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Best Loans for Debt Consolidation & Credit Card Debt

For many, a debt consolidation loan can be a way out, but you should consider getting one carefully, as alternative options may be a better bet for some.

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If you’re struggling with high-interest debt, you’re far from alone. Credit card companies raked in a massive $120 billion from Americans from 2018 to 2020, according to the Consumer Financial Protection Bureau

One oft-touted solution to expensive variable-rate credit card debt is taking out a debt consolidation loan. In the right situation, these loans can really help you—but you’ll need to be a smart shopper when comparing options, so you don’t end up in a worse situation.

We’ll explain how a debt consolidation loan works, how to tell whether it’s right for you and, if it is, how to make the most of this opportunity to pay off credit card debt faster.


Best Debt Consolidation Loans

You can get a debt consolidation loan from just about any lender offering a personal loan. However, our editorial team has picked out a few that may be a good fit for borrowers in different situations:

Loan results will vary based on creditworthiness, loan purpose, loan amount, and other factors.

Best for Low Rates

LightStream

  • Loan Amount: $5,000 – $100,000
  • APR Range: 5.99% – 21.49%
  • Loan Terms: 2 – 12 years
  • Credit Score: 660 or higher

LightStream is an online lender offering no fees and low-rate personal loans for several purposes.

Pros
  • Relatively low APRs
  • No origination fees, no late fees
  • Personal loans up to $100,000
  • Autopay discount
  • Joint applications allowed
Cons
  • No physical branches
  • Rates and terms vary by loan purpose
  • No soft pull prequalification

Lightstream is Truist’s online lending division, formed in 2019 after SunTrust and BB&T merged. Offering personal loans for several purposes, including debt consolidation, medical expenses, home improvement, weddings, car purchases, and more, LightStream could be worth considering for those seeking flexibility. 

The lender offers relatively low rates compared to competitors, including autopay discounts. Eligible borrowers can get approved for personal loans from $5,000 to $100,000, and loan terms range from 24 to 144 months. Of course, the rate and term you get will depend on the specific loan purpose.

Its personal loans also have no origination fees, which can help keep borrowing costs low. However, borrowers will likely need a credit score of 660 to get approved for a Lightstream personal loan. 

Overall, it’s a good lender to add to your shortlist if you’re looking for flexible funding, no fees, and a low APR. Lightstream may also disburse loans as soon as the same day you’re approved, making this lender a decent choice if you need fast funding.

Best for Bad Credit

Upgrade

  • Loan Amount: $1,000 – $50,000
  • APR Range: 7.96% – 35.97%
  • Loan Terms: 2 – 7 years
  • Credit Score: 560 or higher

Upgrade offers flexible terms for personal loans and is accessible to borrowers with less-than-stellar credit profiles.

Pros
  • Accessible to borrowers with bad credit
  • Flexible loan terms
  • Joint applications allowed
  • Direct payment to creditors
  • Secured loan options
Cons
  • Has origination fees from 1.85% to 8%
  • No physical branches
  • Higher APRs than some competitors

Upgrade offers personal loans up to $50,000 for qualifying borrowers and is accessible to those with not-so-ideal credit scores. The low loan minimum of $1,000 also makes it an easy choice for those with small financing needs. However, borrowers in certain states will be subject to higher minimum loan amounts. If you live in Massachusetts, Upgrade’s minimum loan amount is $6,400.

While other lenders may offer longer repayment terms of up to 144 months, those are typically reserved for certain loan purposes. Upgrade has repayment terms of 24 to 84 months for eligible borrowers, no matter what expense you’ll be covering. This flexibility can be useful, especially if you’d prefer a longer timeframe to pay off your loan. 

With this lender, you can expect to pay an origination fee between 1.85% and 8%. Borrowers can view their rate before applying without impacting their credit score. 

Overall, Upgrade is worth considering if you’re looking for a lender that offers multiple banking products and loans with competitive rates and flexible terms.

Best for Fair to Good Credit

Happy Money

  • Loan Amount: $5,000 – $40,000
  • APR Range: 5.99% – 24.99%
  • Loan Terms: 2 – 5 years
  • Credit Score: 640 or higher

Happy Money offers debt consolidation loans accessible to borrowers in the fair credit range.

