If you have a large amount of debt — especially high-interest debt — then debt consolidation might be a good choice. It allows you to combine multiple debts into just one, and often at a lower interest rate and lower monthly payment.
If you’re considering debt consolidation, saving money on interest is probably a top priority for you. Make sure to shop around to find the best interest rate while also taking into account other factors like fees, repayment terms, and more.
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Current debt consolidation loan rates
Debt consolidation is usually done through a personal loan, which most often has a fixed interest rate. You’ll be offered a specific rate at the time of loan approval and will pay that rate for your entire term. Because of these fixed rates, your monthly payments will also remain consistent for the full term. Here’s what you can expect based on current rates:
Average prequalified personal loan rates for borrowers who used the Credible marketplace to select a lender for debt consolidation. Prequalified rates are not offers of credit. Source: Credible.com analysis.
The rate you’ll be offered on your debt consolidation loan depends on several factors:
- Lender: Interest rates vary from one lender to the next. Many lenders share their ranges on their websites so you can see them before applying. While each lender has a range rather than a set rate, different lenders may have lower starting rates or higher maximum rates than others.
- Credit score: Your credit score is one of the most important factors lenders consider. The higher your credit score, the lower the rate you can get. Likewise, a lower credit score will result in a higher rate. Before you apply for a loan, make sure to check your credit score so you’re prepared.
- Debt-to-income ratio (DTI): You may be offered a lower rate if you have a lower DTI , meaning your debt takes up a relatively small percentage of your income. Too high of a DTI could result in you getting a higher rate — or even being denied a loan altogether.
- Loan amount: The amount you borrow may also partially affect your loan interest rate. If you borrow a large sum of money, you may be subject to a higher rate. However, you may also get a higher rate for a very small loan.
- Repayment term: Generally speaking, a longer repayment term results in a higher rate, while a shorter repayment term results in a lower one. In addition to the higher rate, a longer repayment term costs you more in interest either way, since there’s more months for interest to accrue.
Keep in mind: In addition to interest rate, you should also pay attention to a lender’s annual percentage rate (APR). The APR on a loan is the total cost of the loan, including both interest and fees. It gives you a more realistic view of how much your loan will cost.
Learn More: APR vs. Interest Rate on Personal Loans
How does a debt consolidation loan work?
A debt consolidation loan is most often a personal loan. It’s an installment loan that you borrow in one large lump sum and then pay off over a predetermined repayment period.
When you borrow a debt consolidation loan, you pay off other debts, such as high-interest credit card debt or even other personal loans. You no longer have to make several separate payments in different amounts and at different interest rates. Instead, you’ll just have one monthly payment. And because personal loans usually have lower interest rates than credit cards, you’re often able to reduce the cost of all of your debt.
For example: Let’s say you have three separate debts you’d like to consolidate, which add up to $8,250. Your debts are:
- A credit card with $2,500 and an interest rate of 19%
- A credit card with $750 and an interest rate of 21%
- A 36-month personal loan with $5,000 and an interest rate of 12%
You have monthly payments that amount to more than $250. Assuming you make the minimum payment on your credit cards and pay off your personal loan on time. It will take you more than 17 years to pay off all of your debt, and you will pay more than $5,000 in interest.
Now, let’s say you apply for a debt consolidation loan to pay off all three debts. Your credit has improved since you last got a personal loan, so you qualify for an interest rate of 9% on a five-year loan.
Your new monthly payment would be just $171, you would pay only $2,025 in interest — less than half of what you originally would have paid — and your debt would be paid off more than a decade sooner.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Overview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Overview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Overview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Overview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Overview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Overview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Overview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Overview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Overview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Overview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Fees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Overview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Pros and cons of debt consolidation
Before pursuing debt consolidation, consider some of the pros and cons:
Pros
- Simplified payments: Debt consolidation allows you to combine multiple monthly payments into one, which can simplify your monthly budget.
- Lower interest rate: In many cases, you can qualify for a lower interest rate, especially if you’re consolidating high-interest debt.
- Lower monthly payment: A lower interest rate and fewer payments could allow you to pay less on your debt each month, freeing up money for extra payments or other goals.
- Faster repayment: With a lower interest rate, you’re likely to pay off your debt faster, especially if you consolidate credit cards, which have compounding interest, into a personal loan, which has simple interest.
Cons
- Upfront costs: Debt consolidation loans often come with upfront costs, such as origination fees that can range from 1% to 12% of your loan amount. However, some lenders may not charge origination fees.
- Interest rate risk: While many people end up with a lower interest rate after debt consolidation, your rate could increase if you have fair or poor credit.
- Potential credit impact: Debt consolidation can have a short-term negative impact on your credit score because you’re adding new debt to your credit report. However, the long-term impact may be a positive one.
- May not address root causes: If you have problems managing your finances that contributed to your debt, consolidation won’t necessarily help address them.
Learn More:
Additional strategies to get out of debt
If you’re struggling to pay off debt, debt consolidation isn’t your only option. Here are some alternatives to consider:
- 0% balance transfer card: If you have credit card debt, consider getting a 0% APR balance transfer card, which can allow you to avoid interest between 15 to 18 months. This type of strategy is ideal if you’re planning to put more toward your debt beyond the minimum payment in order to pay it down faster without interest accruing. As long as you pay off your debt within that time, you’ll pay no interest at all.
- Debt snowball or avalanche: These debt repayment strategies provide a framework to help you approach your debt. The snowball method pays off your smallest debts first, while the avalanche method pays off the debt with the highest interest first. The snowball method is generally the most motivating, as you see progress toward paying down your debt, but the avalanche method saves you the most in overall interest.
- Negotiate with your lender: If your debt has become overwhelming, consider contacting your lender to see if an agreement can be made. You can do this yourself, though many people negotiate their debts down using debt settlement. However, this should be a last resort, as debt settlement could hurt your credit and leave you open to legal action by your creditors.
- Increase your income: The more money you have to spend in your budget, the more quickly you can pay down your debt. It’s not uncommon for people to pick up side hustles to help pay off debt, but you can also try to increase your income at your current job.
- Credit counseling: A credit counselor can look at your financial situation and advise you on how best to get out of debt. They can also help you establish a debt management plan, which can help reduce your interest rates or fees and make your debt more manageable.
FAQ
Will debt consolidation affect my credit score?
Debt consolidation can affect your credit score both negatively and positively. In the short term, debt consolidation requires a new hard inquiry and adds a new account to your credit report, both of which can temporarily harm your credit. However, in the long run, debt consolidation can improve your payment history and credit utilization, which can improve your credit.
Can I consolidate all types of debt?
You can generally consolidate any type of unsecured debt, meaning debt that doesn’t have collateral. However, it may be more challenging to consolidate secured debt such as auto loans and mortgages.
Can I still use my credit cards after consolidating my debt?
Yes, once you consolidate your debt, your credit card will remain open and available to use. In fact, consolidating your debt will clear up more of your credit limit on your credit card. However, if overspending on your credit card is what got you into debt in the first place, it may be wise to use only your debit card or cash for a while.
Read More: How To Consolidate Bills
Meet the expert:
Erin Gobler
Erin Gobler is a freelance personal finance writer with more than eight years of experience writing online. She’s passionate about making the financial services industry more accessible by breaking down complicated financial topics in simple terms.
