Best Debt Consolidation Loans of January 2024
- Upgrade – Best for Bad Credit
- Universal Credit – Best for Comparing Multiple Offers
- Happy Money – Best for Flexible Repayment Terms
- Achieve – Best for Paying off Credit Card Debt
- Discover – Best for No Interest If Repaid Withing 30 Days
- Best Egg – Best for Debt Consolidation Perks
- LendingClub – Best for Peer-To-Peer Lending
- LightStream – Best for Low Interest Rates
- SoFi – Best for Large Loan Amounts
Why We Picked It
Upgrade stands out for offering loans to borrowers with poor credit history. The minimum credit requirement of 580 is much lower than other lenders, and Upgrade also doesn’t have a minimum income requirement. Loan amounts range from $1,000 to $50,000 with two- to seven-year terms.
Pros & Cons
- Low minimum credit score requirement
- Borrowers can use loans to cover business expenses
- Offers direct lender payoff for debt consolidation loans
- High APR range
- Charges fees for origination, late payment and insufficient funds
Details
Overview: Upgrade was launched in 2017 and provides accessible online and mobile credit and banking services. Since that time, the platform has made more than $3 billion in credit available to over 10 million applicants and continues to expand its online and mobile services.
Upgrade charges an origination fee between 1.85% and 9.99% of the loan, and borrowers will encounter a $10 fee if their payment is more than 15 days late or if the payment does not go through; there are no discounts for autopay. That said, Upgrade borrowers are not subject to a prepayment penalty, so you can reduce the overall cost of the loan if you’re able to pay it off early.
Beyond offering accessible personal loans, Upgrade streamlines the lending process with a mobile app that lets borrowers view their balance, make payments and update personal information. Upgrade’s Credit Heath tool also makes it easy to track your credit score over the life of your loan.
Eligibility:
- Minimum credit score: 580
- No minimum income requirement
- Allows co-applicants
Loan uses:
- Debt consolidation
- Home projects
- Large expenses
- Business expenses
Why We Picked It
Universal Credit is an online lending platform that offers personal loans between $1,000 to $50,000 through its partners, allowing borrowers to compare multiple offers at once. While Universal Credit makes finding a personal loan accessible even to those with damaged credit, it charges high APRs and charges a 5.25% to 9.99% origination fee on all personal loans.
Pros & Cons
- Flexible qualification requirements
- Next-day funding
- No prepayment penalty
- High APRs
- All personal loans charge a 5.25% to 9.99% origination fee
Details
Overview: Universal Credit is an online lender powered by Upgrade with loans originated by partners Cross River Bank and Blue Ridge Bank. The lender offers its loans in every state except Iowa, West Virginia and Washington, D.C.
Eligibility:
- Minimum credit score: 580
- Minimum income requirement: Does not disclose
- Doesn’t allow co-signers or co-borrowers
Loan uses:
- Debt consolidation
- Large expense
- Home project
Why We Picked It
Happy Money offers lending terms from two to five years along with loan amounts of $5,000 to $40,000, making the lender stand out for having flexible repayment options for those who need to consolidate their debt. And, while Happy Money charges a 0% to 5% origination fee, there are no late fees, annual fees or prepayment penalties.
Pros & Cons
- Directly pays third-party creditors
- Competitive APRs
- Assists borrowers with financial wellness through its Peace program
- May charge an origination fee
- Limited repayment terms
- Requires a minimum credit history of three years
Details
Eligibility: To qualify for a Happy Money debt consolidation loan, applicants must have a minimum credit score of 640, though approved applicants have an average score of 705. To be eligible, applicants also must have a minimum credit history of three years, no current delinquencies and a debt-to-income ratio under 50%. There is no minimum income requirement, but Happy Money does not offer borrowers a co-signer or co-applicant option, so applicants must qualify based on their individual financial circumstances.
Loan uses: Happy Money specializes in credit card debt consolidation, making it an excellent option for readers who want to take control of their finances and streamline their debt repayment.
Turnaround time: After submitting an application and all the necessary documents, underwriting may take three to seven business days. After getting approved and signing the paperwork, you will receive the funds within three to six business days, according to a representative.
