Credible
Get Rates
  • Refinance Student Loans
    • Compare Options
      • Best Refinancing Companies
      • Lender Reviews
      • Refinance Student Loans
      • Student Loan Consolidation
    • Learn the Basics
      • Fixed vs. Variable Rates
      • Forgiveness Programs
      • Consolidation vs Refinancing
      • Repayment Plans
      • More on Student Refi
    • How to
      • Consolidate Your Student Loans
      • Pay Off Your Student Loans
      • Lower Your Interest Rate
    • Tools
      • Current Student Loan Refi Rates
      • Refinancing Calculator
      • Repayment Calculator
      • Student Loan Score Calculator
  • Student Loans
    • Compare Options
      • Private Student Loans
      • Parent Student Loans
      • Law School Loans
      • Medical School Loans
      • Graduate Student Loans
    • Learn the Basics
      • Student Loan Limits
      • Living Expenses
      • Applying for FAFSA
      • Federal Student Loans
      • Student Loan Interest Rates
      • More on Student Loans
    • How To
      • Pay for College
      • Take Out Student Loans
      • Apply Without Cosigner
      • Apply for Student Loans
      • Pay for Grad School
    • Tools
      • Best Private Student Loans
      • Current Student Loan Rates
      • Student Loan Interest Calculator: Estimate Payments
      • Lender Reviews
  • Personal Loans
    • Compare Options
      • Best Personal Loan Lenders
      • Lender Reviews
      • Get Personal Loan Rates
    • Learn the Basics
      • How to Qualify
      • How to Get a Loan
      • Where to Get a Loan
      • Personal Loans with Cosigner
      • Pay Off Credit Card Debt
      • More on Personal Loans
    • Best for
      • Credit Card Consolidation
      • Debt Consolidation Loans
      • Home Improvement Loans
      • Good Credit
      • Fair Credit
      • Bad Credit
    • Tools
      • Current Personal Loan Rates
      • Personal Loan Calculator
  • Mortgages
    • Compare Options
      • Mortgage Refinance
      • Home Loan
      • Best Mortgage Refinance Companies
      • Best Mortgage Lenders
      • Mortgage Preapproval
      • Mortgage Payment Calculator
    • Compare Rates
      • Mortgage Refinance Rates
      • 30-Year Fixed Refinance Rates
      • 15-Year Fixed Refinance Rates
      • Home Loan Rates
      • 15-Year Fixed Mortgage Rates
      • 30-Year Fixed Mortgage Rates
    • Learn the Basics
      • How to Buy a House
      • How to Refinance Your Mortgage
      • How to Get the Best Rate
      • Cash-Out Refinancing
      • More on Home Loans and Refi
    • Pay Off Mortgage
      • Home Equity to Pay Off Debt
      • Paying Off Mortgage Early
      • Mortgage Refinance Cost
  • Insurance
    • Insurance Products
      • Insurance Products
      • Learn more about home insurance
    • Compare Options
      • Compare Insurance Quotes
      • Home Insurance Guide
    • Learn the Basics
      • What Home Insurance Covers
      • How Much Home Insurance You Need
      • Estimate Your Home Replacement Cost
      • How to Change Home Insurance
  • Company
    • About
    • Reviews
    • Blog
    • Lenders
    • Editorial Guidelines
    • FAQs
    • Press
  • Find My Rate
Advertiser Disclosure

Debt Consolidation vs. Bankruptcy: How to Choose

Debt consolidation and bankruptcy could both help you manage out-of-control debt — however, keep in mind that bankruptcy should be a last resort.

Emily Guy Birken Emily Guy Birken Edited by Ashley Harrison Updated January 6, 2023

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as "Credible."

If you’re struggling to make your monthly debt payments, then you might consider consolidating your debt or even filing for bankruptcy.

Debt consolidation allows you to combine all of your debt into a single personal loan while bankruptcy is a legal proceeding through which you might be able to discharge some or all of your debt.

