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If you have high-interest debt, consolidating that debt might help you save money and even pay off your balances faster. One way to do this is through a debt consolidation loan — a type of personal loan that lets you combine your debts into one new loan with a single payment.
There are also other options available for debt consolidation.
Here’s what you should know about personal loans vs. debt consolidation loans:
- Is a debt consolidation loan the same as a personal loan?
- 17 personal loans to consider for debt consolidation
- How to qualify for a debt consolidation loan
- What are the benefits of a debt consolidation loan?
- Can a debt consolidation loan hurt your credit score?
- Debt consolidation loan alternatives
Is a debt consolidation loan the same as a personal loan?
Yes — a debt consolidation loan is simply a type of personal loan. Here’s how these loans work:
A personal loan is a kind of installment loan that can be used for almost any personal expense, such as home renovations, a dream vacation, or debt consolidation.
These loans are available from online lenders, banks, and credit unions and generally range from a few hundred dollars up to $100,000 or more, depending on the lender.
Debt consolidation loan
A debt consolidation loan is a type of personal loan that lets combine existing debts into one loan. Depending on your credit, you might also qualify for a lower interest rate than you’ve been paying, which could help you save money over the life of your loan.
In some cases, you’ll need to specify a loan purpose when you apply for a personal loan. While many lenders will let you use a personal loan for debt consolidation, others might have restrictions on how you can use your loan.
Check Out: Credit Card Consolidation Loans
17 personal loans to consider for debt consolidation
Here are Credible’s partner lenders that offer personal loans for debt consolidation:
|Lender||Fixed rates||Loan amounts||Min. credit score||Loan terms (years)|
|9.95% - 35.99% APR||$2,000 to $35,000**||550||2, 3, 4, 5*|
|6.79% - 17.99% APR||$10,000 to $50,000||700||3, 4, 5, 6|
|4.99% - 35.99% APR||$2,000 to $50,000||600||3, 5|
|5.99% - 24.99% APR||$2,500 to $35,000||660||3, 4, 5, 6, 7|
|7.99% - 29.99% APR||$10,000 to $35,000||Not disclosed by lender||2, 3, 4, 5|
|7.04% - 35.89% APR||$1,000 to $40,000||600||3, 5|
|9.99% - 35.99% APR||$2,000 to $36,500||580||2, 3, 4|
|2.49% - 19.99% APR||$5,000 to $100,000||660||2, 3, 4, 5, 6, 7
(up to 12 years for home improvement loans)
|6.99% - 19.99% APR1||$3,500 to $40,0002||660|
(TransUnion FICO®️ Score 9)
|3, 4, 5, 6, 7|
|18.0% - 35.99% APR||$1,500 to $20,000||None||2, 3, 4, 5|
|5.99% - 24.99% APR||$5,000 to $40,000||600||2, 3, 4, 5|
|4.99% - 17.99% APR||$600 to $50,000 |
(depending on loan term)
|660||1, 2, 3, 4, 5|
|6.95% - 35.99% APR||$2,000 to $40,000||640||3, 5|
|5.74% - 20.28% APR10||$5,000 to $100,000||Does not disclose||2, 3, 4, 5, 6, 7|
|8.93% - 35.93% APR7||$1,000 to $20,000||560||3, 5|
|5.94% - 35.97% APR||$1,000 to $50,000||560||2, 3, 5, 6|
|4.37% - 35.99% APR4||$1,000 to $50,0005||580||3 to 5 years4|
Avant: Best for borrowers with poor credit
Avant offers personal loans from 2,000 to $35,000* with terms from two to five years••. If your credit is less than perfect, you might still qualify with Avant.
Axos Bank: Best for fast loan funding
If you’d like to quickly consolidate your debt, Axos Bank could be a good choice. You can borrow $5,000 to $35,000 and could have your money as soon as the next business day if you’re approved.
Best Egg: Best for borrowers with fair credit
Best Egg could be a good option if you want to borrow anywhere from $2,000 to $50,000 and have less-than-stellar credit. If you’re approved, you could have your funds within one to three days after successful verification.
Discover: Best for longer loan terms
With Discover, you could have up to seven years to repay your loan. This could get you a lower monthly payment, easing the strain on your budget. However, keep in mind that a longer interest term also means paying more in interest over time.
FreedomPlus: Best for consolidating high-interest debt
You might qualify for a lower interest rate on a FreedomPlus loan if you use at least 85% of the loan proceeds to pay off existing debt.
Adding a cosigner or showing proof of retirement savings could also get you a lower rate with FreedomPlus.
LendingClub: Best for borrowers who need a cosigner
LendingClub is one of the few lenders that allow cosigners on personal loans. If you have poor credit, applying with a cosigner could help you get approved.
LendingPoint: Best for borrowers with bad credit
LendingPoint specializes in working with borrowers who have near-prime credit — generally meaning a credit score in the upper 500s or 600s.
With LendingPoint, you can borrow $2,000 to $36,500 with a term ranging from two to five years.
LightStream: Best for large loan amounts
If you need to borrow a large amount, LightStream could be a good choice. You can borrow $5,000 to $100,000 with funding as soon as the same business day if you’re approved.
Marcus: Best for flexible repayment options
Marcus personal loans are available for $$3,500 to $40,0002 with terms from three to six years. Keep in mind that if you make on-time payments for 12 months, you can defer one payment interest-free.
