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Best Debt Consolidation Loans

If you’re like many Americans, you’ve got significant debt in the form of credit cards, personal loans and perhaps medical debt. With the economy in flux, you want to consolidate your debt quickly. You may be anxious to find the best debt consolidation loans for your situation and apply for them...

Best Debt Consolidation Loans
Dahna M. Chandler
Award-Winning Business Finance Journalist and Brand Storyteller

Paying off several secured or unsecured loans with a debt consolidation loan can help you better manage your finances. They can help lower your interest on that debt, since they have a single interest rate. That’s ideal if you’re paying higher interest rates on credit cards because of missed payments. Our team of financial experts reviewed and ranked more than 30 online lenders to help you get funded.

Our Top Picks for Best Debt Consolidation Loans

 upgrade_logo
  • Funding as soon as the next day
  • Can be approved with fair credit
  • Variety of discounts on rates
Min. Credit Score
Min. Credit Score Not disclosed
Loan Amounts
Loan Amount $1K-$50K
Est. APR
Loan Repayment 24 to 84 months
bestegg_logo
  • Wide range of loan amounts available
  • Fast application process
  • Direct payments to creditors as an option
Min. Credit Score
Min. Credit Score Undisclosed
Loan Amounts
Loan Amount $2K-$50K
Est. APR
Loan Repayment 36-60 months
upstart review
  • Loans can be funded in one busines day
  • Prequalification with a soft credit check
  • Accepts borrowers with fair credit
Min. Credit Score
Min. Credit Score 600+
Loan Amounts
Loan Amounts $1K-$50K
Est. APR
Loan Repayments 36-60 months
 sofi review
  • No origination, prepayment, or late payment fees
  • Joint applications accepted
  • Offers .25% discount for autopay
  • Borrowers up to $100,000
Min. Credit Score
Min. Credit Score 680+
Loan Amounts
Loan Amount $100K
Est. APR
Loan Repayment 84 months
onemain_logo
  • Offers joint and secured loans
  • Accepts low credit borrowers
  • Can fund a loan the same or next business day
Est. APR
Loan Repayment Up to 60 months
Loan Amounts
Loan Amount $1.5K-$20K
Min. Credit Score
Min. Credit Score Undisclosed

How to Choose the Best Debt Consolidation Loan

When you’re choosing the best place to consolidate debt, there are multiple important factors to consider. Once you start your search, focus on the parameters our experts used to rank the lenders profiled here. By all means, shop around and carefully research each lender before applying to any.

Consider the following factors:

  • Loan Features: Make sure their maximum loan amounts can cover your unsecured debt. Carefully read loan terms, including the length of the loan, and any other “fine print” to determine if they work for you. Also, check loan use limitations on these personal loans. Some don’t allow student loan repayment, for example.
  • Interest rates and fees – Interest rates determine how much a loan will cost you over its term. The higher the interest is, the more you’ll pay over its life. Lenders usually have minimum and maximum interest rates, but they’re based on your FICO® score and credit history. Also, understand the fees you’ll pay and if they’re going to get added to your principal or subtracted from your loan amount. Understand exactly what you’ll pay monthly and over the loan term.
  • Application process - Look closely at the application process. Is it requiring information you don’t feel comfortable providing? Most lenders here allow a “no effect on your credit” soft inquiry for pre-approval, but to get full loan approval, they’ll require a hard inquiry that affects your credit. It’s essential to know that before you apply. Also, know how long the process takes from application to funding and if there are any distinctively competitive offerings for applying.
  • Qualification process – Know before you apply if you qualify for the loan alone or you will need a cosigner. What usually determines that is meeting the minimum credit score and specific income requirements. But if you’re applying for loans jointly, make certain that’s an option with the lender. Also, know if there are membership requirements.
  • Customer support – Consider the customer support the debt consolidation companies you’ve short-listed offer. For example, if you like live chat, make sure that’s available. If you prefer phone service, look for a phone number and check customer service hours for live customer service reps. Also, learn before applying if loan or other information is easy to locate on their site or app. If you want financial literacy tools, make sure the lender’s site offers those
  • Online user reviews - Research their online reviews. Social media might provide clues about all the areas covered above, so review posts and look for customer support there, too.
  • Perks and Bonuses - Will you get bonuses and perks for using a lending company, and do they make applying worthwhile? Consider service offerings like payment flexibility, free FICO® scores, payment alternatives like flexible due dates, “no surprises” lending, and advanced technology like apps.

