Best debt consolidation loans in July 2025

Debt consolidation loan rates

Annual percentage rates (APRs) vary from one lender to the next. Debt consolidation lenders consider several variables in deciding interest rates, including your financial situation, how big of a loan you want, and how long you need to pay it back.

One way lenders evaluate your financial qualifications is by looking at your credit — both your credit report, which shows how you’ve handled credit in the past, and your credit score, which lenders use to assess how likely you are to repay your loan in the future.

In the following table, you’ll see how credit scores can affect APRs on three-year and five-year fixed-rate personal loans, based on Credible’s proprietary data. Note that if you're approved for a personal loan with bad credit, you're likely to pay a rate around 30% APR.

By the numbers

14.36% and 19.64%  — The average APRs on 3-year personal loans and 5-year personal loans, respectively, for Credible borrowers with 720 FICO scores and higher. Week ending July 6, 2025

How does debt consolidation work?

Debt consolidation involves combining two or more existing debts into one loan, ideally with a lower interest rate or lower monthly payment than you’re currently paying. Consolidation leaves you with just one payment to make each month. 

A debt consolidation loan is often a type of installment loan, like a personal loan or a home equity loan. You could also use a low or 0% APR credit card balance transfer offer to consolidate and refinance credit card debt, but you would have to pay off the entire balance during the low- or no-interest period to avoid interest charges. 

If you use a personal loan to pay off debt or refinance credit cards, you'd receive a lump sum. You would use that to pay off your debts and then repay the debt consolidation loan in monthly installments. Conveniently, some personal loan lenders offer to pay your creditors directly, and you might get a rate discount if you do so.

Remember, paying off your credit card balances through debt consolidation doesn’t erase debt. You still have to repay the lender that gave you the debt consolidation loan.

The key elements of a debt consolidation loan include:

• Repayment terms: Most lenders offer terms of two to seven years. Prepayment penalties for personal loans are rare, so you can typically repay the loan early if you manage your finances well.
• Loan amounts: Debt consolidation lenders usually require you to borrow at least $1,000, though some let you borrow up to $50,000 or more.
• Borrowing costs: The APR (annual percentage rate) for personal loans, including debt consolidation loans, typically ranges from 6.49% to 35.99%. APR accounts for the interest rate and any upfront lender fees. The lowest APRs are reserved for borrowers with excellent credit. Several factors influence your APR, including your credit score, credit history, income, and employment status. Personal loans typically have fixed interest, so your rate and payment stay the same for the life of the loan. 

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

• Fees: Lenders may charge fees for issuing a loan. An origination fee is a common one, and may be between 0% and 10% of the amount you borrow, depending on the lender. The origination fee may be deducted from your loan amount upfront, but the lender will clearly disclose both the amount and how you'll pay it, as required by the Truth in Lending Act. Any upfront fees are reflected in the loan's APR, which represents its total annual cost. 
• Funding times: Many lenders can fund a personal loan within 1 to 3 business days, but some offer same-day funding if you’re approved before the lender's daily cutoff time.

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.

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.
• 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.

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 five 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 doing so).

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

Average debt consolidation loan rates

Here are average APRs on personal loans for debt consolidation, by credit score, according to Credible data on closed loans from July 2024 through June 2025:

• Excellent credit (800-850 FICO): 11.72%
• Very good credit (740-799 FICO): 13.46%
• Good credit (670-739 FICO): 20.27%
• Fair credit (580-669 FICO): 29.60%
• Bad credit (below 580 FICO): 31.43%

Debt consolidation is the most common use for personal loans on the Credible marketplace. In June 2025, nearly 38% of people approved for a loan used it for debt consolidation, and the average disbursed loan amount was $25,136.

A closer look at the best debt consolidation loan lenders

Methodology

Credible’s rating criteria incorporates 899 data points across 31 partner and non-partner lenders, spanning interest rates, fees, loan terms, repayment options, customer service, eligibility, efficiency, options for poor credit and no credit, cosigner options, discounts, and more.

Read our full 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.