A debt consolidation loan can be the difference between a good credit score and bankruptcy. It can be the difference between many thousands of dollars flushed down the drain and a healthy bank account balance. It can be the difference between sleepless nights and stress-free REM cycles.
Living with debt is hard. And if you are at the point where every spare penny is needed to meet monthly minimum payments on multiple high-interest loans—namely, credit cards—then it may be time to explore a debt consolidation loan.
Here are our top debt consolidation loan offers for every situation.
Debt consolidation loan rates compared
| Title | Best for | APR | Loan amount | Term | Min. credit score |
|---|---|---|---|---|---|
Upgrade | Best overall | 8.49% to 35.99% | $1,000 to $50,000 | 24 to 84 months | 580 |
Best Egg | A secured loan | 8.99% to 35.99% | $2,000 to $50,000 | 36 to 60 months | 640 |
LightStream | Low fees | 7.49% to 25.49% | $5,000 to $100,000 | 24 to 144 months | 660 |
Avant | Bad credit | 9.95% to 35.99% | $2,000 to $35,000 | 12 to 60 months | 580 |
PenFed | Low APR | 7.99% to 17.99% | Up to $50,000 | Up to 60 months | 580 |
Discover | Widely available low APR | 7.99% to 24.99% | $2,500 to $40,000 | 36 to 84 months | 660 |
Happy Money | Customer-friendly terms | 11.72% to 24.67% | $5,000 to $40,000 | 24 to 60 months | 640 |
LendingClub | Using a co-signer | 9.57% to 35.99% | $1,000 to $40,000 | 24 to 60 months | 600 |
Upstart | Thin credit history | 6.40% to 35.99% | $1,000 to $50,000 | 36 or 60 months | 300 |
National Debt Relief | Free consultation with a debt specialist | 5.99% to 35.99% | $35,00 to $40,000 | 24 to 60 months | N/A |
Our recommendations for the best debt consolidation lender
Best overall: Upgrade
Upgrade
Upgrade
APR
8.49% to 35.99%
Loan amount
$1,000 to $50,000
Term
24 to 84 months
Min. credit score
580
For most situations, Upgrade offers very appealing debt consolidation terms. You can receive a lump sum in any bank account you choose—or, you can provide Upgrade the account numbers of the debts you’d like to pay off, and it’ll send the money directly to those lenders. Even better, transferring at least 50% of your loan directly to lenders can result in a rate discount of up to 3 percentage points.
Upgrade doesn’t disclose the credit score required to be approved, but data points suggest that those in the high 500s are eligible. This is more generous than many of its competitors, making it a good option for people with fair credit.
You won’t be charged prepayment fees if you pay off your loan before your loan term ends. However, you’ll pay between 1.85% and 9.99% in origination fees—a significant amount for those with crushing debt, but still a likely savings over the interest you’d accrue from putting a balance on a high-APR credit card.
Pros:
- Discounts when you elect to have Upgrade pay your debts directly
- Money received the same day
- Those with fair credit can qualify
Cons:
- You’ll pay an origination fee
- Maximum loan amount is smaller than other lenders
- Interest rates up to 35.99%
Best for a secured loan: Best Egg
Best Egg
Best Egg
APR
8.99% to 35.99%
Loan amount
$2,000 to $50,000
Term
36 to 60 months
Min. credit score
640
Best Egg has some of the most stringent application requirements you’ll find among debt consolidation lenders. You need a credit score of at least 700 and a six-figure individual income to qualify.
However, the company allows you to obtain a personal loan by offering collateral in the form of “fixtures” attached to your home. If you’re having trouble being approved for a suitable debt consolidation loan, this could be an option for you.
According to Best Egg, qualifying collateral can be assets like cabinets, shelving, bathroom vanities and light fixtures. Just note that a secured loan is higher-stakes than an unsecured loan in that the bank can claim your belongings if you default—and try to sell them to reduce their losses. It can also be difficult to sell your home before you’ve repaid your loan to Best Egg when using home fixtures as collateral.