Pros
  • No late fees
  • Direct payment to creditors
  • Prequalification with no hard credit check
Cons
  • Can only be used for credit card debt consolidation
  • Has origination fees
  • High loan minimum
  • No joint or co-signed loans
  • Not available in all states
  • Funding slower than other lenders

Happy Money, formerly known as Payoff, offers loans up to $40,000 for credit card debt payoffs. Eligibility is clearly stated online, so borrowers will appreciate the transparent criteria.

Borrowers have the option to have Happy Money deposit funds directly to their credit cards to help streamline the payoff process. Funding can take between three to six business days, which is longer than other lenders, but still considered a decent turnaround time.

Personal loans are accessible to borrowers with fair credit, and there are no options for co-signers or joint applicants. Unfortunately, the loans are not available in Minnesota or Nevada, so borrowers will need to look elsewhere for lending options.

Best for Military Members

Navy Federal Credit Union

  • Loan Amount: $250 – $50,000
  • APR Range: 7.49% – 18.00%
  • Loan Terms: 3 – 5 years
  • Credit Score: None

Personal loans from Navy Federal Credit Union come with no origination fees and can be a good fit for borrowers with less-than-ideal credit.

Pros
  • Fast funding available
  • Minimum loan amounts as small as $250
  • Lengthy repayment terms up to 180 months for home improvement loans
  • Co-signer option available
  • No origination fee
Cons
  • High minimum loan amounts for longer-term loans
  • Need to be a member to get a loan

Navy Federal operates around 350 branches near military bases around the country. It’s open to anyone with ties to the military or their family members, including active-duty servicemembers, civilian contractors, and veterans.

In addition to offering cosigned personal loans for borrowers with less-than-perfect credit, Navy Federal Credit Union also offers secured personal loans. It’s worth putting this lender on your shortlist if your credit isn’t great and you’re looking to compare loan options. 

However, membership is required to get a loan from Navy Federal, and unfortunately, it’s not available to everyone. To qualify, you need to be a veteran, active-duty service member, Department of Defense personnel, or eligible military family member. 

Borrowers won’t pay an origination or prepayment fee, and funding can be available as quick as the same day.

Best for Small Loan Amounts

LendingClub

  • Loan Amount: $1,000 – $40,000
  • APR Range: 8.30% – 36.00%
  • Loan Terms: 3 – 5 years
  • Credit Score: 600 or higher

LendingClub offers quick funding and direct payments to creditors for debt consolidation loans.

Pros
  • Low minimum loan amount
  • Fast funding for personal loans (as little as 24 hours after approval)
  • Joint loans allowed
  • Direct payment to creditors
Cons
  • Has origination fees (3% to 6% of total loan amount)
  • No physical branches
  • Relatively high APRs
  • No co-signed loans allowed

Established in 2006 as a peer-to-peer lending platform, LendingClub offers personal loans as low as $1,000 and up to $40,000. Those seeking a personal loan will appreciate LendingClub’s offerings.

You can use LendingClub loans for almost any purpose, from home improvements to medical bills. Eligible borrowers can get personal loans with repayment terms of 3 or 5 years and borrowers can expect to receive funding as soon as 24 hours after approval. However, APRs do start at relatively higher rates than some competitors.

LendingClub can be a good fit for those looking to consolidate high-interest debt, as they offer the ability to pay your creditors directly from your loan.

You’ll likely need a credit score of at least 600 to get approved, and joint loans are available for those who need some assistance qualifying.

Best for Co-Borrower Option

SoFi

  • Loan Amount: $5,000 – $100,000
  • APR Range: 7.99% – 23.43%
  • Loan Terms: 2 – 7 years
  • Credit Score: 680 or higher

SoFi is an online lender known for its lack of fees and high loan maximum.

Pros
  • No origination fees and no late fees
  • Loans up to $100,000
  • Unemployment protection available
  • Rate discounts
  • Co-borrower allowed
Cons
  • No physical branches
  • High minimum loan amount

SoFi offers a competitive personal loan product that boasts no origination fees, no late fees, and a high maximum loan amount of $100,000. SoFi is one of only a handful of lenders offering loans as large as $100,000. If you need a substantial loan to cover a considerable expense, like a home renovation, SoFi’s high maximum can be a strong option. Its repayment terms range from 24 to 84 months.

