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Best Debt Consolidation Loans of April 2023

Review Updated March 28, 2023
Dana George
By: Dana George

Our Loans Expert

Nathan Alderman
Check IconFact Checked Nathan Alderman
Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

If your desk is awash with monthly bills, including high-interest credit card bills, you're not alone. In fact, a report from The Ascent shows that the average unsecured loan balance is $9,896.

One of the smartest financial moves to make is getting a debt consolidation loan.

The best debt consolidation loans let you take out a personal loan to pay off existing debt, including high-interest credit card debt. You can also use a debt consolidation loan to pay off secured debt like a boat, ATV, or auto loan. If you're a small business owner, a debt consolidation loan can pay off business debt.

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As of Mar. 28, 2023
Lending Partner Min. Credit Score Loan Amounts Apr Range Next Steps
Award Icon 2023 Award Winner
Upgrade
Rating image, 4.5 out of 5 stars.

4.5/5

Min. Credit Score: 580 Loan Amounts: $1,000 - $50,000 APR Range: 8.49%- 35.97% APR
Award Icon 2023 Award Winner
LightStream
Rating image, 4.0 out of 5 stars.

4.0/5

Min. Credit Score: 660 Loan Amounts: $5,000 - $100,000 APR Range: 7.99%-25.00% (w/ AutoPay)*
Award Icon 2023 Award Winner
SoFi
Rating image, 5.0 out of 5 stars.

5.0/5

Min. Credit Score: 680 Loan Amounts: $5,000 - $100,000 APR Range: Fixed: 8.99%-23.43% APR (with all discounts)
LendingClub
Rating image, 4.0 out of 5 stars.

4.0/5

Min. Credit Score: 600 Loan Amounts: $1,000 - $40,000 APR Range: 8.05% - 36.00%
Disclaimers

*SoFi Personal Loan Disclaimer

Fixed rates from 8.99% APR to 23.43% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 03/06/23 and are subject to change without notice. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.

Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-6%, which will be deducted from any loan proceeds you receive.

Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.

Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.

Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.97%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/

Award Icon 2023 Award Winner
Logo for Upgrade
Rating image, 4.5 out of 5 stars.
4.5/5
Minimum Credit Score
580
Loan Amounts
$1,000 - $50,000
APR Range
8.49%- 35.97% APR
Term Length
24 - 84 months

Upgrade offers loans from $1,000 to $50,000, with terms as long as 84 months. All borrowers pay an origination fee. Loans fund in as little as a day. The best rates go to borrowers using at least some of the funds to pay off other debt.

  • Low minimum loan amount
  • Get your funds within one business day
  • Auto secured loans available
  • Not available to residents of all states
  • APRs can be high
  • Origination fees
Award Icon 2023 Award Winner

LightStream

Logo for LightStream
Rating image, 4.0 out of 5 stars.
4.0/5
Minimum Credit Score
660
Loan Amounts
$5,000 - $100,000
APR Range
7.99%-25.00% (w/ AutoPay)*
Term Length
24-144 months

LightStream offers the lowest rates on personal loans, hands down, and high loan limits. Also, LightStream doesn't charge fees. All in all, this is one of the most competitive personal loan lenders you'll come across. The catch is that LightStream has stricter borrowing requirements than some other lenders.

  • One of the lowest APRs in the industry
  • Low-rate guarantee
  • Super fast funding
  • High maximum loan amounts
  • Strict qualification requirements
Award Icon 2023 Award Winner
Logo for SoFi
Rating image, 5.0 out of 5 stars.
5.0/5
Minimum Credit Score
680
Loan Amounts
$5,000 - $100,000
APR Range
Fixed: 8.99%-23.43% APR (with all discounts)
Term Length
24 - 84 months

SoFi offers rock-bottom interest rates and higher loan limits than most lenders. Its loans are designed for well qualified applicants. SoFi doesn't require an origination fee, late fees, or a prepayment penalty.

  • Competitive interest rates
  • No fees required
  • Paused payments for unemployment
  • High minimum loan amount

LendingClub

Logo for LendingClub
Rating image, 4.0 out of 5 stars.
4.0/5
Minimum Credit Score
600
Loan Amounts
$1,000 - $40,000
APR Range
8.05% - 36.00%
Term Length
24-60 months

Lending Club is ideal for borrowers who want to consolidate high-interest debt. By consolidating their high-interest debt into a single peer-to-peer loan, a borrower can save hundreds of dollars in interest.

  • Wide range of loan amounts, ranging from $1,000 to $40,000
  • No prepayment penalty
  • Allows for joint applicants, as long as one borrower meets credit standards
  • Origination fees
Disclaimers

*SoFi Personal Loan Disclaimer

Fixed rates from 8.99% APR to 23.43% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 03/06/23 and are subject to change without notice. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors.

Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-6%, which will be deducted from any loan proceeds you receive.

Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi.

Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.

Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.97%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/

What is a debt consolidation loan?

