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Credit card debt is a fact of life for millions of Americans. The average credit card debt per borrower is $5,472, according to TransUnion’s Q1 2018 report. If you, too, are struggling to pay off your credit cards, a debt consolidation loan could be your best bet.

You’re probably making monthly payments to multiple creditors — on different dates and for different amounts at varying interest rates — which is confusing and expensive. Debt consolidation simplifies your monthly payments and helps you pay off your debt.

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What is a debt consolidation loan?

A debt consolidation loan is typically a personal loan from a lender given in one lump sum, which you use to pay off credit card balances or other qualifying debt. You then pay back the loan in fixed monthly payments over the course of a set number of months.

In general, debt consolidation loans make sense when they offer better terms and lower interest rates than the credit cards you’re paying off, allowing you to get rid of your debt more quickly (and cheaply).

Where to find debt consolidation loans

Debt consolidation loans are available from three main sources and financial institutions.

1. Online lenders

Many online lenders generally offer lower rates and loans to individuals whose credit scores may disqualify them from traditional banks and credit unions. Credible provides you with a platform to compare prequalified rates from several online lenders in one place, so you don’t have to submit individual requests to all of them separately.

Compare Personal Loans through Credible
The personal loan companies in the table below compete for your business through Credible. You can request rates from all of these partner lenders by filling out just one form (instead of one form for each), and without affecting your credit score.

LenderRatesLoan Amounts 
avant

View details
Fixed: 9.95% - 35.99% APR$2,000 up to $35,000**Get Rates

Loan terms
• 2 - 5 years*

Loan amount
• $2,000 to $35,000**

Loan uses
• Debt consolidation, emergency expense, life event, home improvement, and other purposes

Residency
• Must be a resident in the U.S. with a valid Social Security number

Time to get funds
• As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)

Key benefits
• Fast online process, with e-signed contract
• Receive funds as soon as next business day (if approved by 4:30pm CT, Monday through Friday)
• Options for borrowers with less than perfect credit (most of Avant’s customers have credit scores in the 600 to 700 range)

Avant personal loans review

*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.

**Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33.

best egg

View details

Fixed: 5.99% - 29.99% APR$2,000 up to $35,000Get Rates

Loan terms
• 3 or 5 years

Loan amount
• $2,000 to $35,000

Loan uses
• Credit card refinancing, debt consolidation, home improvement, and other purposes

Residency
• Must be a U.S. Citizen or a Permanent Resident Alien
• Can't be a resident of IA, VT, or WV

Time to get funds
• As soon as 1 - 3 business days after successful verification

Key benefits
• Choose your payment date
• You can have up to two Best Egg loans at the same time

Best Egg personal loans review

freedomplus

View details
Fixed: 5.99% - 29.99% APR$10,000 up to $35,000Get Rates

Loan terms
• 2 - 5 years

Loan uses
• Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes

Residency
• Must be a resident in the U.S. with a valid Social Security number

Time to get funds
• As soon as 2 business days

Key benefits
• No fees

FreedomPlus personal loans review

lendingclub

View details
Fixed: 6.95% - 35.89% APR$1,000 up to $40,000Get Rates

Loan terms
• 3 - 5 years

Loan amount
• $1,000 to $40,000

Loan uses
• Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes

Residency
• Must be a U.S. Citizen or Resident Alien with a valid Social Security number and physical address, currently residing in the U.S.

Time to get funds
• Usually takes about 7 days

Key benefits
• The amount you pay will never increase

LendingClub personal loans review

Compare rates from these lenders without affecting your credit score. 100% free!

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lendingpoint

View details
Fixed: 9.99% - 35.99% APR$2,000 up to $25,000Get Rates

Loan terms
• 2 - 4 years

Loan amount
• $2,000 to $25,000

Loan uses
• Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes

Residency
• Must be a U.S. Citizen or Permanent Resident with a verifiable Social Security number

Time to get funds
• As soon as the next business day

Key benefits
• Available to "near prime" borrowers with credit scores as low as 585
• Streamlined approval and application process
• No prepayment penalty

LendingPoint personal loans review

lightstream

View details
Fixed: 4.99% - 16.79% APR $5,000 up to $100,000Get Rates

Loan terms
• 2 - 7 years

Loan uses
• Credit card refinancing, debt consolidation, home improvement, and other purposes

Residency
• Borrower must reside in the U.S.

Time to get funds
• As soon as the same business day

Key benefits
• 0.50% autopay discount (only available prior to loan funding)
• $100 rebate if you’re not completely satisfied with the LightStream experience and if you fill out a questionnaire telling LightStream how they can improve their services

LightStream personal loans review

marcus

View details
Fixed: 6.99% - 28.99% APR*
(For NY residents: 6.99% - 24.99% APR)
*APR discounts may be available for direct payment of outstanding credit card debt and autopay.
$3,500 up to $40,000Get Rates

Loan terms
• 3 - 6 years

Loan uses
• Credit card refinancing, debt consolidation, home improvement, and other purposes

Residency
• Must be a U.S. Citizen or Resident Alien with a valid Social Security number and physical address, currently residing in the U.S.