Here’s what you need to know before deciding on debt consolidation vs. bankruptcy:

  • Debt consolidation vs. bankruptcy
  • What you should know about debt consolidation
  • What you should know about bankruptcy
  • 13 lenders for debt consolidation you should consider before bankruptcy
  • Which choice is the best decision for you?
  • Alternatives to debt consolidation and bankruptcy

Debt consolidation vs. bankruptcy

Getting a personal loan for debt consolidation or filing for bankruptcy are both potential relief strategies for handling out-of-control debt.

Keep in mind: Debt consolidation is a much more conservative option compared to bankruptcy, which should be treated as a last resort.

Here are a few points to consider as you compare debt consolidation vs. bankruptcy:

Debt consolidation

  • Overall cost: Consolidating your debt will generally only cost what you pay in interest. If you’re able to qualify for a lower interest rate than you had before, then you’ll likely pay less than you would have had you not consolidated the debt.
  • Repayment time: Personal loans for debt consolidation generally offer repayment terms ranging from one to seven years, depending on the lender.
  • Credit score impact: Because the amount of debt you have won’t change, this shouldn’t have much impact on your credit score. You could see a slight dip in your score after you apply for the loan and the lender performs a hard credit check — however, this is usually only temporary, and your score will likely bounce back within a few months. Debt consolidation might even help improve your credit score over time if you make on-time payments on the new loan.

Learn More: Credit Card Consolidation Loans

Bankruptcy

  • Overall cost: If you file for bankruptcy, you can expect to pay a filing fee of $310 or $335, depending on whether you opt for Chapter 7 or Chapter 13. You might also have to pay for credit counseling or financial management courses. And if you decide to retain a bankruptcy lawyer, it could cost you up to a few thousand dollars.
  • Repayment time: With Chapter 7 bankruptcy, your assets are liquidated, and your creditors are paid with the proceeds while the rest of your debts are discharged — this usually takes about six months. Chapter 13 bankruptcy, on the other hand, lets you keep your property in exchange for agreeing to a three- to five-year debt repayment plan; if you make all of the agreed-upon payments under this plan, your outstanding debt will be discharged.
  • Credit score impact: Either type of bankruptcy can cause excessive damage to your credit score and will likely limit your ability to take out new loans unless you rebuild your credit. Keep in mind that a Chapter 7 bankruptcy will remain on your credit report for 10 years while a Chapter 13 bankruptcy will stay on your credit report for seven years.
Debt consolidationBankruptcy
Type of processFinancialLegal
Overall costDepends on interest rateA few hundred to a few thousand dollars
(depending on which chapter you file for and attorney fees)
Repayment time1 to 7 years
(depending on lender)
  • Chapter 7: About 6 months
  • Chapter 13: 3 to 5 years
Credit impact
  • Little to no initial impact
  • Might improve credit in the future if you make on-time payments
  • Major negative impact
  • Stays on credit report for 7 to 13 years
    (depending on which chapter you file for)
Effect on debt paymentsLeaves with you a single paymentCould eliminate some or all of your monthly payments
Wipes out debt?NoCan discharge some or all debt

If you decide to take out a personal loan for debt consolidation, be sure to consider as many lenders as possible to find the right loan for your needs. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.

Ready to find your personal loan?
Credible makes it easy to find the right loan for you.

  • Free to use, no hidden fees
  • One simple form, easy to fill out and your info is protected
  • More options, pick the loan option that best fits your personal needs
  • Here for you. Our team is here to help you reach your financial goals

Find My Rate
Checking rates won’t affect your credit

Trustpilot

Check Out: Secured Personal Loans You Should Know About

What you should know about debt consolidation

Choosing to consolidate your debt through a debt consolidation loan could be a helpful way to more easily manage your debt. With this option, you’ll take out a new personal loan that will be used to pay off all of your old debts — leaving you with a single loan to repay over time.