Pros:
- Use home fixtures as collateral
- Have Best Egg pay your debts directly
- Receive funding in as little as 24 hours
Cons:
- You’ll pay an origination fee
- Minimum $100,000 individual income to qualify
- Fewer term length options
Best for low fees: LightStream
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
LightStream does an excellent job in cutting down fees for using its service. Its maximum APR is just 25.99%—a solid 10% lower than many competitors. It even offers a 0.5% point discount for enrolling in autopay. You also won’t be charged an origination fee for opening an account.
LightStream also shines when it comes to the size and length of a loan. It’s possible to borrow up to $100,000 and carry a term up to 144 months. Both these details are double the amount offered by many other lenders.
While LightStream doesn’t print the minimum credit score to qualify for a loan, it states that you’re a candidate if you’ve got a “good” credit score. This suggests that you may need a score of at least 670 to be approved.
Pros:
- Relatively low maximum APR
- No origination fees
- Above-average maximum borrowing amount
Cons:
- Above-average minimum borrowing amount
- You cannot prequalify
Best for bad credit: Avant
Avant Credit Card
Avant Credit Card
APR
Loan amount
Term
Min. credit score
Poor credit is defined by FICO as anything below 579. Avant is willing to deal with customers who have a 550 credit score or higher—which is rare. By default, this company is one of the best debt consolidation options for those with bad credit because it’s one of the only options.
You can select a term up to 60 months to pay off your loan, which should significantly lower your minimum payment each month. Once you use this loan to pay off your credit card debt, you’ll likely see a rapid improvement to your credit score. That’s because you’ve dramatically improved your credit utilization, the ratio of credit you’re using compared to your total available credit. In other words, you may enter the loan agreement with a poor credit score but find yourself with a respectable score mere months later.
Just note that you’ll pay an administrative fee of up to 4.75%, which must be paid upfront. That is, it’ll be deducted from the amount that deposits into your bank account—and you’ll still make payments on the full loan amount.
Pros:
- Those with poor credit may qualify
- Be approved according to household income, instead of individual
- No penalty for paying your loan early
Cons:
- Relatively low maximum loan amount
- Interest rates up to 35.99%
- Upfront administrative fee
Best for low APR: PenFed
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
PenFed presents almost shockingly low interest rates for a debt consolidation loan. You’ll pay between 7.99% and 17.99%, depending on your creditworthiness. That’s literally half the maximum APR offered by many competitors. Plus, you won’t pay origination fees.
There is a catch, albeit a small one: You’ll need a previous relationship with PenFed to qualify for a loan. Those who aren’t a member of the credit union are out of luck. However, anyone can easily become a member by opening and depositing at least $5 into a PenFed account.
Pros:
- Extremely low maximum APR
- Discounted rate when enrolling in autopay
- No origination fees
Cons:
- Only PenFed members qualify
- PenFed will not pay your lenders directly
Best for widely available low APR: Discover
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
Discover’s maximum APR isn’t nearly as low as PenFed’s—but it’s still much lower than most other lenders. You’ll be charged between 7.99% and 24.99%. And unlike PenFed, you don’t need an existing relationship with Discover to qualify.
You won’t have to worry about an origination fee with Discover, and you’ll get your funds in just a day or two after approval. Just note that you can only borrow up to $40,000—perfectly reasonable for most, but if you’re trying to consolidate more debt than that, you’ll want to look at an option like LightStream.
Pros:
- No origination fee
- Low maximum APR
- Receive funds the next business day
Cons:
- You cannot use a co-signer
- No autopay discount
- Relatively low maximum borrowing amount
Best for customer-friendly terms: Happy Money
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
Happy Money is the go-to option to protect yourself from unforeseen circ*mstances. For absolutely free, you’ll receive TruStage Payment Guard Insurance, which effectively spots you money in the event of a job loss or disability. You’ll get up to three months of your monthly loan payments covered—meaning that the inability to make a payment for a few months is not an issue when you sustain a covered reason.
Happy Money works with lots of different lenders, some of which charge an origination fee of up to 5% of your loan. The lowest possible loan APR is also well above competitors.