Time to get funds
• About 1 - 4 business days, given approval and bank account verification

Key benefits
• Tailored monthly payment options designed to fit your budget
• After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all your prior payments in full and on time1

Marcus personal loans review

1 After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all your prior payments in full and on time. Marcus will waive any interest incurred during the deferral and extend your loan by one month (you will pay interest during this extra month). Your payments resume as usual after your deferral. Advance notice is required. See loan agreement for details.

payoff

View details
Fixed: 5.99% - 24.99% APR$5,000 up to $35,000Get Rates

Loan terms
• 2 - 5 years

Loan uses
• Debt consolidation and credit card consolidation only

Residency
• Borrower can't reside in DC, DE, IA, LA, MA, MD, MI, MN, MS, NC, NE, NV, OH, OK, VA, VT, WA, WI, or WV

Time to get funds
• As soon as 2 - 5 business days after verification

Key benefits
• Free FICO score updates
• If you lose your job, they’ll work with you on payments
• Offers scientific personality, stress, and cash flow assessments to help you get a better understanding of your personal finances

Payoff personal loans review

prosper

View details
Fixed: 6.95% - 35.99% APR$2,000 up to $35,000Get Rates

Loan terms
• 3 - 5 years

Loan amount
• $2,000 to $40,000

Loan uses
• Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes

Residency
• Must be a U.S. resident with a bank account and Social Security number

Time to get funds
• On average, within 5 days of accepting your offer

Key benefits
• All loans through prosper are unsecured (no collateral required)
• Loan review process usually completed in 7 business days or less

Prosper personal loans review

upstart

View details
Fixed: 7.99% - 35.89% APR$1,000 up to $50,000Get Rates

Loan terms
• 3 - 5 years

Loan amount
• $1,000 to $50,000

Loan uses
• Debt consolidation, credit card refinancing, home improvement, and other purposes

Residency
• Borrower can't be a resident of CT, CO, IA, MA, MD, VT, or WV

Time to get funds
• Within a day of clearing necessary verifications

Key benefits
• Free credit monitoring
• Free educational resources that can help borrowers

Upgrade personal loans review

upstart

View details
Fixed: 8.89% - 35.99% APR$1,000 up to $50,000Get Rates

Loan terms
• 3 - 5 years

Loan amount
• $1,000 to $50,000

Loan uses
• Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes

Residency
• Must be a U.S. Citizen or Permanent Resident with a verifiable Social Security number

Time to get funds
• As soon as 1 - 3 business days

Key benefits
• Can apply for a second loan after making six on-time monthly payments ($50,000 maximum principal on all loans)

Upstart personal loans review

Compare rates from these lenders without affecting your credit score. 100% free!

Get Rates Now

All APRs reflect autopay and loyalty discounts where available | LightStream payment example | Read more about Rates and Terms

2. Credit unions

Non-profit credit unions typically offer better rates and terms with simpler applications than traditional banks, but you usually need to be a member to get a loan there.

3. Traditional banks

Not all banks offer personal loans for debt consolidation or any other purpose, but many do. Typically, the debt consolidation loan rates and terms banks offer are worse than the other options and the credit score qualifications are more stringent. If you have a long-standing relationship with a bank, though, it’s worth asking what they can do for you.

Ready to see if debt consolidation is right for you?
Compare rates from multiple lenders in just 2 minutes.

Compare Rates Now

How to choose the best consolidation loan

Choosing the best consolidation loan for your situation can be difficult and overwhelming since you have so many loan options. But here are the main steps to take so that you can choose the loan that works for you.

1. Review the requirements

The first step is to know what the requirements are for a debt consolidation loan. Although each lender uses a different formula to determine your creditworthiness, most take into account these common factors when assessing your loan request:

  • Credit score: Your credit score is usually the most important factor. If you have good credit (typically above 720), you’re more likely to qualify for a loan.
  • Credit report history: Many debt consolidation lenders will want to see a credit history of at least one to three years with no bankruptcies within the past one to two years. They might also consider the number of credit inquiries you’ve had over the last year, your open credit lines, and any delinquent payments or charge-offs.
  • Employment status: Lenders might require proof of income and some will require a minimum household income to qualify for a loan (frequently between $20,000 and $40,000, though it varies).
  • Debt-to-income ratio: Your debt-to-income ratio is all your monthly debt (including housing payments) as a percent of what you earn each month before taxes. Generally, lenders consider DTI ratios under 36% as the best. Higher than 50% is usually considered poor.

2. Get prequalified

With Credible, you can submit some basic personal information, the loan amount you’re interested in, and an estimate of your credit score to see if you’re eligible for a loan and what rates you prequalify for. Checking prequalified rates for loans on Credible will not affect your credit score.