Best Debt Consolidation Loans for - Full Overview

This section provides full details about the Best Debt Consolidation Loans.

1.Upgrade - Best for Flexible Loan Options

For people with bad to fair credit, this lender offers both credit card debt consolidation loans and personal loans to consolidate debt. There are no prepayment fees, and you can get one-day funding after clearing necessary verifications. You’ll get a fixed interest rate with a clear payoff date, and you can choose from multiple loan options. There are, however, some caveats to applying at Upgrade like high interest rates for poor credit, origination fees, and an increase in interest rates for late payments.
Pros
No prepayment fees: Pay off early at no cost
Low minimum loan: Borrow as little as $1,000
Get funded quickly: Funds available in 24 hours
Cons
High bad credit interest rates: Can be up to 35.97%
High origination fees: Up to 8% comes from loan amount
Website: Difficult to find specific information


Loan terms range from 24 to 84 months. Borrowers can get between $1,000 and $50,000 in loan funds, but the minimum in Massachusetts is $6,400, in Georgia, it’s $3,000 and Upgrade is not available in DC. Rates range from 5.94% to 35.97% APR, and you can use your car as collateral, but there are titling fees. The minimum FICO® score for approval is 580, but minimum income information isn’t readily available. Funding is as soon as 24 hours after you’re verified. You can’t use Upgrade debt consolidation loans for any post-secondary school expenses.

The Bottom Line

Upgrade is transparent about its fees and lending process and provides some payment flexibility to most borrowers.. It offers credit card debt consolidation loans, low minimum balance loans, and, unlike most debt consolidation companies, lends to qualified people with bad credit. Customer support by phone is available 7 days a week and by email and postal mail, and an Upstart provides a mobile app.

2.Best Egg - Best for Fast Funding

This low-frills lender provides both secured and unsecured debt consolidation loans to borrowers with fair to good credit. Your loan can get funded as fast as 24 hours after verification and doesn’t come with prepayment penalties. Borrowers with the best credit get more payment flexibility and perks. They also can use their homes to secure loans. Customers in good standing can refinance one BestEgg loan with another BestEgg loan. The lender offers no loans in Iowa, Vermont, West Virginia, the District of Columbia, or U.S. Territories. Borrowing minimums differ in Massachusetts, Ohio, Georgia, and New Mexico.
Pros
Clear lending terms: Found in website’s first page footer
Good credit perks: More options with a 700 FICO®
Fast funding: One to three business days
Cons
Availability: Not offered in all states
Origination fees: Reduce loan amounts up to 5.99%
Individual borrowers only: No joint loans allowed


BestEgg offers loans for 36-60 months, and you can pre-qualify for between $2,000 to $50,000 without affecting your credit. In Massachusetts, the minimum loan amount is $6,500; New Mexico and Ohio, $5,000; and Georgia, $3,000. Rates range from 5.99% to 35.99% APR based on credit score, credit history, and debt-to-income ratio. The minimum credit score for approval is a 640 FICO®, but the lowest interest rates go to those with a 700 FICO® score and $100,000 in individual annual income. You can’t fund post-secondary education or securities with BestEgg personal loans.

The Bottom Line

BestEgg debt concolidation loan is most ideal for borrowers with a high FICO® score and six-figure individual income, offering them the best perks for borrowing. People with lower credit score will do better with another lender. It offers live customer service 6 days a week and has a mobile app.