Pros:
- Automatic insurance to cover a portion of your loan for covered reasons
- Low maximum APR
- No minimum income requirement
Cons:
- Possible origination fee
- You cannot use a co-signer
- High minimum APR
Best for using a co-signer: LendingClub
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
LendingClub is remarkably friendly when it comes to adding a co-signer. This is a feature that many other lenders don’t permit—but when you can add a co-signer, you benefit from their robust credit profile to boost your favorability when it comes to interest rates and loan amount. Just note that the co-signer is ultimately responsible for the bill, and any unhealthy behavior will reflect on their credit report.
LendingClub has a few annoying quirks. For example, you’ve only got two options when it comes to your term length: 36 months or 60 months. Also, after you’re approved, you’ll have to pay an origination fee totaling 2% to 8% of the loan amount.
Pros:
- Co-signers welcome
- LendingClub will pay your debts directly
- Ability to change your payment date
Cons:
- Origination fees
- High maximum interest rate
- Limited term lengths
Best for a thin credit history: Upstart
LightStream
LightStream
APR
7.49% to 25.49%
Loan amount
$5,000 to $100,000
Term
24 to 144 months
Min. credit score
660
Upstart doesn’t disclose the credit score necessary to be approved for a consolidation loan. However, it’s one of the only lenders that will take a look at factors other than your credit history. It considers your education and employment to determine whether you’re a good candidate. If you’ve got limited credit history, Upstart could be your best bet at securing an approval.
Unfortunately, you may be charged an origination fee of as much as 12% of your loan. This is eye-wateringly steep—though if you can’t secure an approval from other lenders, it could still be worth the price tag to flee high-APR debt.
Pros:
- Examines non-credit factors to approve you
- Remarkably low minimum APR
Cons:
- Limited term lengths to choose from
- High maximum APR
- Possible origination fees
Best for a free consultation with a debt specialist: National Debt Relief
National Debt Relief
National Debt Relief
APR
5.99% to 35.99%
Loan amount
$35,00 to $40,000
Term
24 to 60 months
Min. credit score
N/A
National Debt Relief is primarily a debt settlement company, which is entirely different from offering debt consolidation—and a considerably more extreme debt consolidation option. However, it also provides affiliate debt consolidation offers from Reach Financial. Reach Financial’s APR begins at a significantly lower rate than many competitors—but you’ll be charged an origination fee that can reach 8%, which may well negate much of your savings on interest.
The main reason you may want to give National Debt Relief a try, however, is for the use of its credit counselors. These professionals have seen it all, and they can help to guide you toward a solvent life. If they think your best option is debt consolidation, they’ll help you with that. If they think there are better options, they’ll help you with that, too.
Pros:
- Talk with a professional about your debt options
- Low minimum APR
- Have Reach Financial pay your debts directly
Cons:
- Potentially high origination fee
- Cosigners not permitted
Tips for comparing personal loans for debt consolidation
Examine APRs
APR stands for annual percentage rate. In short, it’s the interest rate you’ll be paying for the privilege of borrowing money. Depending on your creditworthiness, you may receive interest rates from 5.20% to 35.99%. The disparity between those two rates is astronomical—and can quite easily result in a difference of many thousands of dollars.
Many lenders will allow you to prequalify for a loan before you formally submit an application. This will help you to understand what your interest rates will be if you decide to apply. It’s wise to “rate shop” by prequalifying for loans from multiple companies to see which offers the most favorable APR.
Weigh upfront fees
Administrative fees, origination fees, paperwork fees, etc. often plague personal loans. You could find yourself paying up to 12% in fees just to complete the loan process. Meanwhile, some lenders charge only APR without any origination fees whatsoever. If you find a site that offers a low APR, be sure you’re not getting hit with an additional fee that negates the savings.
Find a lender that offers the amount of money you need
Some companies offer a maximum borrowing amount of $35,000. Others offer up to $100,000. Similarly, some companies allow you to borrow as little as $1,000, while others demand at least $5,000. In other words, not every lender will extend to you the exact amount of money you need.
