Personal loans for debt consolidation are personal loans that are taken out to consolidate your debt. These loans may be offered by online or brick and mortar lenders and come with a variety of different rates, terms, and borrower qualifications. They can help you combine your debts into one payment that is more affordable and easier to manage.
The best personal loans for debt consolidation offer competitive interest rates, lower fees, a variety of repayment terms, and are accessible to borrowers with good and bad credit.
Best Personal Loans for Debt Consolidation of September 2021
Best Overall and for Low Fees : Marcus by Goldman Sachs
Our choice for best overall and low fees, Marcus by Goldman Sachs has a strong industry reputation, doesn’t charge any fees to its borrowers, and offers a range of flexible loan terms.
Adequate loan limit
Easy application process
Need good credit to qualify
No joint applications
|Loan Terms||36-72 months|
|Fees||No late fees or origination fees|
|Time to Receive Funds||As little as 1 to 4 business days|
|Recommended Credit Score||660+|
Read the full review: Marcus Personal Loans
Runner-Up and Best for Flexible Repayment Options : Discover Personal Loans
Discover is known for its flexible payment options, including personal loans with repayment times of up to seven years.
Seven-year repayment option
Low $2,500 minimum to borrow
Good credit recommended
May take longer than one day to receive your funds
|Loan Terms||36-84 months|
|Fees||Late fee of $39, no origination fee|
|Time to Receive Funds||1 to 7 business days|
|Recommended Credit Score||680+|
Read the full review: Discover Personal Loans
Best for Consolidating Credit Card Debt : Payoff
Payoff will help you set up a debt reduction plan and it offers competitive rates to consolidate your debt.
Lower starting APR
Debt payoff plan
Origination fee of 0% to 5%
Higher minimum starting loan amount
|Loan Terms||24-60 months|
|Fees||Note late fee, origination fee between 0%-5%|
|Time to Receive Funds||As little as 2 to 5 business days|
|Recommended Credit Score||640+|
Read the full review: Payoff Personal Loans
Best for Low Rates : LightStream
LightStream offers competitive interest rates for borrowers with high FICO scores and it also offers rate reductions for setting up auto-pay.
High maximum loan amounts
Rate Beat program
Same day funding on some loans
Need a high credit score
$5,000 loan minimum
No pre-qualification option
|Fixed APR||2.49%-19.99% with autopay*|
|Loan Terms||24-84 months*|
|Time to Receive Funds||As soon as the same day|
|Recommended Credit Score||680+|
Read the full review: LightStream Personal Loans
Best for Large Debts : SoFi
SoFi offers debt consolidation loans with higher loan limits and fixed and variable rates that are ideal for taking on large debt.
High maximum loan amount
Loan terms of up to seven years
Income requirements can be stricter than other companies
Need high credit score
No loans under $5,000
|Fixed APR||4.99%-19.63% with autopay|
|Loan Terms||24-84 months|
|Fees||No late fees or origination fees|
|Time to Receive Funds||Typically within a week|
|Recommended Credit Score||680+|
Read the full review: SoFi Personal Loans
Best for Bad Credit : Upgrade
Upgrade offers low minimum loan amounts to borrowers who don’t have good credit.
Prequalification won’t affect credit
Live customer service
Higher interest rates
Loans come with origination fees
Late fees and administrative fees
|Loan Terms||36-60 months|
|Fees||Late fee of $25, administrative fee up to 4.75%|
|Time to Receive Funds||Within four business days|
|Recommended Credit Score||580+|
Read the full review: Upgrade Personal Loans
For those looking for a personal loan for debt consolidation, all of the companies on our list have something to offer, whether it’s a lower interest rate, higher maximum loan amount, or longer repayment terms. When picking a loan, however, make sure you check all the requirements including credit score as many lenders won’t lend to those with poor credit.
If you’re not sure which lender to pick, we recommend checking out Marcus by Goldman Sachs. Besides being backed by a financial powerhouse, the company offers an easy application process and doesn’t charge origination or late fees.
Compare The Best Personal Loans for Debt Consolidation
|Lender||Starting Interest Rate||Minimum Credit Score||Loan Terms (range)||Maximum Loan Amount|
|Marcus by Goldman Sachs Best Overall and Low Fees||6.99%||660||36-72 months||$40,000|
|Discover Personal Loans Best for Flexible Repayment Options||6.99%||680||36-84 months||$35,000|
|Payoff Best for Consolidating Credit Card Debt||5.99%||640||24-60 months||$40,000|
|LightStream Best for Low Rates||2.49%||680||24-84 months||$100,000|
|SoFi Best for Large Debts||4.99%||680||24-84 months||$100,000|
|Upgrade Best for Bad Credit||5.94%||580||36-60 months||$50,000|
Guide to Choosing the Best Personal Loan for Debt Consolidation
Are You in Need of a Personal Loan?
Before you apply for a personal loan, you will want to assess your needs to see if you need one, when you need it, and for what purpose. You may need a personal loan to consolidate debt that has been accruing. A personal loan may be able to help you simplify your bills, reduce interest payments, and help you get out of debt sooner. If you’re considering a personal loan for emergency funds, medical expenses, or other reasons, you might want to look at other options instead.
Compare Personal Loan Lenders
Before choosing a lender, you will want to compare several lenders. You will want to consider the following factors when comparing lenders:
- Loan amount: You should know the minimum and maximum loan amounts the lender offers and make sure your desired loan amount falls within that range. You don’t want to borrow more (or less) than what you need. Make sure the lender you select offers the amount you’re looking for or you might need to take out another loan.