Why We Picked It
Achieve is one of our top picks for debt consolidation loans because of the flexible loan terms (two to five years) and loan amounts ($7,500 to $40,000). These characteristics make it easier to consolidate a large amount of debt while spreading payments out over a lengthy period of time and reducing monthly payments.
Pros & Cons
- Funds available within 48 hours
- Flexible repayment terms
- Allows co-borrowers
- Application is not entirely online
- Imposes a minimum income requirement
- High minimum loan amount
Details
Overview: Achieve is an indirect lending platform that offers personal loans underwritten by Cross River Bank or MetaBank. Like some of our other top picks, Achieve also offers direct payment to creditors. In fact, borrowers who put 85% of the total loan amount toward debt consolidation via direct payment are more likely to qualify for a loan.
That said, depending on the interest rates on your current debts, the potentially high APR Achieve charges may make it more difficult to save money by consolidating. Likewise, the origination fee from 1.99% to 6.99% of the loan amount can make the loan more expensive. If you’re considering Achieve for debt consolidation, it’s important to do the math before you sign on the dotted line.
Eligibility:
- Minimum credit score: 620
- Minimum annual income: $21,500
- Allows co-signers and co-applicants
Loan uses:
- Debt consolidation
- Home projects
- Medical expenses
- Travel costs
Why We Picked It
Discover stands out because of its online application and mobile banking tools, well-reviewed customer support team and quick funding. In general, loans are available from $2,500 to $40,000 and may be issued for between three and seven years.
Pros & Cons
- Option to pay off creditors directly
- No origination fees or prepayment penalties
- Directly pays creditors
- Charges late fees
- Low maximum loan amount
Details
Overview: Discover is an online bank that also offers customers credit cards, retirement solutions and personal loans in all 50 states. Discover charges a late payment fee and does not offer an autopay discount; however, it does not charge any origination fees or prepayment penalties, making it competitive with other top personal loan providers.
Eligibility:
- Minimum credit score: 660
- Minimum household income: $25,000
- Doesn’t allow co-signers or co-borrowers
Loan uses:
- Medical bills
- Business expenses
- Home renovation
Why We Picked It
Best Egg is a lending platform that’s best for borrowers who want to consolidate credit card debt. With Best Egg’s Direct Pay feature, once you accept a debt consolidation loan, the lender will directly pay off your credit card accounts. Payment terms are available from three to five years, so Best Egg can be a great way to consolidate your other debts and spread the payments out over time.
Pros & Cons
- Loan terms available up to five years
- Low minimum APR
- No prepayment penalty
- Does not offer direct payment to third-party creditors
- Charges an origination fee
- Maximum repayment term of five years
Details
Overview: Best Egg is a lending platform available to borrowers in every state except Iowa, Vermont, West Virginia and Washington, D.C. Personal loans are issued by Cross River Bank and range from $2,000 to $50,000.
With Best Egg, borrowers have to pay an origination fee from 0.99% to 5.99% of the loan amount. This fee is an important consideration when calculating how much you can save by consolidating your debts with a Best Egg personal loan. Borrowers can, however, pay off their loan early without incurring a prepayment penalty.
Eligibility:
- Minimum credit score: Does not disclose
- Minimum annual income: Does not disclose
- Does not allow co-signer
Loan uses:
- Debt consolidation
Why We Picked It
LendingClub stands out for being a peer-to-peer lender. While LendingClub imposes high APRs and no autopay discount, applicants can choose to borrow between $1,000 to $40,000. This is a higher maximum loan cap than some other lenders. That said, LendingClub’s loan terms are limited to two to five years, which is less flexible than other lenders on our list.
Pros & Cons
- Will directly pay off third-party creditors as part of balance transfer loan
- Co-applicants permitted
- Available to borrowers with fair to excellent credit
- Origination and late fees
- Limited loan term availability
- High APR range
Details
Overview: LendingClub is a peer-to-peer—or marketplace—lender founded in 2007. As the largest online lending platform for personal loans, LendingClub has worked with over 3 million customers and funded more than $55 billion in loans. It’s also one of the most geographically widespread options, with lending capabilities in every state except Iowa and the U.S. territories.
