Best Debt Consolidation Loans of April 2024

The Bottom Line

When it comes to debt consolidation loans, there’s no shortage of options. However, some will be better than others for your situation. For example, loans above $50,000 can be hard to find, but SoFi offers loans up to $100,000. If you want a long loan term of 84 months, you can apply with NASA Federal Credit Union, First Tech Federal Credit Union, or Upgrade. Further, if you’d like a competitive APR and prefer to borrow from a big bank, you can apply with Citibank. The right fit will depend not only on what the lender offers but on your needs and preferences. 

Guide to Choosing the Best Debt Consolidation Loan

Now that we’ve covered the best debt consolidation loans, here are some other factors to consider to help you decide if getting a debt consolidation loan is right for you. 

What Is a Debt Consolidation Loan?

Debt consolidation is using one loan or credit card to pay off multiple debt accounts. It’s often done to reduce the overall cost of repaying a debt, streamline debt repayments, and/or get immediate financial relief by reducing the cost of monthly debt payments.

Debt consolidation is the most popular reason for getting a personal loan, according to the 2023 Investopedia personal loan consumer survey. Home improvements and large purchases were the next two most common reasons cited for seeking a loan.

How Do Debt Consolidation Loans Work?

Debt consolidation loans are obtained through application by borrowers and typically have a fixed dollar amount and fixed interest rate for a set period of time unless the borrower uses a balance transfer credit card, which usually has a variable interest rate and a revolving credit line. Once approved the lender can directly pay off other creditor balances or simply deposit the loan proceeds in the borrower's checking account to allow them to pay their other higher-interest accounts off. Once existing higher-interest accounts are paid off the borrower begins paying toward the single debt consolidation loan.

Pros & Cons of Getting a Loan for Debt Consolidation

Where to Get a Debt Consolidation Loan

You can find debt consolidation loans from a variety of lenders including credit unions, banks, and online lenders. The best lender for you is going to depend on what you can qualify for and your preferences. Lenders vary in their eligibility requirements, customer service quality, loan offerings, and more, so it’s best to shop around and compare quotes. 

How to Compare Debt Consolidation Loan Lenders

If you’re not sure which lender to choose, here are the main factors to consider as you compare quotes:

• APR range: Consider both the minimum and maximum APR for loans, including any rate discounts for which you may be eligible.
• Fees: Factor in upfront fees, like origination or administration fees, and determine if the fees will be withheld from your loan amount. Be sure to consider prepayment penalties and other fees that you may face. 
• Credit requirement: Check to see if the lender discloses the minimum credit score required to qualify and whether or not it will consider other information like your income and payment history instead of just your credit. 
• Pre-qualification: Find out if you can get pre-qualified and/or receive a quote without a hard inquiry into your credit.
• Loan amounts: Calculate the total amount of debt you wish to pay off and check to see if the lender offers loans that cover the total amount.
• Loan terms: Look at the term or length of time you'll have to repay your loan. Many lenders present this information as a range of months, like 24 to 84 months. Note that a longer repayment term will result in lower monthly payments but more money paid towards interest charges.
• Time to receive funds: Consider the length of time from beginning your application to getting approved and receiving funds. While the lender may transfer funds in as little as one business day, it may take several days or more for your bank or creditor to process the payment.
• Lending restrictions: Make sure loans are available to residents of your state and that your intended use for the funds is allowed by the lender. The lender may also have age and citizenship requirements.

In addition to weighing the above factors, be sure to calculate the overall cost of the new loan and compare it to the overall remaining cost of your existing loan. Ideally, the new loan will save you money each month and overall. 

How Do I Get a Debt Consolidation Loan?