Before you decide whether debt consolidation is right for you, it’s important to consider both the advantages and drawbacks:

Pros of debt consolidation

  • Combines all of your debt: If you consolidate your debt, you’ll end up with just one loan and one monthly payment.
  • Might get a lower interest rate: This could save you money on interest charges over the life of the loan.
  • Comes with a set payoff date: You’ll know exactly when your debt will be paid off.
  • Likely won’t hurt your credit score: While you might see your score go down by a few points after the lender performs a hard credit check, it should bounce back within a few months. A debt consolidation loan might even help boost your score in the future if you keep up with your payments.

Learn More: How to Pay Off Credit Card Debt Fast

Cons of debt consolidation

  • Limited options for bad credit: You’ll typically need good to excellent credit to qualify for a personal loan. While some lenders offer personal loans for bad credit, these loans generally come with higher interest rates compared to good credit loans.
  • Debt isn’t discharged: Unlike with bankruptcy, your debt isn’t discharged through debt consolidation.
  • Could come with fees: Some personal loan lenders charge fees — such as origination or late fees. Keep in mind that if you take out a loan with one of Credible’s partner lenders, though, you won’t have to worry about prepayment penalties.
  • Might not be a long-term solution: If you can’t avoid racking up more debt, then debt consolidation might not help you in the long run.

Before taking out a debt consolidation loan, it’s important to consider how much that loan will cost you in the future. This way, you can prepare for any added expenses. You can estimate how much you’ll pay for a loan using our personal loan calculator below.

Enter your loan information to calculate how much you could pay

? Enter the total amount borrowed $
? Enter your annual interest rate %
or
? Enter the amount of time you have to repay your loan years
Total Payment $
Total Interest $
Monthly Payment $

With a $ loan, you will pay $ monthly and a total of $ in interest over the life of your loan. You will pay a total of $ over the life of the loan.


Need a personal loan?
Compare rates without affecting your credit score. 100% free!

Check Personalized Rates

Checking rates won’t affect your credit score.

Check Out: Where to Get a Personal Loan

What you should know about bankruptcy

Bankruptcy is a legal process that lets borrowers discharge some or all of their debt. There are two types of bankruptcy you might file for: Chapter 7 or Chapter 13.

Either option could provide more comprehensive debt relief compared to a debt consolidation loan, as it allows you to legally discharge some or all of your debts — meaning you won’t be required to pay them off.

However, bankruptcy comes at a steep cost. Not only can it come with expensive fees, but it will severely damage your credit, which will limit your ability to access more credit in the future. But in some circumstances, it might be the kind of relief certain borrowers need.

If you’re thinking about filing for bankruptcy, consider these pros and cons:

Pros of bankruptcy

  • Discharges some or all of your debt: Getting out from under the burden of massive debt can give you some immediate relief.
  • Offers a hard reset for your financial life: While bankruptcy damages your finances, it also offers a way to start over. For some borrowers, this could be worth it.
  • Relatively short time period: Compared to some legal processes, bankruptcy doesn’t come with too long of a timeframe — a Chapter 7 filing is typically resolved in about six months, and a Chapter 13 filing takes three to five years.
  • Doesn’t require good credit or a cosigner: Unlike applying for a debt consolidation loan, you don’t need to worry about having good credit or a cosigner to file for bankruptcy.

Learn More: How to Check If a Personal Loan Company Is Legitimate

Cons of bankruptcy

  • Might require forfeiture of assets: If you file for Chapter 7 bankruptcy, you might lose some of your property if it’s considered nonexempt.
  • Long-term negative consequences to your credit: A bankruptcy will stay on your credit reports for seven to 10 years, depending on the type you filed for. This could make it difficult to access more credit in the future.
  • Not all debt can be discharged in bankruptcy: While bankruptcy might help you get out of credit card debt or discharge medical bills, there are other types of debt that don’t qualify. For example, you can’t discharge student loans, unpaid taxes, alimony, or child support.
  • Could be expensive: Filing fees, lawyer fees, and court fees could increase the cost of bankruptcy.