3.Upstart - Best for No and Average Credit

This AI-driven platform looks holistically at an applicant's financial picture during its underwriting process. It reviews factors beyond credit history, considering non-conventional variables like education work history, and residence. They may ask for SAT scores and transcripts as proof. This leads to more approvals for those with no to average credit. But Upstart doesn’t guarantee all applicants' approval, since they combine non-traditional variables with conventional ones. Those approved with this credit profile may face high interest rates. Upstart is fee heavy, too. It charges origination, late, returned check or ACH, and paper records fees.
Pros
Credit: No to average credit considered
Funding: Next business day
Hardship program: Allows payment deferrals
cons
Fees: Multiple charges for servicing
Interest: Average is 24.83%
Applicants: No co-signers allowed


With at least a 600 FICO® or Vantage score, you can pre-qualify for Upstart loans with no credit hit. Upstart offers loans from $1,000 to $50,000 at between 3.09% and 35.99% APR and terms of 36 or 60 months. Funding is next business day for 99% of personal loan borrowers. But, Upstart’s fees abound. There’s an origination fee of up to 8%, and a late fee of the higher of 5% the amount past due or $15. They charge a $15 returned payment fee and a $10 paper records copy fee. Use restrictions for educational purposes in some states apply.

The Bottom Line

Upstart might be ideal if you have no to average credit and want a lender to consider other factors that make you creditworthy to them. Take a close look at all it offers and requires before applying to determine if taking out a debt consolidation loan from them will improve your financial picture. If you have questions, contact using a web contact form, by email, or phone 7 days a week, but they offer no app.

4.SoFi - Best for High Cash Flow Borrowers

Borrowers with good to excellent credit and ample cash at month’s end looking to consolidate credit card debt do best here. SoFi also allows qualified non-permanent resident aliens (including DACA recipients and asylum seekers) to apply for loans. You can have up to three SoFi loans at one time and use your loans to pay lenders directly. Personal loan borrowers with SoFi can access a variety of member perks, including loan product discounts, financial advisors, and unemployment protection. If your credit isn’t solid enough to borrow on your own, SoFi allows co-borrowers who live in your household but not co-signers who don’t.
Pros
Fixed pay schedule: Easily target payoff date
No fees: Zero application or origination fees
High loan limits: Borrow up to $100,000
cons
High minimum FICO® score: Must be at least 680
Varying minimum loan rates: Many states higher
Limited availability: Not offered in Mississippi


With a FICO® score of 680, you can pre-qualify with a soft inquiry to borrow between $5,000 and $100,000 in most states to consolidate credit card debt. Loan terms range from 36 to 84 months, with an APR between 6.99% and 21.78% but that may vary by state. The minimum FICO® score for a personal loan approval is 680 and minimum income to apply is $45,000. But, the average borrower's income is over $100,000. Approval and funding are the same-day for most borrowers. Prohibited uses for SoFi personal loans include post-secondary education financing, bridge financing, business purposes, and investments.

The Bottom Line

If you meet SoFi’s minimum FICO® score requirements and have plenty of disposable income, you’ll have many lending options with SoFi. The lender makes working with them easy, too, with its mobile app, email, and dedicated, six days a week, customer service for personal loans. You also can reach them on Twitter.

Try SoFi

5.OneMain Financial - Best for Customized Poor Credit Lending

This lender uses non-traditional lending standards to provide loans to people with poor or fair credit who wouldn’t qualify elsewhere. While they require specific information to apply, there’s no required credit score. This lender focuses on your unique financial picture and full credit history to make lending decisions. Loan terms are based primarily on your ability to repay their debt consolidation loan. What you have monthly to pay all your debts is more important than your annual income. You can expect high interest rates on lower than average loan amounts, especially if you don’t secure your loan with your later model vehicle titled only in your name.
Pros
No FICO® scores: Poor and fair credit accepted
Secured loans: Use your car as collateral
Physical locations: Offices near most borrowers
cons
Low limits: Borrow a maximum of $20,000
High origination fees: Up to $500 or up 10%
Limited availability: No loans in AK, AR, CT, MA, RI, or VT