LendingClub also makes debt consolidation easier by offering a balance transfer loan. With this type of loan, LendingClub offers direct payment to third-party lenders, including over 1,700 creditors. Not only does the platform take care of payments for you, you can choose exactly how much of your new loan amount you want LendingClub to pay toward each creditor.
Eligibility:
- Minimum credit score: 600
- Minimum credit history: Three years
- Allows co-applicants
Loan uses:
- Debt consolidation
- Home projects
- Medical expenses
7.49% to 25.49%
with autopay
Why We Picked It
LightStream offers borrowers competitive interest rates along with a high maximum loan amount. Repayment terms are available from two to seven years, making it an excellent option for those who want to spread out the payment of large expenses over time. Loans from LightStream also have no origination, late payment or prepayment fees.
Pros & Cons
- No origination, prepayment or late fees
- Low, competitive rates
- Fast approval and funding
- No prequalification process
- No due date flexibility
- Limitations on use of loan proceeds
Details
Overview: LightStream is a consumer lending division of Truist—which formed following the merger of SunTrust Bank and BB&T. The platform offers unsecured personal loans from $5,000 to $100,000. Loan amounts vary based on the loan purpose. Although a number of lenders offer smaller loans than the LightStream minimum, few lenders offer a higher maximum loan. Repayment terms are available from two to seven years.
LightStream offers loans in all 50 states plus Washington, D.C., and applicants can contact the lender’s customer support team seven days a week; current borrowers have access to customer support from Monday through Saturday. While LightStream doesn’t offer a mobile app for loan management, customers can access their account through LightStream.com.
Eligibility:
- Applicants should have several years of credit history
- Minimum credit score: 660
- Can’t prequalify
Loan uses:
- Large expenses
- Finance land, timeshares and tiny homes
- Home project
8.99% to 25.81%
with autopay
Why We Picked It
With SoFi, loans are available from $5,000 to $100,000, making SoFi a great option for those with excellent credit who need to borrow a large amount of money. Repayment terms range from two to seven years, making SoFi an incredibly flexible option for those with sufficient credit (minimum 650) and annual income (at least $45,000).
Pros & Cons
- Prequalification with soft credit check
- Funding in as little as one to two days
- High loan amounts and lengthy terms
- Does not offer direct payment to third-party creditors for debt consolidation
- Some applicants report difficult qualification standards
- Co-signers are not permitted
Details
Overview: Founded in 2011, SoFi is an online lending platform that offers unsecured fixed-rate personal loans in every state, extending over $50 billion in loans. SoFi offers comparatively low APRs and doesn’t charge origination fees, late fees or prepayment penalties—a stand-out feature because personal loan lenders often charge origination or late payment fees at a minimum.
However, if you’re considering a debt consolidating loan from SoFi, keep in mind that the lender does not offer direct payment to a borrower’s other creditors. This means the loan proceeds will be deposited to your bank account and you’ll have to pay off your other lenders individually.
Eligibility:
- Minimum credit score required: 650
- Minimum annual income: $45,000
- Co-signers not permitted
Loan uses:
- Medical expenses
- Credit card consolidation
- Home projects
- Moving costs
Personal loan interest rates depend on several factors, including the borrower’s creditworthiness, lender, loan amount and repayment term. Typically, however, personal loan interest rates range from around 5.99% to 36%, with the lowest rates reserved for borrowers with excellent credit.
Compare the Best Debt Consolidation Loans of January 2024
Which Debt Consolidation Loan Is Best for You
Best for Bad Credit: Upgrade
With a low minimum credit score of 580, Upgrade is a much more accessible option for borrowers who have a poor credit history.
Best for Comparing Multiple Offers: Universal Credit
As a lending platform that offers personal loans through its partners, Universal Credit is a good option for borrowers looking to compare offers from multiple lenders.
Best for Flexible Repayment Terms: Happy Money
With loans ranging from $5,000 to $40,000 and terms of two to five years, Happy Money gives borrowers a flexible option for consolidating debt.
