7 Best Debt Consolidation Loan Companies for Credit Card Debt in 2023

7 Best Debt Consolidation Loan Companies for Credit Card Debt in 2023

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A debt consolidation loan is a type of personal loan that combines multiple high-interest debts into one fixed monthly payment. Debt consolidation is often used to consolidate unsecured debts such as credit cards, medical bills, and payday loans.

The best debt consolidation loans typically offer low interest rates, flexible payment terms, fast funding, and even direct payment to your creditors. Debt consolidation is a great way to pay less money in interest, reduce your monthly payment amount, and get out of debt faster.

But with so many debt consolidation companies to choose from, picking the right lender can feel like an overwhelming task. To help you decide, we’ve reviewed the best debt consolidation loan lenders. We evaluated each debt consolidation company on a variety of factors including APRs, fees, loan amounts, repayment terms, and credit score requirements.

Here are our picks for the best debt consolidation loans of 2023.

Best Debt Consolidation Loan Companies

  • SoFi: Best for good to excellent credit
  • Upgrade: Best debt consolidation for fair credit
  • Credible: Best for comparing rates with multiple lenders
  • Upstart: Best for no minimum credit score
  • LightStream: Best for large debt consolidation loans up to $100k
  • OneMain Financial: Best debt consolidation loans for bad credit
  • Best Egg: Great for low fixed APRs and 24-hour funding

#1. SoFi: Best Debt Consolidation Loan for Low Interest Rates and No Origination Fees

SoFi is our top pick for the best personal loans for debt consolidation. SoFi is a well-established online lender that offers unsecured personal loans throughout most of the United States, excluding Mississippi. The company offers an online experience, and most users get feedback on their loan status within two to four days.

Loan Amounts and Repayment Terms

SoFi offers loans from $5,000 to $100,000, but some states will have higher minimum amounts: $10,001 in Arizona, Massachusetts, and New Hampshire, and $15,001 in Kentucky.

The platform offers relatively flexible loan terms ranging from 24 to 84 months.

Unlike many other online lenders, SoFi doesn’t charge any origination fees or late fees, though borrowers will continue to accrue interest on late payments. Neither does the platform charge prepayment penalties, meaning you can pay off your loan anytime without negative consequences.

Credit Score and Income Requirements

Qualifying for a debt consolidation personal loan from SoFi requires meeting certain credit and income score requirements. While meeting these requirements doesn’t guarantee loan approval, it does provide a useful baseline to know whether applying for a loan through SoFi is the right option for you.

SoFi has a minimum credit score requirement of 650, and most successful applicants report having a credit score of 700 or higher.

The online lender also has a minimum annual income requirement of $45,000 for its debt consolidation loans. SoFi also emphasizes having a healthy debt-to-income ratio, which shows that borrowers have enough money left over each month to pay off their SoFi personal loan.

If you don’t meet the credit score or income requirements, you may consider applying with a co-applicant, who will be jointly responsible for paying off the loan. It’s important to note that a co-applicant isn’t the same as a co-signer, who assumes responsibility for the loan if the main applicant cannot pay. SoFi and most other debt consolidation lenders do not allow co-signers on their personal loans.

Loan Uses

SoFi personal loans have permitted and prohibited uses. Borrowers can use their personal loans to fund:

  • Debt or credit card consolidation
  • Home improvements
  • Medical procedures
  • Relocation

Perks and Features

SoFi loans offer several perks to make them more appealing to borrowers. The notable ones include:

APR reduction: Autopay enrollees get 0.25{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} off their APR.

Flexible monthly payment dates: In addition to letting borrowers decide their payment dates, SoFi lets customers change their payment dates once per year.

Unemployment protection: SoFi has a loan forbearance program that allows borrowers to pause their repayments for a three-month period (with a hard limit of 12 months in total). SoFi won’t expect repayments during this time, but the drawback is that the loan will continue to accrue interest during the payment freeze. Borrowers must also meet certain criteria to qualify for the program, such as working with SoFi’s career strategy service, actively looking for work, and receiving unemployment benefits.

Who Is Sofi Best For?

SoFi’s high loan amounts make the platform a great option for individuals looking to consolidate large amounts of debt. The lender is also a good choice for individuals with excellent credit and a solid income who want to get a personal loan for home renovation or relocating to a new city or state.