A debt consolidation loan is a loan used to pay off other debt. Usually, a debt consolidation loan has a lower interest rate than other debt (like credit card debt). You can also use it to pay off multiple debts -- for example, multiple credit cards or loans. Then, you have only one debt payment to remember instead of several.

COVID-19 debt consolidation loans

Many people chose to pay off debt during the coronavirus pandemic. If you're trying to simplify your debt payments, or you'd like a structured timeline for paying off debt, a debt consolidation loan may be the right choice for you.

Credit card refinancing vs. debt consolidation

It can be easy to confuse credit card refinancing with debt consolidation, but they are two different things meant to accomplish the same goal -- to become debt free.

There are a couple of ways to refinance credit card debt. One is to transfer your credit card balance to a card with a 0% promotional rate (more on this in a moment). The other is to consolidate the debt through a personal loan.

What are the benefits of using a personal loan for debt consolidation?

A debt consolidation loan can save you money and time. Here are a few other benefits:

  • Lower interest rate: Most debt consolidation loans have a lower interest rate than credit cards. Paying off high-interest debt with a low-interest consolidation loan can save you thousands of dollars over the life of a loan.
  • Lower monthly payments: If you have a lower interest rate, you'll likely also have lower monthly payments. If you find yourself worrying about how you're going to repay credit debt or other unsecured debt, a debt consolidation loan can help you lower the total monthly payment due.
  • Clear finish line: From the time a lender approves your consolidation loan, you will know precisely the repayment term and when it's due to be paid off.
  • Fewer bills: Consolidating multiple debts into a personal loan means you will have fewer bills to juggle. If you're busy like most people, having one installment loan to pay can simplify your life. Rather than making sure each credit card payment is sent, writing a check for your auto loan, and double checking that all other bills are covered, you pay a single monthly payment.
  • Higher credit score: You may be able to improve your credit score by making regular payments. Since your credit history plays a role in everything from renting an apartment to whether you qualify for the lowest auto insurance rates, raising your credit score makes life easier. Once you've achieved excellent credit, you will have access to the best interest rates and loan terms next time you need to borrow money.

What are the drawbacks of debt consolidation loans?

Most financial decisions, including personal loans for debt consolidation, have pros and cons. Here are some drawbacks:

  • If you use your loan to pay off your credit cards, you may be tempted to use those cards again, leaving you with a consolidation loan and new high-interest debt. New debt leads to a higher debt-to-income ratio, an issue that is factored into your credit score.
  • There is often a sense of relief once you've paid off high-interest debt, which may tempt you to spend more money or spend unwisely. The entire point of a debt consolidation loan is to get you out of debt and make your life easier. Whether you take out a secured loan or an unsecured loan, stick to your budget once the loan is paid in full.
  • If you take out a secured loan using collateral, such as your house or your car, to keep the interest rate low, you risk losing that collateral if you miss payments. It's never a good idea to miss payments, but if you're not sure you will make all payments as agreed, consider an unsecured loan instead.
  • The wrong loan can end up costing you money in interest or fees. Make sure you understand all the costs involved and don't inadvertently put yourself in a worse situation. A high origination fee, late payment fees, and prepayment penalty will each take money out of your pocket.

Can I get a debt consolidation loan with bad credit?

Yes, you can get a debt consolidation loan if you have bad credit. Here are a few extra steps you can take to increase your chances of getting approved:

  1. Check your credit reports for errors. Mistakes can drag your score down. To get started, order a free copy of your credit report from each of the three major credit bureaus. Then, read through each record carefully. If you find a mistake on your credit history, report it to the credit bureau.
  2. Get prequalified with multiple lenders. Getting prequalified doesn't affect your credit score -- usually (always ask your lender to confirm, though). By getting prequalified, you can find out whether or not a lender will offer you a loan.
  3. Consider secured debt or getting a cosigner. If you're having trouble getting approved for a loan, look into secured loans (loans that require collateral) or asking someone to cosign your loan. Doing one (or both) of these things can make it easier for you to get approved for a debt consolidation loan.

For more information, check out our list of best personal loans for bad credit.

TIP

Budgeting for loan payments

If you're getting ready to apply for a debt consolidation loan, start by outlining your current monthly expenses and income. Then, estimate how much you can put toward a loan payment each month. (Remember, the loan payment will replace some of your other debt payments.) That way, you'll know ahead of time what size loan payment is best for you -- and you can confidently work toward paying off that debt.

What should I look for in a debt consolidation loan?