Best for Paying Off Credit Card Debt: Achieve
Achieve offers borrowers rate discounts and the option to directly pay off creditors, making it a good option for borrowers looking to consolidate their credit card debt.
Best for No Interest If Repaid Within 30 Days: Discover
Discover is a great option for borrowers who can repay their loan within the first month, as this makes the loan interest-free.
Best for Debt Consolidation Perks: Best Egg
With Best Egg’s Direct Pay feature and no prepayment penalty, Best Egg stands out for the features it offers borrowers.
Best for Peer-To-Peer Lending: LendingClub
For borrowers looking for a peer-to-peer loan, LendingClub offers debt consolidation loans with high maximum loan limits and flexible qualification requirements.
Best for Low Interest Rates: LightStream
With competitive interest rates, LightSteam is a low-cost option for borrowers who can qualify for the lowest rates.
Best for Large Loan Amounts: SoFi
SoFi’s loan amounts range from $5,000 to $100,000, making SoFi a good option for borrowers who need to consolidate a large amount of debt.
Tips for Comparing Personal Loans for Debt Consolidation
Personal loans often are available online through traditional banks, credit unions and alternative lending platforms so you can apply quickly and conveniently, without having to visit a bank branch. Many of these lenders also offer competitive interest rates and flexible repayment terms, meaning you may be able to save money by consolidating your other debts.
Consider these tips when comparing personal loans:
- Where possible, prequalify. Many personal loan providers offer prospective borrowers the ability to prequalify for a loan. This means the applicant can submit details about their financing needs, income, housing situation and other relevant information to find out what kind of loan amounts, rates and repayment terms they are likely to qualify for. Even better, this process typically only requires a soft credit inquiry so you can shop around without hurting your credit score. If you think you may benefit from consolidating your debt—but aren’t sure what rates you’ll qualify for—the prequalification process can streamline your search by ruling out lenders with higher rates.
- Consider the purpose of your loan. While personal loans can be used for a broad range of purposes, they are limited to things like consumer debt consolidation, home improvements, vacations, weddings, funerals, large purchases and other personal expenses. For that reason, lenders often forbid you from using personal loans for postsecondary education expenses, business purposes and illegal activities, at a minimum. When considering a lender, always confirm that debt consolidation is an acceptable use of the loan funds. Even better—determine whether the lender will pay your other creditors directly.
- Keep an eye out for additional fees. Some lenders offer fee-free personal loans that don’t require borrowers to pay origination fees, late payment fees, prepayment penalties or other common loan costs. However, this is more the exception than the rule, so it’s important to ask about fees when shopping for the best loan terms. This is especially important if you’re trying to save money by consolidating debt because fees can cut into your savings over the life of the loan. Likewise, if a lender charges an origination fee, find out whether it’s built into the APR or taken out of the loan amount prior to funding, as this may impact the loan amount you need to request.
- Evaluate the lender’s customer support options. If you’ve found a lender that’s prepared to offer the money you need at acceptable terms, there’s one more thing to consider before signing the loan agreement. While customer support may not seem like a big deal in the honeymoon phase of your loan, it can make a huge difference if you encounter issues with payments or face a financial hardship during your repayment period. Review the lender’s customer service resources and read reviews from past and current borrowers to make sure it’s a good fit.
The Complete Guide to Debt Consolidation Loans
- What Is a Debt Consolidation Loan?
- How Does a Debt Consolidation Loan Work?
- Does Debt Consolidation Hurt Your Credit?
- Pros and Cons of Debt Consolidation Loans
- How To Qualify for a Debt Consolidation Loan
- How To Get a Debt Consolidation Loan
- Alternatives to Debt Consolidation Loans
- Is Debt Consolidation a Good Idea?
- Methodology
- FAQs
What Is a Debt Consolidation Loan?
Debt consolidation is when a borrower takes out a new loan, usually with more favorable terms (a lower interest rate, lower monthly payment or both) and then uses the loan proceeds to pay off their other individual debts. Debt consolidation loans are commonly used to help pay off credit card balances, auto loans and other personal loans.
How Does a Debt Consolidation Loan Work?