Pre-qualify alone or with a co-applicant for a loan for between $1,500 and $20,000 without a minimum credit score a hard credit inquiry. (In North Carolina, the maximum is $7,500.) Residents of some states must borrow larger minimums. Loan terms are 24 to 60 months, with interest rates of 18.00%-35.99%. You must provide proof of monthly cash flow to pay all your bills, including loans. Receive funds by check or direct deposit one to two business days after signing your loan contract. Prohibited loan uses include college and vocational training, business purposes, or investments..

The Bottom Line

OneMain Financial provides options for people with poor to fair credit to get approved for a loan without meeting traditional borrowing requirements. If you can prove you can pay all your bills off monthly after getting a debt consolidation loan, this might be for you. They also offer strong customer service through their branches, phone and email support, and a mobile app.

6.Discover - Best for Flexible Payment Options

For borrowers with strong FICO® scores who need flexible payment options, Discover is one of the best personal loans for debt consolidation. Using their payment calculator, you can design your debt consolidation loan terms around your needs. With your good to excellent credit score, you can get a loan with a long enough term to allow lower payments, ensuring you make timely payments. Discover can use your loan funds to directly pay off your creditors, leaving you one less money management task. Best of all, there are no fees of any kind unless you don’t pay on time.
Pros
Zero fees: No origination or prepayment fees.
Payment flexibility: Choose your monthly payment
Credit scorecard: Free FICO® score checks
cons
Personal only: No co-borrower, co-signer, or joint applicants
FICO® score minimum: 660+
Low borrowing limit: Up to $35,000

discover
Get pre-approved without a hard inquiry for a $2,500 to $35,000 loan, at a fixed 5.99%-24.99% APR for 36 to 84 months. The minimum FICO® score is 660 with a minimum household income of $25,000 annually, but the best loan terms and APR require a 720 FICO® score. There are no fees unless you pay late. Same-day decision and funding is available in most cases. Discover prohibits satisfying secured loans, using funds for post-secondary education, and paying off Discover credit card debt with its debt consolidation loans.

The Bottom Line

Discover is one of the best places to consolidate personal debt if you need a smaller loan, want payment flexibility, and have a high credit score to get the best APR. Having the option to repay your loan off in 30 days and pay no interest is exceptional, and the ability to manage all your Discover accounts on their robust mobile app is too. Customers also have access to phone support available 7 days a week and can contact Discover by mail.

7.Marcus by Goldman Sachs Best for Good to Excellent Credit

Marcus asserts that with a good FICO® score, you can qualify for its debt consolidation loan and get an APR lower than one of your credit cards. That, they say, may save you money over time. Marcus offers a permanent fee-free experience to borrowers, meaning there are no origination fees or prepayment penalties or anything in between. The lender offers customizable payment options, including changes to payment dates three times during your loan term. They also pay your lenders directly. However, Marcus funding time can be at 1-4 business days minimum, you can’t have co-signers and there’s a low maximum loan amount.
Pros
Fees: None of any kind ever
Reward: One payment deferral after 12 months
Payments: Change the date up to three times
cons
Applying: No co-signers or co-borrowers allowed
Approval: Good to excellent credit required
Funding: 1-4 business days after signing contract

marcus goldman sachs
With at least a 660 FICO® score, get pre-approved for $3,500-$40,000 without affecting your credit. The APR for Marcus fee-free loans ranges from 6.99% and 19.99%, but only the most qualified get the lowest rates. Loan terms are 36 to 72 months, and your APR may be higher for longer term loans. Marcus doesn’t identify income requirements, but does consider applicant income for loan approval. Funding takes 1-4 days after bank account verification, and the lender prohibits use of loan funds for refinancing existing student loans.