One standout feature of SoFi is that it offers unemployment protection, which might allow you to pause payments if you lose your job. This is a unique offering that sets it apart from competitors.

SoFi also lets you view your rate without impacting your credit score. While doing a soft credit pull is relatively common, it’s still worth mentioning because some lenders require a hard inquiry before they provide a rate. Those who decide to formally apply will likely need a strong credit score to get approved for a SoFi personal loan. 

Best for No Fees

Marcus by Goldman Sachs

  • Loan Amount: $3,500 – $40,000
  • APR Range: 6.99% – 24.99%
  • Loan Terms: 3 – 6 years
  • Credit Score: 660 or higher

Personal loans offered through Marcus by Goldman Sachs come with unique features, such as no fees, rewards for on-time payments, rate discounts, and the ability to change your due date.

Pros
  • No fees
  • On-time payment reward lets you skip a monthly payment
  • Autopay rate discount
  • Can change loan due dates
Cons
  • No physical locations
  • Can take up to three days to disburse loan funds

Personal loans from Marcus feature no fees, and eligible applicants can borrow up to $40,000. APRs are competitive, ranging from 6.99% to 24.99%, and repayment terms range from 36 to 72 months.

These personal loans come with some notably unique features. Those who make consistent on-time payments are rewarded with the ability to skip a month. If you make 12 consecutive monthly payments, you can skip a payment for one month without interest won’t accrue during that time. Marcus will simply extend your loan term by a month. Borrowers can also benefit from an autopay discount that will apply a 0.25% APR reduction when enrolled.

To get approved for a Marcus personal loan, you’ll likely need a credit score of at least 660. 

How Debt Consolidation Loans Work

person working on consolidating debt
iStock

A debt consolidation loan is any fixed-rate, low-interest loan you take out to repay other debt. Borrowers receive a lump-sum loan that they can use to pay multiple creditors off, then focus only on repaying the debt consolidation loan. Some lenders also the ability to send the loan payment directly to creditors.

People take out debt consolidation loans for a lot of different reasons:

  1. Get a better interest rate so the debt is cheaper overall
  2. Get a longer loan term so monthly payments are more affordable
  3. Get a shorter loan term so you can pay off your debt sooner
  4. Combine multiple separate loans together, such as student loans

One of the most common reasons people take out debt consolidation loans is to repay their credit card debt faster. The average credit card charges 16.65% APR (annual percentage rate), while the average personal loan charges an 8.73% APR, nearly half the interest. At that rate, it could take more than a decade to pay off a $3,000 credit card balance if you only pay the minimum balance due. With a personal loan, you could pay off that balance in three to five years with steady payments. 


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Pros and Cons of Debt Consolidation Loans

Make sure you take these factors into account when deciding whether a debt consolidation loan is right for you:

Pros

  • Can help you save money: If you’re able to pay off the same amount of debt with a lower interest rate, you may be able to save a lot of money in interest. This is especially true if your loan has a shorter term length because you’ll pay that lower rate for a shorter amount of time. 
  • Can improve your credit score: Converting revolving debt like credit cards into an installment loan can increase your credit score, especially if you don’t already have any other loans. Making all of your payments on time can also help improve your credit score
  • Can help you become debt-free sooner: If you can get a better rate, more of your payment will go towards paying down your loan each month instead of the interest. Shorter term loans will also help ensure you pay it off sooner, rather than just paying the minimum credit card balance each month indefinitely. 
  • Can help you lower your monthly payment: Getting a lower rate and taking out a longer-term loan can help lower your monthly payment. But remember that this could cause you to pay more interest in the long term. 

Cons

  • Can be costly: Many personal loans charge origination fees, which are subtracted from the loan amount given to you. Depending on the fee, this could render the loan less helpful than another alternative debt-paying strategy. 
  • Can harm your credit score: You may see a small temporary dip in your credit score if you apply for a personal loan because the lender will do a hard credit check. You’ll also see your credit score go down if you miss any payments. 
  • Can tempt you to get back into debt: Unless you can keep your credit cards at a $0 balance going forward each month, it’ll be easy to end up right back where you started, but with even more debt than before. 
  • May need someone to co-sign on your loan: If you don’t have good or excellent credit, you may need to find someone willing to co-sign on your loan. This is a big favor to ask someone, as that person will be putting their credit on the line for you.