Locate discounts
Some lenders offer discounts for specific activity. As an example, you may receive an APR discount by enrolling in autopay or by opting to have the bank use your loan to pay off your debts directly.
Every little interest rate discount helps, particularly for a loan that lasts many years. It could translate into hundreds of dollars in savings.
How to qualify for a debt consolidation loan
In most cases, you’re going to need a decent credit score to qualify for a personal loan. Ironically, the thing that may be holding back your credit score is a high credit utilization, which can be helped by opening a debt consolidation loan. Many who are considering debt consolidation may need to stick with lenders that are willing to do business with subprime customers.
If your credit score is very low, you may need a cosigner to vouch for you. Again, this means that the bank will examine the cosigner’s credit and approve you according to their reputable credit profile—but it also means they’re ultimately responsible for your loan payments.
Alternatively, a lender may allow you to enter into a secured loan for debt consolidation. This allows you to offer assets as a means of gaining the funding you need. This option is riskier, though: You could lose property if you default.
Alternatives to debt consolidation loans to pay off debt
Balance transfers
Many credit cards come with a 0% intro APR on purchases and/or balance transfers for a large window of time after account opening (up to 21 months, in some cases). You can transfer your high-interest debt to one of these cards and receive a lengthy interest-free period to pay off that debt. Every cent you put toward your bill will go into paying down the principal during this period.
Chase Freedom Unlimited®
Chase Freedom Unlimited®
Credit score
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Intro APR
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Balance transfer intro apr
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APR
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Annual fees
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Welcome offer
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Why we like it
The card_name is a solid flat-rate earnings card with annual_fee_disclaimer annual fee. Although the 1.5% cash back doesn’t seem impressive at first glance, it becomes more valuable when combined with other rewards cards from Chase that can be redeemed for a far greater value.
This card is recommended for everyday use, whether for doctor copays or big box store purchases. It can be a large earner for cardmembers who want to get the most out of their everyday spending.
Here’s the rub: You can only transfer an amount equal to the credit limit you’re approved for. If your credit score isn’t great, you may only be approved for a $2,000 credit line. That won’t be terribly helpful if you’ve got $20,000 in debt.
Dip into your equity
Equity is the value of your property minus the amount you owe on it. For example, if your house is worth $200,000 and you still owe $75,000 on your mortgage, you have $125,000 in home equity.
It’s usually possible to borrow money against the equity you’ve built in a house or car if you need a loan. This effectively stakes your property as collateral (similar to the secured loans discussed earlier). Often, this can result in a fixed monthly interest rate, giving you predictable repayment terms. It can be a good option to eliminate high-interest debt.
Debt settlement
If your back is against the wall and you can’t be approved for a traditional debt consolidation loan, debt settlement is something to investigate. You’ll get to talk to a credit counselor who can explain your options.
Debt settlement companies will negotiate with your creditors to potentially lower the amount you owe. They’ll then roll your monthly credit card payments into one easier-to-manage payment (often with a portion of your settled debt added to your monthly payment as a fee).
If you’re floundering, it could be a good option, but there are serious consequences to using the service. First, you’ll be required to stop making your monthly credit card payments so the company can begin negotiations with the issuer. That’s because lenders aren’t likely to haggle with someone who is still paying their bills. They need to see that you’re not paying what you owe, and that getting something is better than nothing. This will completely tank your credit score, and it will potentially be many years before your credit profile can recover.
Also, the specific credit cards the company negotiates for will be closed. You won’t be able to use them anymore, and your credit utilization may increase due to a reduced amount of available credit. It’s also worth noting that you may potentially be blacklisted by the credit card issuers with whom your debt has been lowered. They may not want to take a risk on you in the future.
Debt consolidation loan: Considerations before applying
Does debt consolidation hurt your credit?
Debt consolidation doesn’t hurt your credit score any more than opening any other loan. When applying, the lender will perform a hard credit inquiry on your credit report, which will temporarily drop your credit score by a few points. Typically, it will bounce back in a month or two.
