not to add to it.
“You’ll be converting score-damaging revolving debt into practically benign installment debt,” Ulzheimer says. “As long as you don’t charge up your cards again, you’ll be happy with your new scores.”
Before you shop around for a debt consolidation loan, consider your chances of approval. Most lenders look at:
- Your credit score. Debt consolidation loan companies typically require at least fair or good credit. Someone with a fair credit score 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, or DTI ratio, is the percentage of your gross monthly income that goes toward paying your debts. A lower ratio is better because it shows lenders that you have a good balance between income and debt and can repay what you owe. Some debt consolidation loan companies allow DTI 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 don’t want to see bankruptcies, tax liens, repossessions or foreclosures. Some lenders allow a co-signer or joint applicant, which can reduce their risk and help you get approved for a loan. But if you use a co-signer, proceed with caution: Default and you may damage your relationship as well as your co-signer’s creditworthiness.
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 meet your needs.
Evaluate debt consolidation loan companies based on these features to find the best fit:
- Interest rates. Compare lenders based on interest rate as a primary factor. Most lenders offer fixed-rate personal loans, while others offer fixed and variable rates. 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 loans without hurting your credit score.
- Loan terms. Loan terms can include loan amount, repayment period, monthly payment, payment due date and fees. 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. Some lenders charge origination fees for loan processing. Sometimes, lenders allow grace periods before they charge late or returned payment fees, if they charge them at all.
- Repayment options. Look for a lender that offers flexible payment options that work for you, whether that’s payment by phone, mail, wire transfer, app or online. Some lenders have flexible repayment options that allow you to change your due date or offer discounts if you sign up for 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, Trustpilot and the Consumer Financial Protection Bureau’s Consumer Complaint Database for lender ratings, reviews and complaints.
Find the Personal Loan That’s Right for You
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. Keep in mind that not all personal loan lenders offer prequalification with a soft credit inquiry.
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 more than 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. Many 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 credit inquiry. Be certain of your choice when you apply because too many hard inquiries in a short period of time could lower your credit score.
4. Get approved and close. Once approved, the loan will go through the closing process, and you will receive funds. The lender may offer direct payment to your creditors or send a check to you for deposit. You may receive funds as soon as the next business day.
Debt consolidation loans are a good option for many people with debt, but they aren’t the only option. If you can’t qualify for the best personal loan with good repayment terms, alternatives include:
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 terms 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. But you’ll likely pay a fee of 3% to 5% of the balance you transfer.
By comparison, personal loans for debt consolidation could offer term lengths of about 60 months, though you’ll have to pay interest.
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.
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 an alternative to bankruptcy because the damaging effects to your credit report can be long-lasting.
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.
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 five 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 loan rates and repayment terms you can afford.
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 credit expert and author Gerri Detweiler.
5. 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 you may be tempted to shop or manage household expenses with your newly cleared accounts, avoid using them 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.
U.S. News selects the Best Loan Companies by evaluating affordability, borrower eligibility criteria and customer service. Those with the highest overall scores are considered the best lenders.
To calculate each score, we use data about the lender and its loan offerings, giving greater weight to factors that matter most to borrowers. Personal loan companies are evaluated based on customer service ratings, interest rates, maximum loan term, minimum and maximum loan amounts, minimum FICO score, online features, and origination fees.
The weight each scoring factor receives is based on a nationwide survey on what borrowers look for in a lender.
To receive a rating, lenders must offer qualifying loans nationwide and have a good reputation within the industry. Read more about our methodology.
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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