The Bottom Line

If what you want is a forever fee-free experience, low APRs, and a transparent process with your debt consolidation lender, consider Marcus. You’ll also get multiple ways to contact Marcus, including phone, postal mail, email, chat, Twitter and Facebook. There’s also a mobile app.

8. Avant - Best for Rebuilding Credit

If you have a fair credit score, Avant offers straightforward unsecured debt consolidation loans to middle-income borrowers with clear application, approval and repayment terms. They say they offer loan products tailored to each person’s individual situation. While they don’t allow co-borrowers and co-signers, applicants can have their household income considered for Avant loans. There are a range of funding options for people looking for smaller loan amounts, too. The APR will be higher, and there are fees applicants should consider, but Avant offers fast funding and no prepayment penalties. Avant loans aren’t available in Hawaii, Iowa, New York, Maine, Vermont and West Virginia.
Pros
Credit scores: Accepts fair scores
Funding time: Next business day after approval
Approval: Household income considered
cons
Fees: Administrative, late and returned payment
Availability: Loans not offered in all states
Applicants: No co-signers or co-borrowers

avant
Easily pre-qualify for Avant loans with no impact to your credit. Minimum requirements are a 580 FICO® score and $20,000 in household income. Rates for a 24-60 month loan for $2,000-$25,000 are 9.99%-35.99% APR, and those with the highest credit score and incomes, get the lowest rates. Fees include an administrative or origination fee of up 4.75%, a $25 late fee, and a $15 returned payment fee. There are no prepayment penalties. Receive funds in your account the next business day after approval, and the only use restriction is business purposes.

The Bottom Line

If you’re interested in debt consolidation for rebuilding your credit, and have a fair credit score and meet minimum income requirements, this loan may meet your needs. Those with lower credit scores and household incomes get higher interest rates, and there are fees, but Avant may be more likely to approve you than most other lenders. To help you manage your account with them, Avant offers phone support 7-days a week, email support, and has a mobile app.

9.LightStream - Best for Loans with Long Terms

Applicants with a good to excellent credit scores and several years of excellent credit history can access high dollar loans with long repayment terms to consolidate their debt. You also get discounted interest rates for using autopay. The minimum loan amount is higher than average, and you can’t get pre-approval, but there are no fees, home equity requirements, or prepayment penalties. They have a Rate Beat program designed to beat competing lender offers for unsecured debt, and provide a Loan Experience Guarantee, sending you $100 if your experience isn't completely satisfactory. The eco-conscious also can take comfort in knowing for every loan it originates, Lightstream plants a tree.
Pros
Loan Limits: Up to $100,000
Loan terms: Up to 144 months
Rates: Low and competitive
Cons
Pre-approval: Not available
Minimum limits: Higher than average at $5,000
Credit: Excellent for lowest rates, best terms

lightstream
Applications to Lightstream require a hard inquiry; there is no rate checking pre-approval process. Applicants should have a minimum 660 FICO® score, and can submit a joint application. Lightstream considers income, liquid assets, and retirement savings, the lender emphasizes excellent credit. While the lender identifies no minimum income, it excludes marijuana income. Loans range from $5,000-$100,000 with 24-144 month terms and rates between 5.73%-19.99% with autopay. Loans get funded the day of approval, and once they are, payment due dates can’t get changed. Loans can’t be used to pay off student debt or existing Lightstream loans.

The Bottom Line

If you need a large loan for debt consolidation and want a lender that rewards your credit, Lightstream could be your ideal lender. The no-fee lender offers unique perks and long repayment terms, but there’s no pre-approval process. Contact Lightstream by mail or via email during its business hours, and the lender offers a mobile app.

