Best Personal Loans for Debt Consolidation

These are are the best personal loans for consolidating high-interest debt and paying it off for good.

Getting out of debt is harder than getting into debt. But if you’re serious about getting out of debt, you can do it faster by using personal loans for debt consolidation, which can help you lower your monthly payments and reduce the interest you pay on what you owe.

Below, we’ll show you how debt consolidation can help you save money, and help you pick a lender that is right for you.

Here are The Ascent's top picks for personal loans for debt consolidation:

  • SoFi -- Low APR for high income earners
  • Barclays -- Low APRs for borrowers with good credit
  • Freedom Plus -- Low APR for good to excellent credit scores
  • Upstart -- Little to no credit history
  • Lending Point -- Borrowers with poor credit
Lending Partner Best For Min. Credit Score Loan Amounts APR Range Next Steps

SoFi

Best For:

Low APR for borrowers with high income

Min. Credit Score:

660

Loan Amounts:

$5k - $100k

APR Range:

5.74-16.49%

Check Rate

Barclays

Best For:

Low APR for borrowers with good to excellent credit scores

Min. Credit Score:

700

Loan Amounts:

$5k - $35k

APR Range:

5.74 - 20.99%

Freedom Plus

Best For:

Borrowers with good to excellent credit scores

Min. Credit Score:

640

Loan Amounts:

$10k - $40k

APR Range:

4.99 - 29.99%

Check Rate

Upstart

Best For:

Little to no credit history

Min. Credit Score:

620

Loan Amounts:

$1k - $50k

APR Range:

8.85 - 29.99%

Check Rate

LendingPoint

Best For:

Borrowers with poor credit scores

Min. Credit Score:

585

Loan Amounts:

$2k - $25k

APR Range:

9.99 - 35.99%

Why you can trust me

I’ve written about the banking industry and personal finance for years, publishing thousands of articles on sites that include Yahoo! Finance, MSN Money and USA Today. In a world where it sometimes feels like the lenders always win, I enjoy helping people navigate the ins and outs of financial products so that they can shop around and get the best possible deal on any loan, credit card, brokerage account, and more. Below, I’ll walk you through personal loans for debt consolidation, and how you can save money by consolidating debt and paying it off once and for all.

Reasons for consolidating debt

If you have high interest debt, consolidating your debt into one loan makes good financial sense. Here are the three best reasons to use a personal loan to consolidate debt:

  • Reduce interest you pay -- The best reason to get a personal loan to consolidate debt is to minimize the interest you pay. Many people make the mistake of paying double-digit interest rates on credit card debt when they could roll their debt into a lower APR personal loan. Why pay 18% APRs on credit cards when you could pay 7% or less on a personal loan?
  • Peace of mind -- Juggling payments on several different credit cards is simply more difficult than consolidating all your balances into one loan with one monthly payment. There’s a lot to be said for eliminating the stress of managing several payments each month. Because of the complicated way minimum payments are calculated on credit cards, it’s possible that consolidating credit card debt with a personal loan could lower your minimum monthly payments even if you don’t lower your APR or pay off the debt faster.

Pay off your debt for good -- If you’re like many people on the debt treadmill, you make payments on your credit cards and never feel like you’re making any progress. The great thing about a personal loan is that a portion of each payment pays down the balance. So, if you pick a three-year loan, you know that after making payments for three years, your debt will be paid off once and for all.

Features of the best personal loans for debt consolidation

Personal loans aren’t like apple pies -- a personal loan can be objectively better than another. There are a few things that separate the best personal loans from the rest of the pack:

  • Low APRs -- The name of the game in debt consolidation is saving money on interest and fees. The best personal loans for debt consolidation have APRs that can start as low as 6%, helping you slash the amount of money you pay in fees and interest over time.
  • No prepayment fees -- It’s my view that lenders shouldn’t punish you for being willing and able to pay off your debt early. None of our best picks for debt consolidation charge prepayment fees, so if you want to pay off a three-year loan in just two years, you can do so penalty free.
  • Low or no origination fees -- Origination fees are a fact of life for some types of loans and some borrowers. An origination fee isn’t a reason to pass on a loan, but it’s important to take the origination fee into consideration when picking one. As you shop around, be aware that origination fees are included in a loan’s APR, so comparing loans based on APR will allow you to compare loans on an apples-to-apples basis. Don’t compare on interest alone, as origination fees are an important piece of the total cost of a loan.

Freedom to shop around -- You should treat a debt consolidation loan like any large purchase, and shop around for the best deal. The companies that make our “best of” list can give you a quote without doing a hard pull on your credit report. Only after accepting a quote will a lender do a hard pull on your credit report. So, you can shop around with the confidence of knowing that getting quotes from multiple lenders won’t hurt your credit score.