Check Out: Pay Off Credit Card Debt ASAP With a Personal Loan

13 lenders for debt consolidation you should consider before bankruptcy

Bankruptcy can offer debt relief, but it also has far-reaching effects that should never be taken lightly. Before deciding whether to file for bankruptcy, it’s a good idea to explore your other options — including debt consolidation loans.

Tip: Keep in mind that if you have poor credit or a large amount of debt, you might still be able to qualify for a debt consolidation loan, depending on the lender.

If you’re struggling to get approved, consider applying with a cosigner. Not all lenders allow cosigners on personal loans, but some do.

Even if you don’t need a cosigner to qualify, having one might get you a lower interest rate than you’d get on your own.

With Credible, you can easily compare your prequalified rates from our partner lenders in the table below in two minutes — for free and without hurting your credit.

LenderFixed ratesLoan amountsMin. credit scoreLoan terms (years)


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 29.99% APR $10,000 to $35,000Not disclosed by lender2, 3, 4, 5
  • Fixed APR: 7.99% - 29.99% APR
  • Min. credit score: Does not disclose
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: If approved, funds sent within 24-72 hours†
  • Fees: Origination fee
  • Discounts: No
  • Eligibility: Available in all states except CO, CT, HI, KS, NH, NY, ND, OR, VT, WV, WI, and WY
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
9.95% - 35.99% APR $2,000 to $35,000**5502, 3, 4, 5*
  • Fixed APR: 9.95% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 550
  • Loan amount: $2,000 to $35,000**
  • Loan terms (years): 2, 3, 4, 5*
  • Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: Avant
  • Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes
  • Min. Income: $1,200 monthly


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 15.19% APR $10,000 to $50,0007003, 4, 5, 6
  • Fixed APR: 7.99% - 15.19% APR
  • Variable APR: N/A
  • Min. credit score: 700
  • Loan amount: $10,000 to $50,000
  • Loan terms (years): 3 to 6
  • Time to fund: Next business day
  • Fees: No prepayment penalty
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, self-employment, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.99% - 35.99% APR $2,000 to $50,0006002, 3, 4, 5
  • Fixed APR: 8.99% - 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 600
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 to 3 business days after successful verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan servicer: Best Egg and Blue Ridge Bank
  • Min. Income: None
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 24.99% APR $2,500 to $35,0006603, 4, 5, 6, 7
  • Fixed APR: 6.99% - 24.99% APR
  • Min. credit score: 660
  • Loan amount: $2,500 to $35,000
  • Loan terms (years): 3, 4, 5, 6, 7
  • Time to fund: As soon as the next business day after acceptance
  • Fees: Late fee
  • Discounts: None
  • Eligibility:  Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 29.99% APR $5,000 to $40,0006002, 3, 4, 5
  • Fixed APR: 7.99% - 29.99% APR
  • Min. credit score: 600
  • Loan amount: $5,000 to $40,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 2 to 5 business days after verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except MA and NV
  • Customer service: Phone, email, chat
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation and credit card consolidation only