10.Payoff (Now Happy Money) - Best for Credit Card Consolidation

Happy Money offers only credit card consolidation through its Payoff Loan to help people who have poor or fair credit scores to achieve financial happiness without shame from borrowing money. They focus on the psychological aspects of managing high-interest credit card debt successfully by using their loans to pay them off. The lender takes a transparent but holistic approach to empowering borrowers to improve their credit score through their approval process and continuing support. That includes a free financial wellness newsletter and a free monthly FICO® score. There is an origination fee, but no others, and there’s no prepayment penalty.
Pros
Wellness Focus: Works to reduce borrower stress
Creditors: Offers to pay them directly
Credit: Considers applicants with low FICO® scores
Cons
Loan Limitations: Only offers credit card consolidation
Loan Amount: Only up to $40,000
Applicants: No co-signers or joint applicants

payoff
Pre-qualify for a Payoff credit card consolidation loan with a 550 FICO® score without affecting your credit. Through lending partners, Happy Money offers individuals loans only from $5,000-$40,000 for a 24-60 month term at a 5.99%-24.99% APR, looking at factors beyond income to determine approval. An origination fee up to 5% is Payoff’s only fee and there’s no prepayment penalty. After approval, most loans take three to five days to get funded after verification. Payoff only allows borrowers to use its loans to satisfy credit card debt.

The Bottom Line

Even with a poor credit score, you might be able to achieve Payoff happiness by getting their loan to satisfy your high-interest credit card debt. You’ll get to choose your Payoff plan with monthly payment with an interest that suits you, and the quickest route to loan payment. Along the way, you’ll get live phone support six days a week, chat, a customer service email, and a mobile app.

11.Rocket Loans - Best for Same-Day Funding

Fair credit borrowers who need fast funding, getting a same-day debt consolidation loan through Rocket Loans may be an option for you. They offer multiple loan amounts to individual borrowers with rate discounts for autopay, but they only offer two repayment term lengths. There are multiple fees associated with this lender’s loans, too, including origination, late payment and returned payment fees. While interest rates can be good for their average customer with a high credit score and income, for those with fair credit and lower income, interest rates might be high.
Pros
Speed: Same-day approval and funding
Discounts: Rate reductions for autopay
Prepayment: Zero early payment penalties
Cons
Applicants: No co-signers or co-applicants
Fees: origination, late, and returned payment
Repayment: Only two repayment terms

rocket loans
Applicants with a 580 FICO® score and $24,000 annual income can get pre-approved with no credit impact. Rocket offers debt consolidation loans from $2,000 to $45,000 at a 5.97%-29.99% APR with either 36 or 60 month repayment terms. You’ll pay an origination fee from 1% to 6%, and other fees include a $15 late and $15 ACH or returned check fee. Even when loans receive same-day approval, same-day funding depends on your bank, and Rocket doesn’t pay third-party lenders directly. They prohibit satisfying student loan debt with its loans.

The Bottom Line

If you’re looking for same-day approval and funding with discounts for autopay, it’s a real possibility with Rocket Loans. Also, you can get live phone support six days a week, and contact the lender by postal mail and email. But, there’s no mobile app.

Best Debt Consolidation Loans - Feature Comparison

Here is a summary of the features of each loan covered here. They may be different in your state and are subject to change frequently. So, please check the lender’s site for updated information.

Company Est. APR Min. FICO® score Loan Amount Loan term
Upgrade 5.94%-35.97% 580 $1,000-$50,000 24-84 months
BestEgg 5.99% to 35.99% 700 $2,000-$50,000 36-60 months
Upstart 3.09%-35.99% 600 $1,000-$50,000 36 or 60 months
SoFi 6.99%-21.78% 680 $5,000-$100,000 36-84 months
OneMain Financial 18.00%-35.99% Undisclosed $1,500-$20,000 24-60 months
Discover 5.99%-24.99% 660 $2,500-$35,000 36-84 months
Marcus 6.99%-19.99% 660 $3,500-$40,000 36-72 months
Avant 9.99%-35.99% 580 $2,000-$25,000 24-60 months
Lightstream 5.73%-19.99% 660 $5,000-$100,000 24-144 months
Happy Money 5.99%-24.99% 550 $5,000-$40,000 24-60 months
Rocket Loans 5.97%-29.99% 580 $2,000-$45,000 36 or 60 months

What is a Debt Consolidation Loan?