Click Here to Check Rates or to Apply Online With SoFi

#2. Upgrade: Best Credit Card Consolidation Loan for Fair Credit

Upgrade is an online-only lending platform specializing in debt consolidation and personal loans. It offers lending services in most of the United States, excluding Iowa, West Virginia, and Washington, D.C.

Loan Amounts and Repayment Terms

Upgrade offers loan amounts ranging from $1,000 to $50,000, depending on the applicant’s credit history and income. The platform has different limits for some states, and borrowers in Georgia must borrow at least $3,005, while Massachusetts residents have a minimum lending limit of $6,400.

Upgrade has relatively flexible loan terms ranging from 24 to 84 months, and the platform doesn’t impose prepayment penalties—if you want to pay the loan off earlier, you can do so with no negative consequences.

It’s important to note that Upgrade has several fees that may increase the cost of the loan. The two major ones are the loan origination fee, which ranges between 2.9{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} and 8{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of the total loan amount, which Upgrade deducts from the amount paid out, and a late fee for any payments not paid within 15 days of the regular payment date.

Credit Score and Income Requirements

Upgrade has a relatively generous minimum credit score requirement of 560, making it a good choice for borrowers with fair credit. However, having a higher credit score doesn’t guarantee you will get the loan, and lower credit scores often translate into higher personal loan rates.

The lender doesn’t disclose its income or debt-to-income ratio requirements in its personal loan eligibility details, but successful applicants report having at least $1,000 in free cash flow per month.

As with most online lenders, Upgrade doesn’t allow co-signers on its debt consolidation loans but allows for co-applicants who meet the minimum credit score.

Loan Uses

Upgrade restricts its personal loan uses to:

  • Debt consolidation
  • Home improvements
  • Large purchases, including vehicles
  • Credit card refinancing

Perks and Features

Upgrade offers several perks for existing and new loan holders to attract more customers. These include:

Autopay discount: If you allow Upgrade to automatically deduct your monthly payments from your bank account, you’ll receive a discount on your APR.

Flexible payments: Upgrade lets borrowers choose their ideal payment date. Borrowers can also change their monthly payment date once per year to ensure they can make their loan payments despite changing circumstances.

Credit monitoring: All Upgrade customers get access to Credit Health, a free service that allows people to monitor their credit score. The service also provides access to educational tools that help users improve their credit scores and obtain useful financial advice.

Mobile app: Upgrade customers can manage their loan via a mobile app, available to Android and iOS users. The app allows customers to do everything they can on their desktop, including changing their details, making payments, viewing their balance, and using the Credit Health tool.

Who Is Upgrade Best For?

Upgrade’s combination of flexible terms and loan amounts makes it the ideal lender for individuals looking to reduce their monthly payments and save money by consolidating their debt. It’s particularly useful for people with a fair to poor credit score, though they will have to pay a higher interest rate than individuals with a better credit history.

Click Here to Check Rates or to Apply Online With Upgrade

#3. Credible: Best for Comparing Multiple Personal Loan Companies

Credible isn’t an online lender but connects people with other personal loan lenders. If you’re shopping around looking for the best debt consolidation loan, an aggregate site like Credible can save you plenty of time by making it easy to compare various options from other companies.

Credible’s partners include Marcus by Goldman Sachs, Upstart, Discover, and SoFi. The site also has a “best rate guarantee” that gives borrowers a cash bonus if they find a better rate elsewhere.

Loan Amounts and Repayment Terms

Credible’s loan amounts depend on the lender but tend to range between $600 and $100,000.

Loan terms across online lenders tend to remain similar, often between 24 and 84 months. Some lenders may offer shorter terms, but these are extremely rare. Similarly, the origination fee and late fees also depend largely on the lender.

Credit Score and Income Requirements

Credible relies on its partners to determine the ideal credit score and income requirements for its unsecured personal loans. In many cases, at least one online lender will have lower credit score limits, but these tend to come with significantly higher interest rates and monthly payments.