To start consolidating debt, apply for a personal loan through your bank or another lender. Once your lender approves you for a debt consolidation loan, it may offer to pay off your other debts automatically—or you will take the cash and pay them off yourself.
After your pre-existing debts are repaid with your new debt consolidation loan funds, you’ll make a single payment on your new loan every month. While debt consolidation often reduces your monthly payment, it accomplishes this by extending the loan period of the consolidated loans. Debt consolidation also streamlines payments and makes it easier to manage finances, like having a single monthly payment due date.
Pro Tip
Using personal loans can be a convenient way to consolidate and pay off high-interest credit card debt. Interest rates on personal loans are usually fixed, which means the interest rate and payment stay the same for the entire loan term. You can also take comfort in knowing your debt will be paid off by a predetermined date as long as you make each payment as scheduled.
Does Debt Consolidation Hurt Your Credit?
Debt consolidation loans can hurt your credit, but the impacts can be temporary. Applying for a loan requires a hard credit check, which can result in a small dip in your credit score. However, the impact of the inquiry on your score will decrease over time and disappear typically after two years. Your credit score may also decrease if you take out a debt consolidation loan, pay off your credit cards and then rack up more debt on those cards.
That said, consolidating loans can be a great way to streamline your payments, reduce your monthly debt service and build healthy financial habits through regular, on-time payments. For that reason, consolidation loans can actually help you improve your credit score over time. What’s more, some lenders even offer credit tools beyond regular lending services to help you manage your credit profile.
Pros and Cons of Debt Consolidation Loans
Debt consolidation loans are a finance tool. Like any tool, it can either help or hurt you, depending on how you use it. Before you submit an application to borrow money, make sure you’ve fully considered the pros and cons of debt consolidation loans.
Pros of Debt Consolidation
- Simplifies your debt repayment
- Rates may be lower than the rates on credit card debt
- Helps you pay down debt faster if you opt for shorter-term loans
- Can improve your credit score, especially if you’re consolidating credit card debt
- Lowers your payment if you opt for long-term and/or lower-rate loans
Cons of Debt Consolidation
- Can damage your credit if you miss any loan payments
- Your options may be more limited if you have bad credit
- Can be somewhat confusing, especially as your old debts are being paid off
- Can tempt some people to run up their credit cards again once they’re paid off
How To Qualify for a Debt Consolidation Loan
Qualifying for a debt consolidation loan is similar to any other personal loan.
Shop around for lenders where you meet the minimum qualifications. If you don’t meet the credit score requirements, take steps to improve your credit score. This can include correcting mistakes on your credit report, paying credit card debt or paying down any past-due accounts.
Getting preapproval for a debt consolidation loan can verify that you’ll qualify for the loan when you submit an official loan application.
How To Get a Debt Consolidation Loan
While the process varies by lender, follow these general steps to get a debt consolidation loan:
- Check your credit score. Check your credit score for free through your credit card issuer or another website that offers free scores. This will help you understand your creditworthiness and qualification chances. Aim for a score of at least 610; however, a score of at least 720 will yield the most favorable terms.
- If necessary, take steps to improve your credit score. If your score falls below 610 or you want to boost your score to receive the best terms possible, take time to improve your score before applying, such as lowering your credit usage or paying off unpaid debts.
- Determine how much debt you need to consolidate. Once you check your credit score, calculate how much money you need to borrow to consolidate all of your debts. Remember, though, you’ll receive your money as a lump sum, and you’ll have to pay interest on the entire amount—so only borrow what you need.
- Shop around for the best terms and interest rates. Many lenders will let you prequalify prior to submitting your application, which lets you see the terms you would receive with just a soft credit inquiry and without hurting your credit score.
- Submit a formal application and await a lending decision. After you find a lender that offers you the best terms for your situation, submit your application online or in person. Depending on the lender, this process can take a few hours to a few days.
How To Get a Debt Consolidation Loan With Bad Credit
If you have bad credit, you can strengthen your application by improving your debt-to-income (DTI) ratio. You can do this by increasing your income—with a side hustle or otherwise—or by paying off some of your smaller, more manageable debts. If you choose to pay down some of your debts, this could also help improve your credit score, accomplishing two things at once.
