Best Debt Consolidation Loans in June 2026

When to consolidate debt

Consider a debt consolidation loan if you:

• Can lower your interest rate
• Need to reduce your monthly payment
• Would rather simplify multiple payments into one
• Want to improve your credit by paying down credit card balances

A primary benefit of debt consolidation is saving money through a lower interest rate. But it can also reduce your monthly payment by lowering your rate, extending your repayment term, or both — which could help you avoid late fees and credit damage.

When not to consolidate debt

Debt consolidation may not make sense if you: 

• Can’t afford the new loan payment
• Won’t qualify for a lower interest rate
• Aren’t struggling to manage multiple payments
• Are considering bankruptcy

If a new loan doesn’t provide a clear advantage, such as a lower interest rate or lower monthly payment, it’s usually not worth it. And if bankruptcy is on the table, new debt could be considered fraudulent and not dischargeable.

Ways to consolidate debt

While personal loans are a common way to consolidate debt, they’re not the only way — and sometimes there are better options. Which is best depends on how much debt you have, the quality of your credit, which types of loans are available to you, and how long you’ll need to comfortably afford repayment. 

• Personal loans offer fixed payments, relatively fast funding, and lower average rates than credit cards. They’re ideal if you have good credit and need a low monthly payment. Plus, they’re typically unsecured, meaning you don’t risk collateral. They may be your only option if you don’t have home equity and can’t qualify for a 0% APR balance transfer card. While rates are lower than average credit card rates, they’re higher than rates on home equity loans (and 0% APR credit cards). Watch out for origination fees.
• 0% APR balance transfer credit cards may seem like a no-brainer — if paid off during the promotional period, you can save significantly in interest. But promo periods top out at 2 years. If you can’t afford to pay off the transferred amount in that timeframe, you’ll be charged interest at the card’s standard rate, which could defeat the purpose of debt consolidation. Most cards also charge a balance transfer fee between 3% and 5%.
• Home equity loans provide lower interest rates (under 10%) and longer terms than other debt consolidation options, but typically require at least 15% equity in your home and take longer to fund. Since your home is used as collateral,  you could lose it if you can’t make payments. Pay attention to closing costs.
• 401(k) loans don’t require credit approval since you’re borrowing from yourself. As a result, they have low rates but carry serious risks. Money you borrow is not invested, meaning you could lose out on retirement growth during the loan’s term; if you leave your job, repayment is often due immediately. Unpaid loans are treated as distributions, which means you’d owe income tax and potentially, a 10% early withdrawal penalty. 

Which debt consolidation method should you choose?

In many cases, either a personal loan or 0% APR credit card balance transfer will be the safest and most accessible choice. Both are unsecured, which means you won’t risk an asset to get the loan. A home equity loan — which uses your home as collateral — may be worth exploring if you’ve built up substantial equity and debt. As noted, a 401(k) loan can be a risky proposition. But if expensive debt is limiting your ability to contribute further to your retirement and other loans are not an option, it could be worth careful consideration. 

More details on the best debt consolidation lenders of 2026

Debt consolidation is the most popular use for personal loans on the Credible marketplace. People who took out debt consolidation loans paid off $25,760, on average, in May. Data is based on 2,913 closed loans.

What kinds of debt can you consolidate?

You can consolidate most types of debt, especially if you use a personal loan that sends a cash lump sum to your bank account. Some lenders offer the option of sending loan funds directly to your creditors, sometimes with a small interest rate discount. Here are a few common examples of debt that can be consolidated with a personal loan:

• Credit cards
• Medical bills
• Payday loans
• Other personal loans
• Lines of credit

Some debts, though, are better consolidated with other loan types — student loans, for example, are typically best consolidated with a new student loan.

Tip: Because they include upfront fees, APRs can be more informative than interest rates alone for estimating the total cost of a loan.

Pros and cons of debt consolidation

Debt consolidation loans have clear benefits whether you have multiple accounts you want to consolidate or just need a lower monthly payment. (You can also use a debt consolidation loan to pay off one loan only). But they have some drawbacks you should also consider.

Details on the pros

• One bill, one payment: You’ll have just one bill to keep track of and one payment to make each month.
• Lower APRs than credit cards: Average interest rates on personal loans are typically lower than the average rate on credit cards, so you might save money on interest and reduce the amount of your monthly payments. The average interest rate on a 2-year personal loan was 11.40%, according to Federal Reserve data, compared with an average credit card interest rate of 21.52%.
• Lower monthly payment: Even if you can't qualify for a lower rate, you could still lower your monthly payment by opting for a 5- or 7-year loan term. Note that this can result in higher total interest costs over the course of the loan. But it can be a good move to save your credit if you can't currently afford to make payments.
• Fixed rates and payments: Debt consolidation loans usually have fixed rates and repayment terms, which could help you set a timeline for paying off debt.
• Could improve your credit: Making timely payments every month until your loan is fully repaid can improve your credit. Your payment history makes up 35% of your FICO score.
• Discounts: Many lenders can use your loan to pay your creditors directly, and some offer direct pay discounts.
• Fast funding: Funding can be quick with a debt consolidation personal loan or credit card balance transfer.

Details on the cons

• Hard credit check: Lenders typically run a hard credit inquiry when you apply, and the loan application may lower your credit score by as much as 10 points for up to a year.
• Upfront fees: Some loans have origination fees, which add to the cost of your loan.
• Could be hard to qualify: It can be hard to qualify for debt consolidation if you have bad credit.
• May not solve spending issues: You may be tempted to re-use credit cards you’ve paid off or take out other forms of debt.