Loan Uses

Credible’s personal loans have use restrictions, but these will vary depending on the lender. Most people use their personal loan proceeds to:

  • Consolidate credit card debt
  • Renovate their home
  • Finance a vehicle
  • Fund moving costs or other large expenses

Most lenders will also have restrictions on how people can use their loans, including:

  • Tertiary education financing
  • Gambling
  • Investments

Perks and Features

As an aggregate site, Credible doesn’t have many loan-specific perks and features.

However, the platform offers a best rate guarantee, ensuring you get the most reasonable rate possible for your debt consolidation loan. If you find and accept a better offer within eight days of checking rates on Credible, the site will give you $200.

The site frequently has a promotion that gives people a gift card when they pay off their loans. Depending on the loan size, these cards range in value, but some users receive up to $1,000 when they close their loan.

Who Is Credible Best For?

Credible is an excellent site for people looking at various loans for debt consolidation. The site allows people to compare similar loans and find out which ones are best for them while highlighting aspects such as origination fees, interest rates, and various perks and features of individual lenders. Users need only input their details once to get a wide range of loans through which they can browse.

The best rate guarantee is also a great incentive, as it means you either get cash if you find a better offer or get the best possible debt consolidation loan rate through the site.

Click Here to Check Rates or to Apply Online With Credible

#4. Upstart: Recommended for Borrowers With Little Credit History

Upstart is an online lender that provides relatively low debt consolidation loan rates to people with a poor or fair credit history. The platform uses an AI algorithm to evaluate applicants across several unique factors, including education, job history, and current residence, to decide whether to grant loan approval.

In addition to making it easier for poor credit borrowers to get debt consolidation loans, the AI model means that people get faster approval and access to their loan funds than they would on many other platforms.

Loan Amounts and Repayment Terms

Upstart offers a minimum loan amount of $1,000 in most states, except for Massachusetts, Ohio, New Mexico, and Georgia, which have much higher minimum amounts. The maximum loan amount offered by the service is $50,000.

Upstart doesn’t have very flexible loan terms, only offering 36- or 50-month options. This lack of flexibility means users don’t have as much control over their monthly debt payments as with other lenders. However, the platform doesn’t charge a prepayment penalty, meaning that customers can take a long-term loan, take advantage of the lower monthly payments, then pay off the loan as soon as possible.

Upstart charges several fees for its personal loans, including:

  • An origination fee of up to 8{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of the total loan amount
  • Late fees of 5{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of the missed payment amount, or $15, whichever is higher.
  • An unsuccessful payment fee of $15 for any declined bank account payments
  • A $10 paper copy fee for any physical record copies

Credit Score and Income Requirements

Upstart’s AI underwriting model means that the platform doesn’t place too much of an emphasis on credit score and income when determining eligibility.

However, the site does recommend a minimum credit score of 600 with no credit report inquiries, bankruptcies, or delinquent accounts for a successful application.

The platform also requires that borrowers have full-time employment or a job offer starting within six months of the application. The site will consider individuals with part-time jobs, as long as they have a minimum annual income of $12,000 and no outstanding account delinquencies.

Upstart does not consider co-signers or co-applicants—every person must apply for their personal loan individually.

Loan Uses

Upstart allows borrowers to use their loan funds for:

  • Credit card consolidation
  • Existing debt consolidation
  • Medical payments
  • Home improvements
  • Student loan refinancing

Perks and Features

Unlike many debt consolidation lenders, Upstart does not offer an APR discount for autopay users. The company’s main perk is a hardship program that allows borrowers to suspend their monthly payments if they cannot meet their debt payment obligations. However, while these suspensions can offer some breathing room, the platform doesn’t suspend interest accrual, meaning that you’ll have to pay more monthly once you resume payments due to the additional interest.

Who Is Upstart Best For?

Upstart is an excellent choice for individuals who haven’t established a credit history or have bad credit but still have a job or good education. The platform’s AI algorithm looks at many situational factors when determining loan rates and approval, so individuals with higher degrees and stable jobs have a better chance of getting favorable interest rates despite their bad credit history.

Click Here to Check Rates or to Apply Online With Upstart

#5. LightStream: Top Consolidation Company for Good to Excellent Credit

LightStream is an online lender that offers personal loans for debt consolidation or other large expenses. It has earned a solid reputation for being consumer-friendly while providing competitive rates and multiple debt repayment options.