OneMain Financial: Best for below-average credit
Unlike many other lenders, OneMain Financial doesn’t require a minimum credit score, which means you might qualify even if you have less-than-prime credit.
OneMain Financial also uses an in-person “ability to pay” evaluation to help determine your loan options.
Payoff: Best for consolidating credit card debt
Payoff personal loans can only be used to consolidate credit card debt. You can borrow $5,000 to $40,000 with a term ranging from two to five years.
PenFed: Best for small loan amounts
If you only need a small loan amount, PenFed could be a good option. You can borrow as little as $600 up to $50,000 with a term from one to five years.
Prosper: Best for borrowers with good credit
Prosper operates an online, peer-to-peer loan marketplace where you can borrow $2,000 to $40,000.
Note that when you apply for a Prosper loan, investors will need to commit to funding it, which means the loan process might take longer compared to other lenders.
SoFi: Best for borrowers with excellent credit
With SoFi, you can borrow $5,000 to $100,000 with a term from two to seven years. Although SoFi doesn’t disclose its credit requirements, most SoFi borrowers have very good to excellent credit.
As a SoFi borrower, you’ll also enjoy perks like unemployment protection and free financial advising.
Upgrade: Best for fast loan decisions
Upgrade personal loans are available for $1,000 to $50,0000 with terms of three or five years. If you’re approved, you could have your loan funded within a day of clearing necessary verifications.
Upstart: Best for borrowers with thin credit
Upstart will consider your education and job history to determine potential not reflected in your credit score. This means you might qualify even if you have thin credit — meaning you don’t have enough of a credit history to have a credit score.
How to qualify for a debt consolidation loan
If you’re ready to get a debt consolidation loan, follow these three steps:
- Check your credit. Before shopping for a loan, it’s a good idea to make sure your credit is as strong as possible. You can check your credit reports from each of the credit bureaus for free through AnnualCreditReport.com. If there are any errors, dispute them with the appropriate credit bureaus to potentially boost your score.
- Compare lenders and pick a loan option. Be sure to compare as many lenders as possible to find the right loan for you. Consider not only rates but also repayment terms, any fees charged by the lender, and eligibility requirements. After comparing lenders, choose the loan that best suits your needs.
- Complete the application and get your funds. You’ll need to fill out a full application and submit any required documentation, such as tax returns or pay stubs. If you’re approved, the lender will have you sign for the loan so you can get your money — typically within one week or less, depending on the lender.
It’s also important to consider how much a debt consolidation loan will cost you over time. This way, you can prepare for the new monthly payment and adjust your budget accordingly. 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
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.
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What are the benefits of a debt consolidation loan?
Debt consolidation loans offer several benefits. For example, a debt consolidation loan could:
- Streamline your payments: Instead of juggling multiple debt payments, consolidating your debt combines your balances and leaves you with just one payment going forward. This can help you more easily manage your debt.
- Potentially reduce your interest rate: Depending on your credit, you might qualify for a lower interest rate compared to what you’ve been paying. This could help you save money on interest charges over time and maybe pay off your debt faster.
- Give you a set payoff date: Debt consolidation loans have fixed repayment terms, so you’ll know exactly when you’ll be out of debt.
Learn More: Average Personal Loan Interest Rates
Can a debt consolidation loan hurt your credit score?
A debt consolidation loan could either help your credit score or hurt it — though keep in mind that the positive effects will likely outweigh any negative impact over time.
Here’s how a debt consolidation loan might negatively impact your credit:
- Hard credit inquiry: The lender will perform a hard credit inquiry to determine your creditworthiness, which might cause your score to drop by a few points. However, this effect is usually only temporary, and your score will likely bounce back within a few months.
- Missed payments: If you miss any of your loan payments, your credit could be damaged.
And here’s how a debt consolidation loan could you build your credit:
- Build positive payment history: Payment history makes up the biggest part of your FICO score — 35%. If you make all of your payments on time, you might see your credit score go up.
- Reduce credit utilization: Your credit utilization is the total amount of debt you owe divided by the amount of credit you have available, and it makes up 30% of your FICO score. If you reduce your debt with a debt consolidation loan, you could improve this ratio and potentially raise your credit score.
- Debt Relief Programs: Options to Reduce Debt
- Debt Consolidation Loan vs. Credit Card Refinancing: How To Choose
Debt consolidation loan alternatives
If a debt consolidation loan doesn’t seem right for you, here are some other options to consider:
- Credit card: Balance transfer cards allow you to move your balances to one card to help you pay off credit card debt. Some cards also offer a 0% APR introductory period, which means you could avoid paying any interest if you repay your balance by the time this period ends. However, keep in mind that if you can’t pay off your card in time, you could be stuck with hefty interest charges.
- Home equity line of credit (HELOC): If you’re a homeowner and have equity in your home, a HELOC could be another way to consolidate your debt. Because a HELOC is secured by your home, you might get a lower rate compared to a personal loan — but this also means you risk losing your house if you can’t make your payments.
- Debt management: If you’re overwhelmed by your debt, a nonprofit credit counseling agency — such as the National Foundation for Credit Counseling — could help you develop a debt management plan. The agency will work with your creditors to distribute your payments so you can become debt free within five years.
If you decide to take out a debt consolidation loan, remember to consider as many lenders as possible to find a loan that works for you. Credible makes this easy — you can compare your prequalified rates from multiple lenders in two minutes.
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