How to compare debt consolidation loans

When shopping for debt consolidation loans, follow these steps:

1. Consider how much money you need to consolidate your debt.
2. Prequalify with multiple lenders to get a sense of the APR you’ll pay. (See if you prequalify by selecting “Find My Rate” or “Check Rates” on this page.)
3. Consider the impact of origination fees. Origination fees are paid upfront (out of the loan proceeds) and reduce the amount you or your creditors receive. You may need to borrow more than the amount you owe to compensate. Seek out lenders without origination fees, if possible.
4. Use a personal loan calculator to estimate monthly payments for different repayment periods based on APRs you've prequalified for.
5. Find lenders that offer the loan amount you need and the repayment term you want.
6. Prioritize lenders that pay your creditors directly (some will give you an interest rate discount for choosing the direct-pay option).

Learn More: How to Choose the Best Debt Consolidation Loan Lender

Debt consolidation loan alternatives

While a debt consolidation loan may help you simplify debt or pay it off faster, it’s not the only or always the best option.

Debt management plan

A debt management plan, or DMP, through a certified credit counseling agency can help you create a debt paydown plan in cooperation with your creditors. The credit counselor may also be able to negotiate to forgive fees or lower interest rates on your behalf.

Instead of paying your creditors directly, you pay the credit counseling agency instead, which then sends payments to your creditors. You’re typically required to close the accounts you’re paying off as well, and are not allowed to open new credit accounts.

Fees consist of an enrollment fee and monthly maintenance fees — both modest in comparison to most other debt consolidation alternatives.

Debt settlement (not recommended)

Debt settlement companies offer to negotiate with your creditors to reduce how much you owe. However, you’re often required to stop making even minimum payments as a negotiation tactic, and the process can take years. In turn, this can devastate your credit.

Even if you already have bad credit, settled debts stay on your credit report for up to seven years. Plus, there’s no guarantee that creditors will approve a settlement, and they could sue or seek to garnish your wages for repayment. Payment is usually made to the debt settlement company based on a percentage of the settled amount and only if the company succeeds in settling one or more of your debts. 

Debt avalanche or debt snowball methods

If you can’t get a lower rate, or don’t want to sacrifice credit score points to a hard credit pull (required for most new loan applications), it can make sense to keep your current debt and get strategic about paying it down.

The debt avalanche is the quickest way to go — make larger payments on debt with the highest interest rate, while paying the minimum on lower-rate balances. By paying down your highest-interest rate debt first, you can minimize interest costs, accelerating your debt payoff and saving money. But if you’re motivated by quick wins, choose the debt with the smallest balance to pay off first — this is the debt snowball method. The psychological impact of paying off one credit card or loan can be huge and keep you motivated to tackle the next debt in line. 

Bankruptcy

Bankruptcy is typically a last-resort option, but it can also be a strategic move if you’re working to preserve your retirement or savings accounts and don’t foresee being able to pay down debt with new income. That said, it has serious credit consequences and will stay on your credit report for up to seven to 10 years depending on the type of bankruptcy you file. If you can pay off debt via debt consolidation or a debt management plan, either is probably a much better option. Consult with a bankruptcy attorney to better understand the risks, benefits, and costs of filing. 

Methodology

Credible evaluated 32 lenders across 1,184 data points to choose the best lender overall plus top picks for different borrowers and use cases. Across lenders, we collected data on customer experience and service options, minimum and maximum fixed interest rates, minimum and maximum loan amounts, funding times, loan terms, fees, discounts, third-party reviews, and more.

We assigned a numerical value to each attribute based on how that feature compared with the same feature for every other lender in the set. Attributes were grouped into categories, scores were compiled, and categories were weighted according to their relative importance — for instance, maximum origination fees were weighted highest since loan cost is among the most important factors in determining loan value.

• Borrower cost (22.5%): Origination fee ranges and minimum and maximum APRs measure upfront and overall costs and lender accessibility across different credit score groups.
• Flexibility (22.5%): Maximum loan terms, number of loan purposes, minimum and maximum loan amounts, and availability of joint loans and secured loans measure the range of options for loan size, repayment terms, and types of loans.
• Eligibility and availability (22.5%): Minimum income requirements, funding speed, minimum credit score requirements, and state availability measure how easily and how quickly borrowers can access personal loans.
• Reputation (15%): Trustpilot, Better Business Bureau, and JD Power ratings measure customer satisfaction.
• Discounts, customer service, and account management (12.5%): Discounts for auto pay and direct pay, plus availability of mobile apps and live customer support chat, measure borrower perks and ease of managing loans.
• Partner lender data (5%): Data from loans closed by our partners, including average rates, loan amounts, funding time, and eligibility criteria, measure real-world performance and borrower outcomes.

Learn more about how Credible rates lenders by exploring our full personal loans lender rating methodology.

Where we get our data

Credible is a personal loans marketplace that partners directly with lenders to offer loans for a wide range of credit profiles and loan purposes. Because of these relationships, we have access to the most current interest rates that real borrowers are being approved for, along with average rates by credit score and loan purpose, approval rates overall and by lender, and more. The data we use is primary source data, updated weekly, and does not include any personally identifiable information about borrowers.