Best Debt Consolidation Personal Loans of April 2024
Updated March 29, 2024 at 3:09 pm
Juggling multiple debts across different creditors, each with its own due date and payment platform can feel chaotic to manage. According to the Federal Reserve Bank of New York, the total household debt in the third quarter of 2023 was at $17.29 trillion, which includes mortgage loans, credit cards, student loans, car loans and other consumer debt.
The best debt consolidation loans can make your debt repayment experience more straightforward by combining your existing debts into one streamlined loan. Learn more about the many debt consolidation programs available today and how consolidation works.
Our Methodology Newsweek Vault’s loan experts evaluated multiple data points to help our readers make sense of their borrowing options across student loans and personal loans. To narrow down the best available offers, we weigh the product pros and cons across five core categories, including:
- Application process
- Eligibility requirements
- Interest rates
- Loan amounts (minimum and maximum)
- Repayment flexibility
Our Picks - Best for quick funding: Discover Personal Loan
- Best for no fees: SoFi Personal Loan
- Best for low starting rates: Upstart Debt Consolidation Loan
- Best for credit card debt: Happy Money The Payoff Loan™
- Best for joint applicants: LendingClub Personal Loan
- Best for sign-up incentives: Upgrade Personal Loan
- Best for large debt amounts: Lightstream Personal Loan
- Best for secured loans: Best Egg Secured Personal Loan
- Best for interest rate discounts: Achieve Debt Consolidation Loan
Compare Personal Loans
9 Best Debt Consolidation Loans
Best for Quick Funding
Discover Personal Loan
on Credible’s website
Why We Chose It
Borrowers need strong credit to qualify but can receive loan funds as early as the next business day after the loan is accepted. Disbursement is also flexible in that you can have Discover allocate funds directly to your creditors or request a lump-sum disbursement into your deposit account. Read our Discover personal loans review.
Pros
- Fast funding
- Fewer fees
- Direct creditor payoff option
Cons
- No interest rate discounts
- Ineligible for Discover credit card debt
- Late fees apply
Best for No Fees
SoFi Personal Loan
on Credible’s website
Why We Chose It
SoFi’s personal loan for credit card debt is a great choice for borrowers who are fee-averse. The lender doesn’t charge origination fees, late fees or prepayment penalties. Read our SoFi personal loans review.
Pros
- No fees
- High maximum loan amount
- Interest rate discounts
Cons
- Cosigners not accepted
- Funding can take a few days
- No direct creditor payoff
Best for Low Starting Rates
Upstart Personal Loan
on Credible’s website
Why We Chose It
Upstart rewards eligible borrowers with low rates starting at 6.40% APR. The lender also looks at more than your credit score to assess eligibility. But debt consolidation loan applicants with strong credit have a higher likelihood of qualifying for Upstart’s most competitive fixed rate. Read our Upstart personal loans review.
Pros
- Low starting rate
- Low minimum loan amount
- Uses alternative factors for loan approval
Cons
- Origination and late fees
- Limited term options
- Cosigners not accepted
Best for Credit Card Debt
Happy Money Personal Loan
on Credible’s website
Why We Chose It
Happy Money lets borrowers with a credit score of 640 or higher pay off their credit card balances directly for a streamlined debt consolidation process. Although the loan product is designed specifically for credit card debt consolidation, it might be able to include other unsecured consumer loans into The Payoff Loan. Read our Happy Money personal loans review.
Pros
- Direct credit card payoff available
- Fewer fees
- Maximum rate is lower than what other lenders offer
Cons
- Not available in all states
- Origination fee
- Minimum 3 years of established credit
Best for Joint Applicants
LendingClub Personal Loan
on Credible’s website
Why We Chose It
Co-applicants can apply for a joint debt consolidation loan with LendingClub. Bringing on a creditworthy cosigner can boost your eligibility for a competitive interest rate, and is a viable way to lock in a low rate since LendingClub doesn’t offer rate discounts. Read our LendingClub personal loans review.
Pros
- Allows joint loan applications
- Direct creditor payoff available
- Available to residents in all states and Washington, D.C.
Cons
- Origination fee
- High starting rates
- No interest rate discounts
Best for Sign-Up Incentives
Upgrade Personal Loan
on Credible’s website
Why We Chose It
First-time, individual Upgrade Personal Loan borrowers can participate in a welcome bonus worth $200. The incentive requires borrowers to open an Upgrade Rewards Checking Plus account, and fund it with a minimum of $1,000 within the first 45 days of opening to receive the bonus. Read our Upgrade personal loans review.
Pros
- Welcome bonus offer available
- Fast funding when funds are sent to borrower
- No prepayment penalty
Cons
- Origination fee applies
- Low maximum loan amount
- High APR range
Best for Large Debt Amounts
LightStream Personal Loan
on Credible’s website
Why We Chose It
Lightstream’s Debt Consolidation loan offers a high maximum borrowing limit for those who qualify. Eligible borrowers might be approved for up to $100,000, and depending on when the loan is accepted, same-day disbursement might be an option. Read our LightStream personal loans review.
Pros
- High maximum loan amount
- Same-day funding is possible
- Interest rate discount available
Cons
- No direct payoff to third-party creditors
- Only online applications accepted
- Payment due date can’t be changed after loan is funded
Best for Secured Loans
Best Egg Secured Personal Loan
on Credible’s website
Why We Chose It
Best Egg offers a unique secured personal loan option that provides borrowers with a 20% APR discount on average, compared to its unsecured personal loan option. Unlike a Home Equity Loan which uses your home as collateral, Best Egg’s “Secured Loan + Homeowner Discount” puts a lien on your home fixtures, like cabinetry and bathroom vanities. Read our Best Egg personal loans review.