The lender offers personal loans to residents of all 50 states, Puerto Rico, and Washington, D.C.

Loan Amounts and Repayment Terms

LightStream’s minimum loan amount is $5,000 in all states, and the maximum is $100,000, though these amounts may vary due to an applicant’s qualifications and needs.

The platform offers flexible loan terms ranging from 24 to 84 months for most uses, such as consolidating debt or large purchases. LightStream is willing to extend these terms to 144 months for home improvement, solar, or swimming pool loans.

What makes LightStream so appealing to many customers is its lack of fees. The site doesn’t charge origination fees, prepayment penalties, or late fees. LightStream also offers autopay customers lower interest rates.

Credit Score and Income Requirements

LightStream requires a minimum credit score of 660 and a stable income sufficient to pay current debt obligations and the new loan repayments.

The platform uses several other factors when determining interest rates, such as the applicant’s:

  • Debt-to-income ratio
  • Liquid assets
  • Revolving credit card debt
  • Retirement savings
  • Current mortgages
  • Accounts, such as a savings or checking account and credit card account

Like most online personal loan lenders, LightStream doesn’t allow co-signers on its loans. However, it does allow co-applications, as long as both applicants meet the minimum requirements and reside on the same premises.

Loan Uses

As part of the loan agreement, borrowers must only use their LightStream funds for certain specified uses. These include:

  • Land purchases
  • Wedding costs
  • Medical expenses
  • Home improvements or renovations
  • Credit card debt consolidation
  • Preschool and K-12 expenses

Borrowers cannot use their loan funds to:

  • Refinance previous post-secondary education loans
  • Pay for college or post-secondary education
  • Purchase stocks or bonds
  • Refinance any existing LightStream loan
  • Fund illegal activities
  • Perks and Features

In addition to a slick user interface and fast application process, LightStream offers many perks and features that make it appealing to borrowers. These include:

A rate beat program: If you receive approval for a personal loan from a competitor, LightStream will beat that interest rate by 0.1{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9}, as long as it’s a fixed-rate loan with the same loan amount, purpose, terms, and payment method.

Loan experience guarantee: The platform takes its user feedback seriously, which is why it offers borrowers the opportunity to provide feedback and receive $100. Any borrower can express dissatisfaction with their loan within 30 days by contacting the site and submitting a completed questionnaire. Each user can only receive one $100 payment per funded loan.

Who Is LightStream Best For?

LightStream is a flexible and user-friendly platform that offers personal loans with high upper limits. The site tends to have a very quick application process and turnaround time, and many applicants report getting their funds within two to three days, making it a good option for individuals who need large amounts of money quickly.

One drawback of LightStream is that it doesn’t have a preapproval process, so any loan applications are subject to a hard credit check. If you’re shopping around and evaluating multiple lenders, this lack of preapproval may negatively affect your credit score.

Click Here to Check Rates or to Apply Online With LightStream

#6. OneMain Financial: Good Option for Borrowers with Bad Credit

OneMain Financial focuses on individuals with fair to poor credit, allowing them to consolidate debt and improve their credit score with a manageable fixed monthly payment. What makes OneMain stand out from other debt consolidation loans is that it allows for the addition of collateral to personal loans. Loans secured with collateral tend to have lower interest rates, dramatically reducing the monthly debt payments and saving the borrower money in the long run.

Loan Amounts and Repayment Terms

OneMain’s minimum loan amount is $1,500 in most states, though Alabama, California, Georgia, North Dakota, Ohio, and Virginia all have higher loan minimums. The maximum loan amount is $20,000 in almost every state except North Carolina, which has a limit of $7,500.

OneMain offers several loan terms, ranging from 24 to 60 months. The lender doesn’t charge prepayment penalties, so borrowers can repay their loan sooner without paying for the privilege.

As with many other lenders, OneMain charges origination fees, late payment fees, and insufficient fund fees. If you choose to put your car up as collateral, you may also have to pay government registration fees to register the lender’s lien against your car title.

Credit Score and Income Requirements

While OneMain doesn’t disclose its minimum credit score, the lender doesn’t use the FICO credit score in its underwriting. Instead, OneMain relies on the borrower’s ability to pay their loan while covering existing debts. Similarly, the company doesn’t disclose its income or DTI ratio, saying it reviews every application using various factors.