In fact, debt consolidation will likely increase your credit score. That’s because it helps to lower your credit utilization by zeroing out your credit cards. After paying off your bills with a debt consolidation loan, your credit score could quickly rise by double digits.
Can you get a loan to consolidate debt with bad credit?
It’s possible to get a debt consolidation loan with bad credit, but you’ll have to work with lenders that have lower application standards than most. This may result in a higher APR, but it could still save you a bundle when compared to what you’re currently spending in interest.
When to consider a debt consolidation loan
If you’re finding it difficult to manage multiple monthly credit card payments, it’s probably worth looking into debt consolidation. Credit cards tend to incur crippling interest rates, and you’re likely to receive a lower interest rate with a personal loan.
What are the risks of debt consolidation loans?
Unless your proposed APR will result in more interest payments than you’re currently paying across multiple credit cards, debt consolidation is an overwhelming win. Yes, there’s the occasional annoying fee, but rolling your debts into one single monthly payment will almost certainly free up more of your income.
Just note that once your credit card balances have been eliminated you’ll again have the ability to dig yourself into a deeper hole. Be sure you’ve turned a corner on your overspending, or debt consolidation could actually be detrimental.
TIME Stamp: Debt consolidation can be a life preserver for your credit
Debt consolidation can help you to undo a lot of mistakes. If you’ve found yourself in a maelstrom of expensive monthly credit card bills, you may only have enough money to spend for the minimum payment. That could take you years (decades, even) to wipe out your debt.
A debt consolidation loan will roll these accounts into one digestible monthly payment—meaning you can use more of your money to pay toward the principal.
Frequently asked questions (FAQs)
Is debt consolidation a good idea?
Debt consolidation is a good idea for those with high-interest debt. Personal loans tend to have lower interest rates than, say, credit cards.
How does debt consolidation affect my monthly payments?
Debt consolidation will eliminate the monthly payments on your other accounts. You’ll then pay a single (often much more affordable) monthly payment to the debt consolidation lender.
Do I have to consolidate all of my debt?
You don’t have to consolidate all of your debt. In fact, depending on your creditworthiness, you may not even be approved for a loan that’s large enough to cover the total debt.
How much can I save with debt consolidation?
Depending on the size of your debt, you could save many thousands of dollars by opting for a debt consolidation loan.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.
Introduction
As an expert and enthusiast, I have been trained on a vast amount of data to provide accurate and insightful information on a wide range of topics. I can analyze and understand complex texts, generate human-like responses, and even provide code examples to illustrate concepts. With my expertise in various domains, I can help you understand the concepts mentioned in the article you provided.
Debt Consolidation Loan
A debt consolidation loan is a financial solution that allows individuals with multiple high-interest debts, such as credit card debts, to combine them into a single loan. By consolidating debts, borrowers can simplify their repayment process and potentially lower their interest rates, leading to a more manageable financial situation.
Benefits of Debt Consolidation Loan
Debt consolidation loans offer several benefits, including:
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Improved Credit Score: By consolidating debts, individuals can simplify their repayment process and reduce the risk of missing payments. Consistently making payments on time can positively impact their credit score over time.
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Lower Interest Rates: Debt consolidation loans often come with lower interest rates compared to high-interest credit cards. This can result in significant savings on interest payments over the life of the loan.
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Simplified Repayment: Instead of managing multiple monthly payments, borrowers only need to focus on a single monthly payment for their debt consolidation loan. This can make it easier to keep track of payments and avoid late fees.
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Reduced Stress: Living with multiple debts can be stressful. Debt consolidation loans can help alleviate this stress by providing a clear path to becoming debt-free.
Concepts in the Article
The article you provided discusses various debt consolidation loan offers and lenders. It provides information on different loan options, including their APR (Annual Percentage Rate), loan amount, term, and minimum credit score requirements. Here are some key concepts mentioned in the article:
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Upgrade: Upgrade is listed as the best overall debt consolidation loan option in the article. It offers appealing terms, including the ability to receive funds in any bank account or directly pay off debts. Upgrade does not disclose the required credit score but is known to be more lenient compared to other lenders.
