Debt consolidation loans

A debt consolidation loan is any loan that you use to pay off debt, like to pay off credit card debt, student loans, a car loan, or medical bills.

If you’re considering debt consolidation, these are your options:

• Personal loan with a fixed interest rate and repayment term (offered by Credible)

• Cash-out mortgage refinance with fixed loan terms and a fixed or variable interest rate (offered by Credible)

• Home equity loan with a fixed repayment term and a variable or fixed rate

• Home equity line of credit (HELOC) with an open-ended repayment term and variable interest rate

Getting a personal loan to consolidate your debts can be a good idea. A personal loan provides a number of benefits when used to pay off existing debt:

• You’ll have one monthly loan payment, instead of several

• You could get a lower interest rate

• You could pay off your debt faster (helping you save money in interest)

• You might improve your credit score

Consolidating credit card debt can improve your credit score in three ways:

1. Reducing the overall amount of debt you owe

2. Lowering your credit utilization ratio (how much of the available credit limit you’re using on each card)

3. Improving your credit mix (adding a personal loan to your credit mix can boost your credit score)

Learn More: How Debt Consolidation Helps Your Credit

Debt consolidation lenders typically look at a number of factors, including how much of your monthly income is needed to repay your existing debt — this is your debt-to-income ratio or DTI. Credit history and minimum credit score are also important factors in qualifying for a debt consolidation loan.

Bad credit won’t automatically disqualify you with every lender, but good credit (and even fair credit) can help you get lower rates. If you have bad credit or too much debt to qualify for a consolidation loan, consider seeking credit counseling and creating a debt management plan with a financial advisor.

Find Out: How to Build Credit Fast

The interest rate you're offered on a debt consolidation loan depends on the type of loan you're applying for, your credit history, and credit score. Rates are often lower than credit cards, making it a good idea to use a personal loan to pay off credit card debt.

Using your home's equity to consolidate debt — through a cash-out mortgage refinance, home equity loan, or home equity line of credit (HELOC) — can often get you an even lower rate. But that's because you're putting your home up as collateral. A personal loan is unsecured debt, so you don’t need property to guarantee repayment.

Use a personal loan calculator to estimate your debt payments: Personal Loan Calculator

None of the lenders on the Credible platform charge prepayment penalties. Whether you want to make more than the minimum monthly payment to pay down debt or pay off your loan entirely, there's no prepayment penalty with any of Credible’s lenders.

If you're taking out a debt consolidation loan from a lender that's not on the Credible platform, however, there may be a prepayment fee to look out for. So, do your research before deciding on a lender so you know exactly which fees might apply.

A debt consolidation loan is when you take out a new personal loan to pay off many types of debt, including credit cards, auto loans, and medical bills. With a debt consolidation loan, you can choose a repayment term that fits your budget and make a single monthly payment.

Lowering the interest rate on your loans can help you get out of debt faster.

Credit card balance transfers let you move one or more credit card balances to a single low-interest credit card, simplifying repayment. You'll typically be offered a low, introductory interest rate on a balance transfer card, but it can increase in as soon as six months.

Keep in mind, too, you might be charged a credit card balance transfer fee, typically 3% to 5% of the amount you're transferring. So make sure it doesn’t cost you more than the interest you save. Personal loans, including debt consolidation loans, also typically have an origination fee from 0% to 8%.

Debt consolidation loans are offered by traditional banks and credit unions, as well as online lenders that offer a streamlined application and qualification process. Since every lender has different methods for evaluating borrowers, a good way to find the best lender for you is to compare lenders to see which will offer you the best rate.

To find the best lender, you should be checking your rate with multiple lenders — and also compare fees and repayment options to decide which loan option is best for your own personal finance situation and financial goals without affecting your credit score. Typically, you want to find a personal loan with low, fixed rates and minimal fees.

Credible evaluated loan and lender data points for 22 lenders in 10 categories to identify some of the best personal loan companies.

Credible's partner lenders:

• Avant
• Axos
• Best Egg
• FreedomPlus
• LendingClub
• LendingPoint
• LightStream
• Marcus by Goldman Sachs
• Payoff
• Prosper
• SoFi
• Upgrade
• Upstart

Read More: Who Are the Best Personal Loan Lenders?