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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.
You’re clicks away from finding the right loan. Answer a few questions and start comparing real offers from multiple lenders within minutes. This won’t impact your credit.
Lending Partner | Min. Credit Score | Loan Amounts | Apr Range | Next Steps |
---|---|---|---|---|
![]() 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 | |
![]() 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)* | |
![]() 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% |
*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/.
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.
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.
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.
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.
*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/.
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.
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.
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.
A debt consolidation loan can save you money and time. Here are a few other benefits:
Most financial decisions, including personal loans for debt consolidation, have pros and cons. Here are some drawbacks:
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:
For more information, check out our list of best personal loans for bad credit.
TIP
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.
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:
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:
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.
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.
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%.
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.
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 |
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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