How to Choose the Best Debt Consolidation Loan for You

Tackling debt is hard—this is not a news flash. Luckily, taking out a debt consolidation loan is easy. Here are some tips to keep in mind before you apply:

  • Make sure your credit report is accurate: Unfortunately, it’s common to have errors on your credit history that can drag your score down and penalize you unfairly. Check your credit report before you apply for a loan and fix any errors on your report to ensure you can get the most competitive rate.
  • Compare offers based on APR, not interest rate: The interest rate is only part of the loan cost; the APR accounts for your interest rate and other fees associated with the loan, like origination fees. That’s why it’s best to compare APRs to get a fuller picture of the cost of the loan.
  • Watch for fees: Lenders often deduct origination fees, along with other fees, from your loan amount. If so, you’ll need to do some math to ensure you apply for the correct loan amount you need. Try to avoid loans with prepayment penalties, too, so you don’t get charged for paying your loan off early. A fee-free loan is often the best option if you meet pre-qualification requirements.
  • Look into balance transfer cards: Sometimes, a different route can make more financial sense—especially if you can’t secure a low APR loan. Taking out a 0% APR balance transfer card, for example, can be a good interest-free option.
  • Use a debt consolidation calculator: The math can be tricky, but always run the numbers to ensure you’ll actually save money. A debt consolidation calculator can help you decide if a consolidation loan is worth doing. 
  • Shop around as much as possible: The more lenders you pre-qualify with, the more likely you will find the best loan deal for you. Don’t forget to check with your local credit unions and banks. Just make sure each lender does a soft credit check at this stage. Too many hard credit checks can harm your credit.
  • Consider adding co-applicants: If your credit isn’t the best, you may have better odds of approval if you add a co-signer to your application. A co-signer is someone who agrees to repay the loan for you if you’re not able. Similarly, a co-borrower, or someone who agrees to be jointly responsible for your loan, can help boost your approval odds.


Should You Take Out a Debt Consolidation Loan?

Debt consolidation loans aren’t right for everyone. If you take one out when you’re not ready, you could end up in even more debt than you started. 

First, consider your credit score. You’ll stand the best chance of being approved for a more competitive rate if you have good credit. You might be able to snag a slightly better rate than your current one with average credit, so it’s worth checking your options at the very least.

Next, consider your spending habits. Yes, credit consolidation loans are meant to manage credit card debt, but they’re only effective when you keep your spending in check. If you have high debt, it’s best to get a handle on that first by developing a habit of budgeting and saving. In turn, moderate debt and smart money management make getting back on track with a consolidation loan a bit easier.


FAQs About Debt Consolidation

How long does it take to get approved for a debt consolidation loan?

While funding times vary by lender, most lenders can approve you within a business day or two after you apply. It could take longer if they need more information or if your account needs a closer review.

Can you get a debt consolidation loan if you have bad credit?

Yes, there are many lenders out there who offer debt consolidation loans or bad credit loans to borrowers with lower minimum credit scores. You’ll need to be extra cautious to ensure the math works in your favor, as lenders may add more fees or approve a higher interest rate than they would for someone with excellent credit. You may also need to apply with a co-signer or co-borrower.

Will I always save more with a debt consolidation loan?

Not always. To get a big picture of your commitments, factor in any fees, interest rate, and loan terms (you can do this with a debt consolidation calculator). If you’re stretching out your debt over a longer period, paying a higher interest rate, or incurring fees, a debt consolidation loan could be more expensive than your current setup over the long term.

Do I need to consolidate all of my debts?

No. You can consolidate as many or as few of your debts as you want. 

While we work hard on our research, we do not always provide a complete listing of all available offers from credit-card companies and banks. And because offers can change, we cannot guarantee that our information will always be up to date, so we encourage you to verify all the terms and conditions of any financial product before you apply.

Lindsay VanSomeren
Lindsay VanSomerenhttps://lindsayvansomeren.com/
Lindsay VanSomeren lives in the Pacific Northwest where she enjoys budgeting for her favorite activities like gardening, learning languages, and fishing. She's passionate about helping other people understand how to manage their money to live their best lives. Her work has appeared in Credit Karma, Forbes Advisor, FICO, and more.

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