-
Best Egg: Best Egg is mentioned as a secured loan option for debt consolidation. It allows borrowers to use collateral in the form of home fixtures to secure the loan. Best Egg has stringent application requirements, including a high credit score and a six-figure individual income.
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LightStream: LightStream is highlighted for its low fees and competitive borrowing terms. It offers a wide range of loan amounts and term lengths, with no origination fees. LightStream also provides a discount for enrolling in autopay.
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Avant: Avant is recommended for borrowers with bad credit. It is one of the few options available for individuals with a credit score of 550 or higher. Avant allows borrowers to select a term up to 60 months to pay off their loan.
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PenFed: PenFed offers low APRs for debt consolidation loans. It provides discounted rates for enrolling in autopay and does not charge origination fees. However, to qualify for a loan, borrowers need to have a previous relationship with PenFed.
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Discover: Discover is mentioned as a lender with widely available low APRs. It offers competitive interest rates and does not require an existing relationship to qualify. However, the maximum loan amount is limited to $40,000.
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Happy Money: Happy Money is highlighted for its customer-friendly terms. It offers an insurance program called TruStage Payment Guard, which covers loan payments in the event of a job loss or disability.
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LendingClub: LendingClub allows borrowers to use a co-signer, which can help improve their chances of approval and potentially secure better interest rates. LendingClub pays debts directly to lenders and offers the option to change the payment date.
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Upstart: Upstart is mentioned as an option for individuals with a thin credit history. It considers factors other than credit history, such as education and employment, to determine loan eligibility. Upstart charges origination fees but offers a low minimum APR.
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National Debt Relief: While not a traditional debt consolidation lender, National Debt Relief is mentioned for its debt settlement services. It provides affiliate debt consolidation offers and offers free consultations with debt specialists.
Tips for Comparing Debt Consolidation Loans
The article also provides tips for comparing and choosing debt consolidation loans:
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Examine APRs: APR is the annual percentage rate, which represents the interest rate borrowers will pay for the loan. Comparing APRs from different lenders can help identify the most favorable interest rates.
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Weigh Upfront Fees: Some lenders charge origination fees or other upfront fees. It's important to consider these fees when comparing loan options, as they can impact the overall cost of the loan.
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Find a Lender for Your Loan Amount: Different lenders have different maximum and minimum loan amounts. It's essential to find a lender that offers loan amounts suitable for your debt consolidation needs.
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Locate Discounts: Some lenders offer discounts for specific actions, such as enrolling in autopay or having the lender pay debts directly. These discounts can help reduce the overall cost of the loan.
Qualifying for a Debt Consolidation Loan
To qualify for a debt consolidation loan, borrowers typically need a decent credit score. However, some lenders are willing to work with individuals with subprime credit scores. In such cases, borrowers may need a cosigner or be open to secured loan options.
Alternatives to Debt Consolidation Loans
The article also mentions alternatives to debt consolidation loans:
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Balance Transfers: Transferring high-interest debt to credit cards with 0% introductory APRs can provide a temporary interest-free period for repayment. This can be a suitable option if the credit limit is sufficient to cover the total debt.
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Dipping into Equity: Borrowing against the equity in a property, such as a home or car, can provide funds to pay off high-interest debts. This option typically involves using the property as collateral and may result in predictable repayment terms.
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Debt Settlement: For individuals unable to qualify for traditional debt consolidation loans, debt settlement may be an alternative. Debt settlement involves negotiating with creditors to potentially reduce the amount owed, but it can have significant consequences for credit scores and future borrowing opportunities.
Conclusion
Debt consolidation loans can be a valuable tool for individuals struggling to manage multiple high-interest debts. By consolidating debts into a single loan, borrowers can simplify their repayment process and potentially reduce their interest rates. It's important to carefully compare lenders, consider fees, and assess loan amounts and terms to find the best debt consolidation loan option. Additionally, individuals should be aware of alternatives to debt consolidation loans and understand the potential impact on their credit scores and overall financial situation.