OneMain allows for co-applications but does not allow co-signers for its personal loans. However, it is one of the few personal loan lenders offering unsecured and secured loans. If necessary, you can put up assets, such as cars, trucks, and boats, as collateral to either receive a larger loan or obtain a better interest rate. Considering the company focuses on providing the best bad credit loans, using collateral to reduce your monthly interest rate can make your high-interest debt significantly more manageable.

Loan Uses

As with most debt consolidation personal loans, OneMain limits the purposes for which you can use your loan funds. Borrowers can use their loan proceeds to:

  • Consolidate multiple debts into one monthly payment
  • Improve or renovate their home
  • Buy recreational vehicles
  • Fund life events, such as weddings or relocations
  • Deal with emergencies
  • Perks and Features

OneMain offers several features that, in addition to providing secured loans, may make the company appealing to customers. These features include:

Physical branch locations: In addition to offering online lending services, OneMain has a network of physical branches around the country. If you prefer dealing with real people when obtaining loans for debt consolidation, this feature may seal the deal for you.

Mobile app: While not the slickest app on the market, OneMain’s app lets you manage your account remotely. Users can make monthly payments, view their balance, change their payment details, and check their credit scores.

Who Is OneMain Financial Best For?

OneMain is a great option for borrowers who have poor or fair credit. The service offers flexible personal loans, and the option to secure the loan can help people reduce how much they pay on high-interest debt every month and make it easier to qualify for a consolidation loan.

Click Here to Check Rates or to Apply Online With OneMain Financial

#7. Best Egg: Great for High-Interest Credit Card Debt

Best Egg is an online lending service offering secured and unsecured loans. The platform aims its features directly at debt consolidation, such as direct payment on credit card balances for credit card consolidation.

Loan Amounts and Repayment Terms

Best Egg’s minimum loan amount is $2,000 in most states. This amount is higher in Massachusetts, New Mexico, Ohio, and Georgia. The maximum loan amount is $35,000, though Best Egg does allow multiple loans as long as the total balance stays under $50,000.

The site has slightly more restrictive loan terms than its competitors, only offering three- or five-year loans. The good news is that the lender doesn’t charge prepayment fees, so borrowers can opt for longer terms and still pay off the loan amount before the due date without penalty.

The lender charges an origination fee of between 0.99{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} and 5.99{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of the total loan amount and an insufficient funds fee of $15.

Credit Score and Income Requirements

Best Egg requires a minimum credit score of 640 and a debt-to-income ratio of 30{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9}, meaning applicants must not have debt exceeding 30{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of their monthly income.

While these minimums are good indicators of whether you’ll qualify for an unsecured debt consolidation loan, applicants with excellent credit and high income tend to get better interest rates.

Loan Uses

Best Egg allows borrowers to spend their loan proceeds to:

  • Consolidate debt
  • Pay taxes
  • Fund home improvements
  • Pay for emergencies, such as repairs or medical bills

Perks and Features

To provide the best loans for debt consolidation, Best Egg offers several perks for individuals who want to consolidate debt and save money. These features include:

Direct payment for debt consolidation: Instead of going to each lender and paying them, borrowers can let Best Egg handle the debt repayment of various credit card balances and other debt. The site also offers larger loan amounts and better interest rates for people who use their loans for debt consolidation.

Flexible due date: Borrowers can change their payment due date once a year to better suit their budget and circumstances.

Credit report access: Best Egg provides customers with a six-month FICO score trend highlighting vital credit factors, allowing borrowers to build excellent credit during the lifespan of their loan.

Who Is Best Egg Best For?

Best Egg is a great option for borrowers looking for no-fuss personal loans for debt or other expenses. The lender offers options for secured and unsecured debt while providing a flexible range of loan amounts and useful features. If you want a direct lending experience, Best Egg may be the right option for you.

Click Here to Check Rates or to Apply Online With Best Egg

What Is a Debt Consolidation Loan?

A debt consolidation loan is a way to take multiple debts and roll them into one monthly payment.

By taking out a personal loan, you can pay off your existing balances on high-interest accounts. You can also pay off a personal loan by consolidating it under new terms with a more competitive interest rate. Not only do debt consolidation loans help reduce the amount you spend per month, but they also dramatically simplify your monthly bill payments and may even help you establish a better credit score.