A debt consolidation loan combines multiple debts like credit cards, personal loans, medical and others into one loan. It allows you to pay all debt included in the loan off at once in a single monthly payment over the term of the loan. Often, its APR is lower than a single credit card added to the loan but not always. That depends on your credit.

How Does a Debt Consolidation Loan Work?

Debt consolidation loans combine all the debts included in the loan into one loan at a fixed APR with a predictable payment each month. Often, that payment is larger than any one of the debts included, but smaller than paying each monthly payment separately. This can increase your cash flow and allow you to preserve or rebuild your credit as long as you make your loan payment on time each month.

What Are the Reasons for Debt Consolidation?

There are multiple reasons for getting a debt consolidation loan. Here are some that you might consider as you look at this option for paying your debt.

  • Multiple debts gone: Manage all debt repayment in one loan
  • Amounts available to borrow: Ability able to borrow enough cover all debts is possible
  • Flexibility loan funds use: Use loan proceeds to pay different debt types in one loan
  • Set time frame to pay off all debts: Consolidated debts get paid by same date
  • Reduce payment sizes: Smaller loan payment than a current monthly debt payment
  • Better terms: Get better terms than on current credit cards or personal loans
  • Eliminate high interest debt: Consolidate at lower interest than credit cards or loans
  • Predictable payments: Make same payment monthly for the duration of loan
  • Locked in interest: Get the interest rate locked for the loan’s duration
  • Unsecured and secured loans available: Secure loans on collateral like vehicles
  • Improved credit score: Debt consolidation can lead to higher FICO score
  • Better cash flow: Lower payment on all debt can lead to more cash monthly

What Are The Dangers of Debt Consolidation Loans?

There are some risks involved in getting debt consolidation loans that you should contemplate before you do. They include the following, but examine your situation for others.

  • Ignoring root causes of debt: Not considering and addressing the reasons debt is high
  • Running up debt again: Maxing out credit cards and getting new loans after consolidation
  • Rushing debt consolidation: Not researching it well and planning repayment strategy first
  • Making wrong choice: Choosing the wrong debt consolidation loan or lender
  • Missing payments: That can lead to damaged credit and inability to borrow
  • Not considering debt’s full cost: Not identifying fees that raise the debt’s cost
  • Prepayment penalties: Not knowing if there prepayment penalties and what they are
  • Taking Securing consolidation loans: Using vehicles, houses, or other assets may lead to their loss
  • Mistaking debt settlement for debt consolidation: It’s essential to know the difference
  • Not considering other payoff options: Are debt consolidation loans the best option?
  • Adding hard inquiries to credit: Rate shopping incorrectly can lead to damaged credit

How to Qualify For a Debt Consolidation Loan

Before you apply for debt consolidation loans, you should know how to qualify and only apply for those for which you qualify. That way, you reduce the likelihood of getting declined for loans, which makes it harder to get others once lenders see declined applications.

  • Show ability to repay: Have all income documents ready that show capacity to repay
  • Check your credit report first: Find and fix mistakes to for an increased credit score
  • Improve debt-to-income ratio: Pay down or off any debt possible before applying
  • Research lenders by credit score: Find those lending in specific credit score ranges
  • Identify potential co-signers or co-borrowers: Ask their permission before starting to apply
  • Contact lenders with questions: Do this before pre-qualifying to ensure it’s the right lender

How to Get a Debt Consolidation Loan

Once you know you qualify for certain debt consolidation loans, use these criteria to secure the loan that’s best for you and your unique financial situation.