Pros
- Secured and unsecured loans available
- Collateral for secured loans are limited to home fixtures
- No prepayment penalty
Cons
- No interest rate discount available
- Origination fee
- Must have equity in your home
Best for Interest Rate Discounts
Achieve Debt Consolidation Loan
Vault Verified
Why We Chose It
Achieve only requires a credit score of 620 and offers unique interest rate discounts that can help lower your overall borrowing costs. For example, you can reduce your rate by having Achieve conveniently pay your creditors off using the loan funds, showing proof of a retirement account or adding a co-applicant to your loan.
Pros
- Interest rate discounts
- Flexible term options
- Co-applicants allowed
Cons
- Origination fee
- Funding can take up to 72 hours
- Not available in all states
What is a Debt Consolidation Loan?
Debt consolidation loans are available through banks, credit unions and online financial lenders. A debt consolidation loan merges your existing unsecured debts into one new, fixed-rate installment loan. In combining multiple debts into one, consolidation effectively makes keeping track of due dates and payments much easier.
Some borrowers may qualify for an interest rate on a debt consolidation loan that is lower than the rates of their current debts. Consolidating high-interest debt into a low-interest loan can save you money over the life of your loan and might even help you pay off your debt faster.
You can find consolidation loans that are secured or unsecured. A secured debt consolidation loan requires collateral, like your home, which the lender can seize if you default on the loan. However, many debt consolidation companies offer loans that don’t require a guarantee.
How Do Debt Consolidation Loans Work?
When you’re approved for a debt consolidation loan, repaying your original debts might work in a couple of ways. Some personal loan debt consolidation programs give you a lump-sum disbursement, similar to borrowing a personal loan.
In this scenario, you’ll use the funds to manually pay off your other creditors in full. After paying down your original debts, you’ll make payments toward the consolidated loan for the total amount, plus interest and applicable fees.
Another common approach with debt consolidation loans is when your new consolidation lender pays off your original debts on your behalf. If this is how your lender operates, you’ll give them the details of your debts, including the creditor’s name, account number, and balance. Moving forward, you’ll make monthly payments to your debt consolidation lender.
How to Get a Debt Consolidation Loan
Successfully getting a debt consolidation loan depends on several factors. If you’re in the market to consolidate your existing debt, complete the following steps to better your chances of approval.
- Create a plan: Decide which debts it’d make sense for you to include in the consolidation. For example, you might choose to consolidate all of your high-interest credit card debt only or include a mix of existing credit card debt and installment loan balances.
- Check your credit: Check your credit score to see where your credit stands, and request a free credit report on AnnualCreditReport.com. The latter can help you spot any credit reporting errors that might be dragging your score down.
- Prepare your information: Gather your personal information, like proof of citizenship, and financial documents, like pay stubs and tax returns. Debt consolidation companies use this information to ensure you’re eligible for a loan and to determine if you meet its borrower criteria.
- Shop around: Always compare multiple debt consolidation programs before accepting any loan. It’s a good idea to check interest rates and terms with at least three lenders to ensure you’re receiving the most competitive offer.
- Submit an application: Once you’ve narrowed your options to a lender you’d like to move forward with, proceed to the formal loan application. Submitting an application will lead to a hard credit inquiry to further verify your eligibility.
Pros and Cons of Debt Consolidation Loans
Debt consolidation loans can be a useful strategy if you’re balancing multiple debts, but there are also considerations to weigh before moving forward. Below are the advantages and disadvantages of this debt payoff approach.
Pros of Debt Consolidation Loans
- Fewer debts to manage
- Reduced interest rates
- Explicit repayment term
Cons of Debt Consolidation Loans
- Fees might apply
- High interest rates for bad credit
- Secured loans put your assets at risk
Alternatives to Debt Consolidation Loans
Debt consolidation loans aren’t the only way forward when repaying your debt. Depending on your personal situation, you might have access to a few different debt management options.
Balance Transfer Credit Card
If you have good or excellent credit, a balance transfer credit card lets you combine individual credit card balances into one. Card issuers often offer zero- or low-interest on the transferred amount, though a balance transfer fee typically applies. Depending on the amount you transfer, this might be a flat fee or equal to a percentage of the transferred amount.
Borrowing against your home equity
Homeowners might be able to leverage the equity they have in their homes to help pay off other debt. A home equity loan, for example, lets you borrow a lump-sum of your home equity at a fixed interest rate. But there’s a risk that you could lose your home if you’re unable to repay the loan.
Debt Settlement
This option is found through third-party companies that promise to negotiate a lower, lump-sum payoff with your creditors on your behalf. But debt settlement often involves high fees and might adversely affect your credit since it encourages you to stop paying your creditors until a settlement is reached. Keep in mind there’s no guarantee that your creditors will agree to a reduced settlement. So be wary if a program sounds too good to be true.
Frequently Asked Questions
Do Debt Consolidation Loans Hurt Your Credit?
Debt consolidation loans can help your credit score over time, but it might cause a temporary drop in the short term. Applying for new loans, opening new accounts and closing old accounts can have a brief, negative impact on your credit score. Generally, your score rebounds as you make on-time payments toward the loan.
Is It Hard To Get A Consolidation Loan?
If you have good or excellent credit and can show a lender you are able to repay a loan, getting a consolidation loan can be easy. But if you have poor credit, limited income or your credit report has recent negative marks, it can be difficult to find a consolidation loan.
What Credit Score Do You Need for a Consolidation Loan?
Debt consolidation programs have their own unique credit score requirement. A good FICO Score starts at 670. Generally, a higher credit score puts you in a more favorable position for a debt consolidation loan with favorable rates.
Editorial Note: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, hotel, airline or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post. We may earn a commission from partner links on Newsweek, but commissions do not affect our editors’ opinions or evaluations.