How We Ranked the Top Debt Consolidation Companies

The best debt consolidation loans are those that meet your current financial needs. It’s no use consolidating debt if you’re paying a higher interest rate or if you can’t pay off all of your existing debt using one loan. As with any major life decision, it’s vital to research various lenders to find one that is reputable and offers the services you require.

We evaluated numerous online loan providers to find the best personal loans for debt consolidation. Our analysis consisted of various factors, including those that affect the quality of the loan and those that showcase the lender’s reliability.

Loan Repayment Terms

Loan terms can drastically affect the final loan cost. In general, longer terms mean lower monthly payments but higher total repayment costs as the loan has more time to accrue interest.

On the other hand, shorter terms mean higher monthly payments but a lower total loan cost as the loan has less time to accumulate high levels of compound interest.

We like lenders that offer a wide range of loan terms, allowing customers to choose which ones are best for their needs.

Costs and Fees

Calculating the total loan cost is a good way of seeing whether a loan is a good option or not. Factors that play a role in the total cost of the loan include the interest rate, term, and various fees. Many personal loan providers charge an origination fee of up to 10{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} of the total loan amount, and many others charge additional fees for missing a payment or having insufficient funds in your savings or checking account. These hefty fees may outweigh the benefits of having a relatively low APR.

Interest Rates

A debt consolidation loan will only help you save money if the annual percentage rate (APR) is lower than that of your current debts. If you have excellent credit, chances are you’ll get a competitive APR that is much better than your credit card’s interest rate. However, if you have poor credit, you may end up paying 30{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} APR, which is significantly higher than credit card interest rates.

Funding Speed

Lenders can take several days to deposit your loan proceeds into your bank account. If you need the money urgently, it may be better to go with a provider that pays out quickly, but funding speed shouldn’t be a dealbreaker for most debt consolidation loans.

Eligibility Requirements

Lenders look at your credit history and income profile to determine whether you can reliably pay off your debt consolidation loan. Some sites explicitly state their eligibility requirements, while others give rough estimates.

Some platforms cater to applicants with low credit scores, but these personal loans may have prohibitively high interest rates. An alternative would be to find a lender offering secured personal loans that can lower your loan’s APR.

How To Qualify for a Personal Loan for Debt Consolidation

Qualifying for a debt consolidation loan can be challenging, especially if you’re facing one of the many roadblocks, such as a lack of credit history, a low FICO score, or large outstanding amounts of unsecured debt. The good news is that it’s possible to address these issues and qualify for a personal loan that fits your needs.

Build Your Credit Score

Building a good credit history takes time and effort, but the results are worth it. Not only will a good credit score make obtaining a debt consolidation loan easier, but it will also ensure you get a better APR, reducing the total amount you’ll need to pay back.

Add a Co-signer if Possible

Co-signers are people who agree to assume your debt if you can’t pay. Typically, many personal loans don’t allow co-signers, but it’s worth shopping around to find those that do. Once you find the right lender, make sure you can pay your loan; otherwise, you put your co-signer in a very tough situation.

Compare Rates and Terms From Multiple Lenders

A good way to find the best personal loans is to compare multiple lenders. Sites such as Credible can do this for you, saving you the time of filling out multiple forms and applying for dozens of loans. Remember that APR isn’t the only indicator of a good loan; also, look at lenders that don’t charge an origination fee, which often takes a good part of your loan amount.

Alternatives to Loans for Debt Consolidation

Using loan consolidation companies tend to be a good method for paying off multiple debts at a time, but they’re not the only option available. Some other options are better suited to individuals with certain incomes or FICO scores, while other strategies can help those struggling with unsecured debt they cannot handle alone.

Balance Transfer Credit Cards

Balance transfer credit cards often have an interest-free period, allowing you to transfer your existing credit card debt and pay it off without incurring any additional interest. However, you do need a very high FICO score—typically 690 or higher—and you should have the funds to pay off the credit card balance transfer within this introductory period.

Debt Settlement Companies

Debt relief services are companies that reach out to your creditors on your behalf in an attempt to lower your debt amount in exchange for settling the debt faster.