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.3% - 35.89% APR $1,000 to $40,0006003, 5
  • Fixed APR: 8.3% - 35.89% APR
  • Min. credit score: 600
  • Loan amount: $1,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: Usually takes about 2 days†
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: LendingClub Bank
  • Min. Income: None
  • Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.99% - 23.99% APR $5,000 to $100,0006602, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
  • Fixed APR: 5.99% - 23.99% APR
  • Min. credit score: 660
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7*
  • Time to fund: As soon as the same business day
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except RI and VT
  • Customer service: Phone, email
  • Soft credit check: No
  • Loan servicer: LightStream
  • Min. Income: Does not disclose
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.74% - 17.99% APR $600 to $50,000
(depending on loan term)
6601, 2, 3, 4, 5
  • Fixed APR: 7.74% - 17.99% APR
  • Min. credit score: 660
  • Loan amount: $600 to $50,000*
  • Loan terms (years): 1, 2, 3, 4, 5
  • Time to fund: 2 to 4 business days after verification
  • Fees: None
  • Discounts: None
  • Eligibility: Does not disclose
  • Customer service: Phone, email
  • Soft credit check: No
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
6.99% - 35.99% APR $2,000 to $50,0006402, 3, 4, 5
  • Fixed APR: 6.99% - 35.99% APR
  • Min. credit score: 640
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as one business day
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA, ND, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
7.99% - 23.43% APR10 $5,000 to $100,000Does not disclose2, 3, 4, 5, 6, 7
  • Fixed APR: 7.99% - 23.43% APR10
  • Min. credit score: Does not disclose
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7
  • Time to fund: 3 business days
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except MS
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Solely for personal, family, or household uses


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
8.49% - 35.97% APR $1,000 to $50,0005602, 3, 5, 6
  • Fixed APR: 8.49% - 35.97% APR
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000*
  • Loan terms (years): 2 to 7
  • Time to fund: Within a day of clearing necessary verifications
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except West Virginia
  • Customer service: Email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes


Credible Rating
Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
View details
5.4% - 35.99% APR4 $1,000 to $50,00055803 to 5 years4
  • Fixed APR: 5.4% - 35.99% APR4
  • Min. credit score: 580
  • Loan amount: $1,000 to $50,0005
  • Loan terms (years): 3 to 5 years4
  • Time to fund: As fast as 1 business day6
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $12,000
  • Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
Compare rates from these lenders without affecting your credit score. 100% free!

Compare Now


Trustpilot

All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

Learn More: How to Get a $50,000 Personal Loan Fast

Which choice is the best decision for you?

Ultimately, the right choice between debt consolidation vs. bankruptcy will depend on your individual circumstances.

For example, if you’d like to combine multiple debts to more easily pay them off and have good enough credit to qualify for a new loan, then debt consolidation is likely the better choice — especially because it won’t damage your credit.

However, if your debt has ballooned to the point where paying all of it off is next to impossible, then bankruptcy might be a realistic option to take control of the situation despite the long-term consequences for your credit.

Tip: If you’re at the point of considering bankruptcy, it’s a good idea to discuss it with a bankruptcy attorney. This way, you can be sure you’re making the right decision.

Regardless of whether you choose debt consolidation or bankruptcy, make sure you understand how each option will affect your financial health now and in the future.

Check Out: How to Get a $100,000 Personal Loan Fast

Alternatives to debt consolidation and bankruptcy

While debt consolidation and bankruptcy are both options to ease the financial burden of debt, they aren’t your only choices. Here are a few alternatives to consider:

  • Home equity loan: Homeowners might be able to tap into the equity in their homes with a home equity loan. If you’re considering a home equity loan vs. a personal loan, keep in mind that because a home equity loan is secured by your house, you can likely get a lower interest rate on this type of loan compared to a personal loan. However, if you default on the loan, you risk losing your home.
  • Home equity line of credit (HELOC): A HELOC is another way to borrow against the equity in your home. Unlike a home equity loan, a HELOC is a kind of revolving credit — meaning you can repeatedly draw on and pay off your credit line. Just keep in mind that defaulting on a HELOC could lead to foreclosure on your home.
  • Personal line of credit: You could also think about a personal line of credit, which is a type of unsecured revolving credit. If you’re considering a personal line of credit vs. a personal loan, keep in mind that a personal line of credit might come with a higher interest rate compared to a personal loan.
  • Balance transfer card: Transferring your debt balances to a balance transfer card is another way to consolidate and pay off debt without racking up more interest charges. These cards sometimes offer a 0% APR introductory period, which means you can avoid paying interest if you can repay your balance by the time this period ends. Just remember that if you can’t pay off your card in time, you could be stuck with some hefty interest charges.
  • Credit counseling: There are nonprofit credit counseling organizations that specialize in creating debt management plans that help borrowers take control of their debt. For example, you could consider reaching out to the National Foundation for Credit Counseling or a similar trusted organization for assistance.