How you can save money by consolidating debt

Consolidating debt with a personal loan can save you a considerable amount of interest, particularly if you need more time to pay off a loan. Below, we’ll compare a $5,000 balance on a credit card at a typical APR of 18% to a personal loan at a typical APR of 9%, and assume you want to pay off the balances in three years.

Metric Personal loan Credit card
APR 9% 18%
Monthly payments $159.00 $180.76
Total interest paid $723.95 $1,507.43

In this example, consolidating credit card debt and cutting your APR in half from 18% to 9% can save you about $783 in interest over a three-year repayment period. Of course, how much you save could be much higher, depending on the size of your existing debt and the difference in the APRs you receive on a credit card and personal loan.

There is nothing magical about saving money with a debt consolidation loan. It’s all about lowering the APR on your loan, and thus reducing the total cost of interest and fees over time. Remember, a loan’s APR is inclusive of any fees (like origination fees) as well as interest, so it is the best way to compare one loan to another.

If you have good credit

If you have good credit (a credit score of 700 or better, generally speaking), you’ll find it relatively easy to qualify for a low APR personal loan to consolidate debt. Many lenders compete aggressively for business in this credit score band, which gives the borrower an advantage in getting larger loans at low APRs.

Lender Why?
Barclays Low APRs for borrowers with good credit
FreedomPlus Low APRs and potential rate discounts
SoFi Low APRs and no fees

Barclays is very selective about who it will lend to (usually you'll need a credit score of 700+), but it rewards those that qualify with no fees and interest rates that tend to be very low.

SoFi has the largest loan amount we’ve ever seen at $100,000. Its underwriting is especially selective, but it’s a go-to solution for borrowers who have ample income and good credit scores because it boasts some of the largest loan amounts and the lowest APRs, an unlikely combination.

FreedomPlus scores bonus points for its unique underwriting methods. If offers rate discounts to borrowers who 1.) have a cosigner, 2.) use a substantial portion of the amount borrowed to pay down debt, and/or 3.) have a sufficient amount of retirement savings.

If you have bad credit

It’s harder to get a personal loan if you have a low credit score (in the 600s), but it’s far from impossible. Some lenders work specifically with borrowers who have no or low credit scores, making them the first place to go if your credit isn’t exactly perfect.

Lender Why?
FreedomPlus Allows cosigners for lower APRs
LendingPoint Specializes in loans to people with credit scores in the 600s (past bankruptcy is okay)
Upstart Specializes in loans to people who have no credit history

FreedomPlus is one of the few lenders that issues loans up and down the credit spectrum. What I like most for borrowers who have bad credit is that, to my knowledge, it’s the only online personal loan company that allows applicants to have a cosigner on a loan. If you know someone willing to cosign on a loan for you, you can potentially score a very low APR, even if your credit is far from perfect.

Upstart stands out for the fact it is willing to lend to people who have thin credit profiles. While other lenders make decisions based on FICO® Scores and incomes alone, Upstart is willing to look deeper into its applicants, making lending decisions based on their jobs, employment history, and other factors that are reliable indicators of a borrower’s ability to make payments.

Is a personal loan right for you?

Not yet sold on whether a personal loan is a good solution for you? I get it -- taking out yet another loan is a big financial decision. To help you along, ask yourself whether the statements below apply to you. If they do, a personal loan is likely the best choice for your borrowing needs.

  1. You are serious about paying down debt -- Don’t make the mistake of using a personal loan to pay off credit cards and then run up high balances on your credit cards again. Paying off debt isn’t as easy as consolidating it; you’ll need to make changes to your spending habits, too.
  2. You don’t have collateral for a cheaper loan -- Homeowners who have substantial home equity can likely consolidate debt less expensively and on better terms by using a home equity line of credit (HELOCs). Personal loans are always more expensive than secured loans like HELOCs because they aren’t backed by collateral.
  3. You need a longer time to pay off debt -- If you can afford to pay off your debt in a year or so, a 0% intro APR balance transfer credit card is a less expensive way to refinance your debt. However, if you need two or three years to pay off debt, a personal loan can be a better choice.

You can qualify for a lower APR -- There are only a handful of situations where it makes sense to move a balance to a loan with a higher APR, but doing so won’t reduce the interest you pay, even if it lowers your minimum payments. Frankly, it probably isn’t worth moving a balance at an 18% APR to a personal loan with a 17% APR. The bigger the APR difference, the better.