1. Get pre-qualified: The personal loan application process usually starts by getting pre-qualified. You’ll provide a few basic details about yourself, such as your name, contact information, income, and Social Security number, to your potential lender.
2. Review your options: The lender will perform a soft credit check, which won’t affect your credit score or overall credit profile. If the lender thinks you’re a good risk, it'll respond with a loan offer outlining your options, interest rates, and loan costs. Use this to compare rates and terms and other features among several lenders.
3. Complete a formal application: Once you find the best personal loan option, complete a full loan application with the lender. You’ll probably need to provide copies of documents proving your identity (government-issued identity photo I.D.), income (recent pay stubs, tax returns, or W-2s), and finances (recent bank statements).
4. Receive funds and make a plan for repayment: If you’re approved, your lender will disburse your loan funds to your bank account or by check, depending on its policies. 

Alternatives to a Debt Consolidation Loan

If you're struggling with debt, a debt consolidation loan can be a good option. However, if you have poor credit and don't believe you could qualify or would prefer to not go through the loan process, you could also try:

• Credit card balance transfers: If you have credit card that allows you to transfer balances—at a favorable rate—you may be able to transfer your debt with higher rates into one payment and save money on interest expense in the long term. A balance transfer credit card also offers a very seamless way to consolidate credit cards and other high interest debts from multiple lenders onto one new card account, potentially involving the lowest rates with a 0% APR introductory period for a year or more. Some balance transfer offers charge a balance transfer fee but some do not, so it pays to shop around.
• Tapping home equity: Utilizing a home equity line of credit can be a cost-effective way to pay off high-interest debts and save money on interest.
• Negotiating with your creditors: Contact your creditors' customer service and ask what they can do to help. They may offer reduced interest rates or forbearance or some other option to help you keep up.
• Establishing a budget that factors in debt repayment: Pursue a debt payoff strategy such as the debt snowball or debt avalanche that helps you prioritize debt repayment and and help you plan your budget.
• A debt relief program: Debt relief or debt settlement is a strategy that seeks to reduce the total amount you owe and put you on a payment plan until the negotiated amounts are paid off. Because this approach requires you to stop making payments during the negotiation, your credit score will take a significant hit.
• Credit counseling: This is similar to debt settlement, except the credit counseling agency won’t ask you to stop making payments. Instead, it will negotiate with your creditors for reduced interest rates on your debt, establishing a debt management plan, and you will pay off your debt in full over time by making payments on time under the revised repayment schedule. Debt management plans have the benefit of not negatively affecting your credit history with credit bureaus.

You can also take out a home equity loan or a loan against your 401(k), but consider the consequences first. If you default, your home will be at risk. And any funds you withdraw from your 401(k) will not be earning interest for your retirement. 

How We Picked The Best Debt Consolidation Companies

To evaluate and rank personal loan providers we collected hundreds of data points across 70 lenders, including traditional banks, credit unions, fintechs, and special interest finance companies. We researched and evaluated APRs, loan amounts and terms, fees, customer experience, and much more. To rank the lenders in our database and to generate star ratings, we weighted the data we collected, based in part on what consumers told us were the most important features of a personal loan and lender in a survey we conducted. We grouped those factors into four broad areas:

• Loan costs (advertised APR, fees, and six other factors): 29.25%
• Loan terms (loan amount, repayment term, and three other factors): 22.25%
• Borrowing requirements (credit score, membership requirement, and six other factors): 28.5%
• Additional features (online application, pre-qualification, and eight other factors): 20%

Learn more about how we evaluated personal loans in our complete methodology.

Why You Should Trust Us

Investopedia collected 31 key data points from 70 companies from Aug. 4-23, 2023 to identify the most important factors for readers choosing a debt consolidation lender. We used this data to review each company for rates, fees, loan amounts, and other features to provide unbiased, comprehensive reviews to ensure our readers make the right decision for their needs. Investopedia launched in 1999 and has been helping readers find the best debt consolidation companies since 2019.

Learn More About Debt Consolidation Loans

• What is debt consolidation?
• What is debt relief?
• How to get a debt consolidation loan
• How to get out of debt
• Pros and cons of debt consolidation
• How much does a debt relief program cost?
• Personal loan vs debt consolidation loan
• Debt consolidation vs debt settlement
• Best debt relief companies