There are debt consolidation loans for bad credit if you can’t improve your credit score enough to qualify for other loans. You may also have better luck applying for secured loans, which are more accessible to applicants with bad credit because they reduce the lender’s risk and often come with lower interest rates.
Alternatives to Debt Consolidation Loans
If you don’t qualify for a traditional debt consolidation loan or want to compare other available options, consider alternatives, including:
1. Balance transfer credit cards. Some credit card providers offer cards that let you move—or transfer—existing credit card debt to a new card with a 0% introductory APR, often for a small fee. As long as you repay your debt within the introductory period, typically up to 21 months, you can avoid paying interest. Any unpaid balances after the introductory period ends will begin to accrue interest.
2. Home equity loan. If you have sufficient equity in your home, typically at least 15% to 20%, you may be eligible to borrow up to 85% of your equity. Funds are disbursed as a lump-sum payment, which you can use to repay high-interest debts, and interest is owed on the full loan amount. Home equity loans are secured by your home, which means the lender can repossess the property if you default on the debt.
3. Home equity line of credit (HELOC). Similar to a home equity loan, a HELOC also gives you access to funds through your home equity. However, instead of receiving funds as a lump-sum payment, you’ll have access to a credit line you can use as needed, and reuse as you repay your balance during the draw period. You’ll also only pay interest on the amount you borrow, not the entire approved amount.
Is Debt Consolidation a Good Idea?
Determining whether debt consolidation is a good idea for you depends on your credit score and whether you’re taking other steps to improve your financial habits. Debt consolidation may benefit you if:
- You’re committed to paying off the full amount of your debt consolidation loan
- You have enough cash flow to cover all of your debt payments
- You’re okay with repaying your loans over a longer period of time
- You’ve improved your credit score since you took out your original loans
- You have a financial plan to avoid running up your debts again
Find the Best Balance Transfer Credit Cards Of 2024
Methodology
We reviewed 15 popular lenders based on 11 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:
- Loan cost. 35%
- Loan details. 20%
- Eligibility and accessibility. 20%
- Direct payment to creditors. 15%
- Customer experience. 10%
Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated the availability of each provider’s customer support team.
Where appropriate, we awarded partial points depending on how well a lender met each criterion.
To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.
Should I get a personal loan to pay off debt?
Falling behind on debt payments can have a damaging effect on your credit score and may ultimately result in repossession of collateral or accounts being sent to collections. If you’re struggling to make payments on all of your individual debts, consider taking out a personal loan to streamline your payments and increase the repayment term—thereby reducing your monthly payment.
A debt consolidation loan also may be a good option if your credit score has improved since you applied for your loans. By qualifying for a lower interest rate on a debt consolidation loan, you’ll be able to reduce how much you pay over the life of your loans.
How long are the terms of a debt consolidation loan?
The most common term for debt consolidation loans are three to five years. You may be able to find lenders offering different term lengths ranging from one year to 10 years, however.
How much can I save with debt consolidation?
How much you can save depends on the amount you’re paying off, your interest rates and your term length. A debt consolidation loan can have lower interest rates than your current debt, and in some cases, shortening your loan term can also save you money on interest.
A debt consolidation calculator can help you understand how much you’ll save with a debt consolidation loan.
Is there debt consolidation for veterans?
Veterans who have Veterans Affairs (VA) loans may qualify for a Military Debt Consolidation Loan (MDCL), also known as a VA Consolidation Loan. This acts as a cash-out refinance. Veterans who don’t have VA loans can rely on traditional personal loans to consolidate their debts.
How long does it take to get approved for a consolidation loan?
Approval turnaround times typically vary per institution. For example, some online lenders may approve your loan within a matter of minutes, while banks may take a few days or up to a week to process. Once your loan is approved, funding can arrive within 24 to 48 hours or up to one week, depending on your lender.
Also, keep in mind that once you are approved for a debt consolidation loan, it might take several weeks to pay off your existing debts, depending on the lender. They will likely still hold you responsible for any payment due dates within that waiting period.
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