If you decide that a personal loan for debt consolidation is right for you, remember to shop around and compare as many lenders as you can to find a loan that best suits your needs. Credible makes this easy — you can see your prequalified rates from multiple lenders in two minutes.

Ready to find your personal loan?
Credible makes it easy to find the right loan for you.

  • Free to use, no hidden fees
  • One simple form, easy to fill out and your info is protected
  • More options, pick the loan option that best fits your personal needs
  • Here for you. Our team is here to help you reach your financial goals

Find My Rate
Checking rates won’t affect your credit

Trustpilot


About Rates and Terms: Rates for personal loans provided by lenders on the Credible platform range between 5.40%-35.99% APR with terms from 12 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 10%. 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.

About the author
Emily Guy Birken
Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

Read More

Home » All » Personal Loans » Debt Consolidation vs. Bankruptcy: How to Choose

Personal Loan Basics


  • Personal Loan Interest Rates
  • How to Get a Personal Loan
  • Qualify for a Personal Loan
  • Where to Get a Personal Loan
  • Time to Fund a Personal Loan
  • How to Get Out of Credit Card Debt

Personal Loan Amounts

  • Get a $5,000 Loan
  • Get a $10,000 Loan
  • Get a $20,000 Loan
  • Get a $50,000 Loan
  • Get a $100,000 Loan

Tools and Resources

  • Good Credit Loans
  • Fair Credit Loans
  • Bad Credit Loans
  • Get Personal Loan Rates
  • Current Personal Loan Rates
  • Best Personal Loan Lenders
  • Best Debt Consolidation Loans
  • Personal Loan Calculator
  • Lender Reviews

  • Click to share on Facebook (Opens in new window)
  • Click to share on LinkedIn (Opens in new window)
  • Click to share on Twitter (Opens in new window)
  • Click to email a link to a friend (Opens in new window)

Related Articles

Personal Loans

Debt Consolidation for Senior Citizens: Strategies to Get Out of Debt

Personal Loans

3 Steps to Get a Debt Consolidation Loan for Bad Credit

Personal Finance

Debt Relief Programs: Options to Reduce Debt

  • Read More
    • Refi Student Loans
    • In School Loans
    • Personal Loans
    • Mortgages
    • Insurance
  • Resources
    • Lender Reviews
    • Loan Calculators
    • Student Loan Score Calculator
    • Data Insights
    • Debt Statistics
    • Sitemap
  • Compare
    • Student Loan Refinance
      • Current Student Loan Refi Rates
    • Student Loan Consolidation
    • Private Student Loans
      • Current Student Loan Rates
    • Personal Loans
      • Current Personal Loan Rates
    • Refinance Mortgage
      • Mortgage Refinance Rates
        • 15-Year Fixed Refinance Rates
        • 30-Year Fixed Refinance Rates
    • Home Loans
      • Home Loan Rates
        • 15-Year Fixed Mortgage Rates
        • 30-Year Fixed Mortgage Rates
    • Insurance
  • Top Lenders
    • Best Student Loan Refi Companies
    • Best Private Student Loans
    • Best Personal Loans
    • Best Mortgage Lenders
    • Best Mortgage Refinance Companies
  • Company
    • About
    • Reviews
    • Blog
    • Editorial Staff
    • Editorial Guidelines
    • News
    • Press
  • Legal
    • Terms of Use
    • Privacy Policy

© 2023 Credible


Credible Operations, Inc. NMLS ID# 1681276 | NMLS Consumer Access | Licenses and Disclosures
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.