- Interest rate: Is the rate fixed or variable? What will your rate be? What are rates based on and how can you lower your rate? The better your credit score, the lower your rate is usually. This matters because paying high interest rates costs you more money, and you’ll want to pick a lender that charges the lowest interest.
- Fees: Know what fees the lender charges upfront. Look for prepayment fees, origination fees, and late fees. The more fees, the more your loan balance and monthly repayment amount will be. You’ll want to choose a lender that has low to no fees attached to the loan.
- Repayment periods: You need to know how long you have to pay back the loan and when your payments are due. Some lenders offer flexible terms and others are more stringent. Compare the different options between lenders, and also consider if the shorter term might come with a larger monthly payment. Those payments might not fit your budget.
- Funding times: If you need your money in a hurry, choose a lender with next-day loan funding. Funding times vary, but they are usually within a few days of an approved loan application.
Apply for a Personal Loan
You’ll typically apply for a personal loan online, over the phone with an agent, or at a bank or credit union branch with a representative. You will generally need a form of photo identification, your Social Security number, and proof of income. Lender requirements vary but bank statements, pay stubs, and tax returns are generally accepted.
Keep in mind that having your finances in order improves your chances of approval and a good credit score improves your chances of getting a low interest rate.
Frequently Asked Questions
What Is Debt Consolidation & How Does It Work?
Debt consolidation is a method of paying down your debt by borrowing a larger loan that you then use to pay off multiple smaller loans or credit cards. You may be able to consolidate high-interest credit card debt or other types of debt through borrowing a large amount.
One of the main advantages of debt consolidation is that it puts all of your debt “under one roof.” Rather than trying to keep track of several monthly payments and interest rates, you only have to make one, fixed monthly payment. Additionally, depending on the rates you have across your accounts, you may end up with a lower overall interest rate, which could help you save money on the amount you pay in interest.
Debt reduction software can help you organize and execute a debt repayment plan that includes debt consolidation as one of its strategies.
It’s important to have a broad debt repayment plan when you use debt consolidation, though. Once you pay off your smaller loans and credit cards, you might be tempted to get into even more debt. This can be an issue with credit cards since paying them off through debt consolidation can “free up” more room to spend on those lines of credit. If you aren’t careful, you could accumulate a large amount of debt again.
Pros & Cons of Debt Consolidation
All debt is in one, manageable place
Potential to reduce the overall interest rate and save money
May help you get out of debt faster
Interest rates may be high if you have poor to fair credit
Newly freed-up space on credit cards could tempt you to spend again
Origination fees could add to the cost of the new loan
When Does Debt Consolidation Make Sense?
If you’re hoping to simplify your bills and potentially get out of debt faster, debt consolidation might help. Debt consolidation is most likely to make sense when you have good credit, but your debt amounts might be too high to complete a credit card balance transfer. Additionally, a debt consolidation loan may also be a good move if you don’t want to use the equity in your home to manage your unsecured debt.
If a debt consolidation loan doesn’t fit your budget or financial situation, there are alternatives to consider.
- HELOC: A home equity line of credit, or HELOC, is based on the equity in your home. You might be able to pay off a large amount of debt at a reasonable interest rate. However, you’re securing that line of credit with your home, so if you run into any financial problems in the future, you could potentially lose your house.
- Credit card balance transfer: It’s possible to use a balance transfer credit card to consolidate and pay off your debts via one line of credit. Many balance transfer cards offer 0% APR for a certain introductory period of time, too, so you can save on paying any interest for, say, 21 months. You may be able to pay off your debt faster when the entire payment goes toward one low-interest balance.
- Debt snowball: Rather than putting everything together at once, the debt snowball method has you tackle your smallest balance first while maintaining your minimum payments on all other debts. As each debt is paid off in full, you add your old payment amount to the next debt on your list, accelerating the rate at which you pay down your next debt. Ideally, over time, you’ll eliminate each debt one by one until you’re debt free.
- Debt avalanche: Similar to the debt snowball method, this strategy starts with your highest-interest debt. The debt avalanche method doesn’t offer the quick psychological win of the debt snowball, but it can help you save you money on interest and may be faster.
How Should I Choose a Personal Loan for Debt Consolidation?
There’s no one way to determine the best debt consolidation loans. To find the right fit for you, start by figuring out what you need to accomplish. Decide what’s important, whether it’s fast funding, low or no fees, or the ability to consolidate a large amount of debt. Some lenders also offer longer repayment periods, which could lower the amount you pay per month.
Additionally, if you have poor to fair credit, you might need to look for a lender that specializes in offering personal loans to those with credit problems. Pay attention to origination fees and other costs, and compare your loan options. Depending on what you qualify for, you might have no choice but to pay an origination fee.
While checking your loan options with a lender may not affect your credit score, officially applying for and securing one will. Consider shopping around for the right personal loan within 30 days to reduce the number of inquiries to your credit. Securing the loan may ding your score, but if you stay on top of your payments, you could rebuild it.
To choose the best personal loans for debt consolidation, we considered company reputation, time in business, and other factors including fees, interest rates, repayment terms, minimum credit score requirements, and minimum and maximum loan amounts.
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay may be higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice.
Payment example: Monthly payments for a $10,000 loan at 5.95% APR with a term of 3 years would result in 36 monthly payments of $303.99.