The reason to look at personal loans for debt consolidation is to see if one would benefit your financial situation. Here's what you should look for:

  • A competitive interest rate: Shop for the best rate you can find, although the interest rate is not the only thing that determines how much a loan will cost. You must also factor in the cost of the origination fee and repayment term. These are reflected in the loan's APR.
  • Low origination fees: An origination fee is an upfront cost that lenders charge you for processing and distributing your loan. They typically range from 1% to 8%. Say you take out a loan for $10,000. That means you may pay anywhere from $100 to $800 in origination fees. The best debt consolidation loans charge little or no origination fees. If you have excellent credit, check with your lender to learn if the fee is negotiable.
  • Repayment terms that work for you: Ideally, you want to find a loan with the shortest loan period you can afford. The faster you pay off your loan, the less you will pay in interest. For example, let's say you borrow $10,000 at 9% interest. If you choose to pay it off in three years, your monthly payments will be $318, and you will pay a total of $1,448 in interest. Now, if you instead choose a six-year loan, your payments will be lower at $180 per month -- but you will pay a total of $2,978 in interest, or $1,530 more.
  • No prepayment penalties: Some lenders charge you a fee if you decide to pay a loan off early. Look for a lender who does not charge prepayment penalties. As a borrower, the primary purpose of a debt consolidation loan is to get you out of debt as quickly as possible.

What are the alternatives to personal loans for debt consolidation?

Personal loans for debt consolidation can be a great way to meet your financial goals, but they're not the only option. Here are some alternatives to a debt consolidation loan:

Balance transfer credit cards

A balance transfer card offers an introductory rate, most often a 0% APR for a set time period (typically 12 to 21 months). You apply online, give the new credit card company a list of the balances you want to be transferred, and wait to hear back from it. Transfer fees usually range from 3% and 5% of the balance transferred. But beware: The card's interest rate will rise dramatically as soon as the intro period ends. You should plan to pay the card off in full before then.

Pros

  • No interest charges on balance transfers during intro period
  • May increase your credit score

Cons

  • Only effective if you stop using credit while repaying the debt
  • Transfer fees charged
  • Interest rate rises dramatically once the intro period ends

Home equity loans

If you owe less on your home than it's worth, that means you have equity and can borrow against it. If you use a home equity loan for debt consolidation, you'll owe your mortgage lender instead of your other creditors (like credit card issuers). The interest rate might be lower on a home equity loan than you'd pay on a credit card or personal loan. The danger is that you could lose your home if you miss payments.

Pros

  • Likely to provide you with a much lower interest rate
  • Can increase your credit score

Cons

  • Lender has the right to repossess your home (the collateral) if you fail to make payments
  • Easy to get into even more debt unless you stop using other available credit (like credit cards)

401(k) loans

While the best move with a 401(k) plan -- or any other retirement plan -- is to leave it alone and let it grow, some plans do allow for borrowing. You don't have to worry about your credit score when borrowing from your 401(k) because no credit check is required. A 401(k) loan generally lets you borrow 50% of your 401(k) balance or $50,000, whichever is less (with some exceptions). When you take out a 401(k) loan, you pay interest to yourself by putting your interest payments back into your retirement account. However, if you don't pay back the loan within five years, you will owe income tax and a penalty of 10%.

Pros

  • No credit check required
  • In essence, you repay yourself, with interest

Cons

  • The money borrowed has no opportunity to grow, potentially costing you thousands of dollars
  • If the loan is not repaid within five years, you'll pay income tax and a penalty of 10%

Is a debt consolidation loan right for you?

Yes, if consolidating means snagging a low enough interest rate to save money long term. That's money that can be put toward important goals like building an emergency account, paying off other existing debt, or investing.

The best financial options give you a way to solve today's money issues while helping you plan for the future. Properly used, personal loans for debt consolidation can do just that.

To recap, the best debt consolidation loans of April 2023:

Lending Partner Min. Credit Score Loan Amounts APR Range Best For
Upgrade 580 $1,000 - $50,000 8.49%- 35.97% APR Debt consolidation and fair credit
LightStream 660 $5,000 - $100,000 7.99%-25.00% (w/ AutoPay)* Borrowers with good credit
SoFi 680 $5,000 - $100,000 Fixed: 8.99%-23.43% APR (with all discounts) Low APR for borrowers with high income
LendingClub 600 $1,000 - $40,000 8.05% - 36.00% Low APR for borrowers with good to excellent credit scores

FAQs

  • Your credit score could climb. Consolidating debt leaves you with more available credit (for example, paid off credit cards). As long as you don't add charges to the cards you just paid off, the "debt utilization" portion of your credit score improves. In addition, making monthly payments on time helps boost your score.

  • The credit score required to consolidate debt depends on the lender. Some lenders that cater to those with poor credit consider applicants with scores as low as 560-580.

  • How much debt you can consolidate depends on a number of factors, including your credit history and income.

  • Ramsey is not a fan of debt consolidation loans, believing that it will take you longer to repay the debt. In his opinion, the longer it takes you to repay the loan, the more interest you'll pay.

    We recommend you take Ramsey's advice on this topic with a grain of salt. Crunch the numbers to determine how long it will take you to pay off existing debt at the rate you're paying. Then, find out how much a consolidation loan will cost you monthly. Finally, compare the total interest paid in both scenarios.

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