Once you receive prequalified rates, you can submit a formal application for the loan option that is best for you. When you actually apply for a loan, however, you trigger a “hard pull” on your credit which affects your credit history.

But the hit your credit score takes with a “hard pull” may be more than counterbalanced by the benefits the loan provides your credit. Loan installment payments are generally better for your credit score than credit card debt, even if the total debt you’re paying off is the same. So erasing the maxed-out debt on those cards and replacing it with a loan may give you a credit boost.

3. Consider your options carefully

It might be tempting to jump on the offer with the lowest monthly payments, but you’ll want to weigh other factors as well to ensure you’re making the best decision for your situation.

When evaluating the costs of different loans, you’ll want to consider the following:

  • Total cost: For each offer, you should determine the amount you’ll actually end up paying at the end of your loan term, not just your monthly loan payment. If your monthly payment is lower, but stretched out over a long time, it could cost you more than paying credit card minimums since interest will keep accruing.
  • Origination fees: Most lenders charge you origination fees when you take out a loan. This is typically a percentage of the overall loan amount, usually between 1% and 6%. Look for lenders instead who have no fees.
  • Prepayment penalties: Some lenders don’t want you to pay off your debt early and will penalize you if you do so. This fee will vary depending on when in the loan’s life cycle you pay it off, so be sure to check if there are any prepayment penalties.
  • Late fees: Lenders typically tack on a fee for late monthly payments either as a percent of the monthly payment or a flat amount.
  • Scams: If a lender says your loan is “guaranteed” without getting much information from you, or if they charge you a fee upfront just to process your request — stay away. People saddled with high-interest credit card debt can be easy targets for scam artists, so make sure you’re only working with reputable lenders, like those on Credible.

Debt consolidation loan alternatives

If you don’t meet all of the requirements for a debt consolidation loan, but are still struggling with credit card debt, you still have other debt consolidation options. Here are a few to consider:

  • 0% APR credit card: Many credit cards offer a 0% introductory rate that, in some cases, applies to balance transfers. You might want to open a balance transfer credit card for your existing credit card balances and use the introductory period — which can be as long as 21 months — to pay your debt off. Just make sure you’re able to get the card paid off before the promotional rate expires or you’ll be stuck paying high credit card interest rates all over again.
  • Home equity loan: If you own your home, you might qualify for a home equity loan that you can use to consolidate debt. You can get lower rates on home equity loans than on personal loan. But you’ll need to weigh the pros and cons in your particular situation — some experts say you should only take out home equity loans to pay for things that increase your home’s value. But it may be your best choice depending on your other options.
  • Student loan refinancing: If the debt you’re struggling with isn’t on credit cards, but instead you’re burdened by student loans, a personal loan for debt consolidation won’t work. However, you still have other options to help with your student loan debt like a federal Direct Consolidation Loan or student loan refinancing.

Take the time to research and weigh all of your options before deciding if loan consolidation is the best solution for you. Although using a personal loan for debt consolidation can be a great way to to get out of debt, it won’t won’t fix all of your bad financial habits.

The psychological effect of being debt free and having a clean slate might tempt you into racking up a new round of debt, but be honest with yourself about what got you into trouble to begin with. Addressing any bad spending habits now is important to your long-term financial health.

Leah Schmerl contributed to the reporting for this article.


About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 3.99% - 35.99% APR with terms from 24 to 84 months. Rates presented include lender discounts for enrolling in autopay and loyalty programs, where applicable. Actual rates may be different from the rates advertised and/or shown and will be based on the lender’s eligibility criteria, which include factors such as credit score, loan amount, loan term, credit usage and history, and vary based on loan purpose. The lowest rates available typically require excellent credit, and for some lenders, may be reserved for specific loan purposes and/or shorter loan terms. The origination fee charged by the lenders on our platform ranges from 0% to 8%. Each lender has their own qualification criteria with respect to their autopay and loyalty discounts (e.g., some lenders require the borrower to elect autopay prior to loan funding in order to qualify for the autopay discount). All rates are determined by the lender and must be agreed upon between the borrower and the borrower’s chosen lender. For a loan of $10,000 with a three year repayment period, an interest rate of 7.99%, a $350 origination fee and an APR of 11.51%, the borrower will receive $9,650 at the time of loan funding and will make 36 monthly payments of $313.32. Assuming all on-time payments, and full performance of all terms and conditions of the loan contract and any discount programs enrolled in included in the APR/interest rate throughout the life of the loan, the borrower will pay a total of $11,279.43. As of March 12, 2019, none of the lenders on our platform require a down payment nor do they charge any prepayment penalties.

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About the author
Jamie Young
Jamie Young

Jamie Young is a Credible authority on personal finance. Her work has been featured by Time, Business Insider, Huffington Post, Forbes, CBS News, and more.

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