  • Get pre-qualification: Choose lenders that only require soft credit pulls
  • Credit score: It’s important to only choose lenders that accept applicants in a specific credit score range
  • Add a co-signer or co-borrower: Lean if this is allowed before applying
  • Set borrowing limit: Decide a maximum borrowing amount repayable with all other bills
  • Check all criteria: Formally apply only to those that fit certain criteria based on their features
  • Have documentation ready: Be ready to provide additional documentation lenders require

Best Ways to Consolidate Debt

Write about other ways of financing you can use to consolidate debt besides loans (but mention debt consolidation loans in this list). Write briefly and concise, each way in bullet point

  • Balance a transfer credit card–find one that allows you to transfer all credit card debt to one card.
  • HELOC (home equity line of credit) or refinancing your house–use a lower interest line of credit or do a cash-out refinance to pay your debts.
  • Credit counseling debt consolidation–many are nonprofits that negotiate with your creditors to help you pay debt. Make sure it’s not debt settlement your doing, which can hurt your credit.
  • 401K loan–take funds from your retirement account to repay your debt. Understand the tax consequences of this method and how it will affect your retirement plans.

Conclusion

Getting a debt consolidation loan is a big decision. It takes significant careful research to identify the best personal loans for debt consolidation based on your finances and planning to choose the best place to consolidate debt for your needs. Here, we’ve provided you some of the top rated debt consolidation companies for all credit types and scores. If you take your time and avoid the mistakes identified above, you should be able to get a debt consolidation loan that improves your financial picture.

Frequently Asked Questions (FAQ)

Is there a difference between an online lender and a bank?

Many online lenders are not banks, but have banks backing them and proving loan funds. It’s important to check whether the bank backing the online lender is one you want to work with, especially if you have a current relationship with them or had one with them that’s less than positive.

Does debt consolidation hurt my credit?

Only if it increases your credit utilization percentage, lowers the average age of your credit, causes you to close credit cards, especially older ones, or you max out your credit cards again. Also, if you don’t pay the loans on time or overextend yourself after doing debt consolidation and can’t pay your debt, you may hurt your credit.

Is debt consolidation a good idea?

It’s a good idea if it allows you to manage your debit more easily, lower your payment and interest rate, and doesn’t come with excessive fees that add to the cost of your debt. To be beneficial your able to afford the payments along with your other expenses and not require you to secure the loan with a vehicle or other assets.

How much can I save with debt consolidation?

It depends on your situation, but you might be able to save on interest payments over the life of credit card or other debt. You may also find you have increased cash flow because you’re saving money with a single loan payment rather than multiple payments per month.

How does debt consolidation affect monthly loan payments?

It can reduce your loan payments to a single payment monthly at a lower interest rate that both stay the same over your consolidation term. This way you’re not trying to keep track of multiple monthly payments each month that can change in amount or the interest on them changes.

Which type of loan can be used for debt consolidation

Most lenders consider debt consolidation loans a type of personal loan, so personal loans get used for debt consolidation. But, if you get a line of credit either individually or on your home, or do a cash-out refinance loan, those can be used for debt consolidation. You also can get a 401K loan.

Can debt consolidation save me money?

It can as long as you get a loan or payment plan from a credit counselor that lowers your monthly payments and interest. Then, you don’t run up more debt while you’re paying off the loan or debt repayment plan.

How do I choose a debt consolidation company

Look for those who have been in business a while and have a track record you can examine using rankings or social media comments. Also, decide whether you want to find loan consolidation companies, credit card consolidation companies, or a lender that provides both. Otherwise, use the criteria under each lender provided by our experts to decide which is right for you.

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About the Author

Dahna Chandler

Dahna Chandler

Award-Winning Business Finance Journalist and Brand Storyteller

Dahna M. Chandler is award-winning business and finance journalist with over 20 years of experience writing for major American media outlets and recognized multinational financial brands. She writes about personal finance, insurance, and real estate.

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