While using these services is easier than searching for debt consolidation loans, many of these companies charge steep fees for their work and may not always be successful in their efforts.

Credit Counseling

Several nonprofit organizations, such as credit unions, offer credit counseling, which combines planning and debt consolidation to create a manageable repayment strategy. In many cases, these organizations get favorable terms and interest rates, making them a better option than securing a consolidation loan yourself.

Home Equity Loans

A home equity loan is a secured loan that lets you use your home’s equity—the difference between its value and what you owe on the mortgage—as collateral. Since secured loans usually have better rates and terms than unsecured loans, a home equity loan may be a smart debt consolidation strategy.

Frequently Asked Questions About Debt Consolidation

Will debt loans hurt my credit score?

A debt consolidation loan can improve or harm your FICO score, depending on several circumstances.

Any hard credit check, such as that done by a lender when issuing a personal loan, negatively affects your credit score for around six months.

However, when you consolidate debt—especially credit card debt—you lower your credit card utilization. A low utilization means that you have access to credit that you aren’t using, which is an appealing sign to lenders that you’re not in financial trouble.

A debt consolidation loan that makes your monthly repayment more manageable can also indirectly improve your FICO score. Late or missed payments can harm your score, so meeting your obligations via lower monthly payments shows that you’re reliable, raising your FICO score.

What are the drawbacks of a consolidation loan?

As with any personal loan or line of credit, you may run the risk of getting into more debt, either by racking up new debt or having a higher APR than your original debts.

Can you get a credit card consolidation loan with bad credit?

Some lenders offer personal loans for debt specifically targeted at applicants with bad credit. Some of these platforms look at alternative factors, such as your employment history, education, and location, while others mitigate the risk of a poor credit record by charging an extremely high APR. Many lenders will also increase their origination fee if you have bad credit, leading to an even higher total loan cost.

We recommend shopping around for the best debt consolidation loans that offer reasonable rates while meeting your target loan amount.

Is debt consolidation a good idea?

Consolidation loans are a good idea for certain people under certain circumstances. Individuals with poor credit may find it difficult to find loans that consolidate debt at a lower interest rate than their original APR, meaning that they may end up paying more per month to pay off the same debt.

Taking out a loan requires a thorough look at your situation. In some cases, working with credit unions or taking out home equity loans may be a better option, while others may benefit from credit counseling services that outline a specific debt recovery plan.

How long does it take to get approved for a consolidation loan?

Most lenders will inform you about your preapproval status within seconds of submitting your application. This approval is conditional on a subsequent hard credit check but is a good way to see how much you’ll pay for the origination fee and your expected rate.

If you decide to go forward with the loan, you can expect to wait between two and seven days for approval. Online services tend to be faster, and you can often expect to find the funds in your account within 48 hours of approval.

However, each lender is different, and times may vary.

What are the interest rates for personal loans?

Interest rates depend largely on your FICO score and income. Lenders alleviate risk by charging higher interest rates, so that even if you default on the loan, you’ve paid much more than someone with a lower rate. Similarly, lenders issue low APRs to applicants with good credit histories and scores as they expect them to be reliable customers.

Generally, debt consolidation loan rates range between 4.99{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9} and 35.99{d0229a57248bc83f80dcf53d285ae037b39e8d57980e4e23347103bb2289e3f9}. While the highest rate is still lower than payday loans, it’s much higher than credit card rates.

Final Thoughts on Debt Consolidation Loans

Finding the best debt consolidation loans requires intensive research into rates, fees, and the trustworthiness of loan companies. While many banks offer personal loans, online providers have joined the fray, making the situation more complicated than ever.

Our careful evaluation of the most popular debt consolidation loan providers should be a great place to start your search for the ideal loan that meets your needs. Take the time required to choose one that works for you.

Summary of the Top Recommended Debt Consolidation Loan Companies

  • SoFi: Best for good to excellent credit
  • Upgrade: Best debt consolidation for fair credit
  • Credible: Best for comparing rates with multiple lenders
  • Upstart: Best for no minimum credit score
  • LightStream: Best for large debt consolidation loans up to $100k
  • OneMain Financial: Best debt consolidation loans for bad credit
  • Best Egg: Best for secured loans

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