Best Debt Consolidation Loans of April 2024

• Upgrade – Best for Bad Credit
• Universal Credit – Best for Comparing Multiple Offers
• Happy Money – Best for Flexible Repayment Terms
• Achieve – Best for Paying off Credit Card Debt
• Discover – Best for No Interest If Repaid Withing 30 Days
• Best Egg – Best for Debt Consolidation Perks
• LendingClub – Best for Peer-To-Peer Lending
• LightStream – Best for Low Interest Rates
• SoFi – Best for Large Loan Amounts

Personal loan interest rates depend on several factors, including the borrower’s creditworthiness, lender, loan amount and repayment term. Typically, however, personal loan interest rates range from around 5.99% to 36%, with the lowest rates reserved for borrowers with excellent credit.

Summary: Best Debt Consolidation Loans of April 2024

Which Debt Consolidation Loan Is Best for You

Best for Bad Credit: Upgrade

With a low minimum credit score of 580, Upgrade is a much more accessible option for borrowers who have a poor credit history.

Best for Comparing Multiple Offers: Universal Credit

As a lending platform that offers personal loans through its partners, Universal Credit is a good option for borrowers looking to compare offers from multiple lenders.

Best for Flexible Repayment Terms: Happy Money

With loans ranging from $5,000 to $40,000 and terms of two to five years, Happy Money gives borrowers a flexible option for consolidating debt.

Best for Paying Off Credit Card Debt: Achieve

Achieve offers borrowers rate discounts and the option to directly pay off creditors, making it a good option for borrowers looking to consolidate their credit card debt.

Best for No Interest If Repaid Within 30 Days: Discover

Discover is a great option for borrowers who can repay their loan within the first month, as this makes the loan interest-free.

Best for Debt Consolidation Perks: Best Egg

With Best Egg’s Direct Pay feature and no prepayment penalty, Best Egg stands out for the features it offers borrowers.

Best for Peer-To-Peer Lending: LendingClub

For borrowers looking for a peer-to-peer loan, LendingClub offers debt consolidation loans with high maximum loan limits and flexible qualification requirements.

Best for Low Interest Rates: LightStream

With competitive interest rates, LightSteam is a low-cost option for borrowers who can qualify for the lowest rates.

Best for Large Loan Amounts: SoFi

SoFi’s loan amounts range from $5,000 to $100,000, making SoFi a good option for borrowers who need to consolidate a large amount of debt.

How To Compare Best Debt Consolidation Loans

Personal loans often are available online through traditional banks, credit unions and alternative lending platforms so you can apply quickly and conveniently, without having to visit a bank branch. Many of these lenders also offer competitive interest rates and flexible repayment terms, meaning you may be able to save money by consolidating your other debts.

Consider these tips when comparing personal loans:

The Complete Guide to Debt Consolidation Loans

What Is a Debt Consolidation Loan?

Debt consolidation is when a borrower takes out a new loan, usually with more favorable terms (a lower interest rate, lower monthly payment or both) and then uses the loan proceeds to pay off their other individual debts. Debt consolidation loans are commonly used to help pay off credit card balances, auto loans and other personal loans.

How Does a Debt Consolidation Loan Work?

To start consolidating debt, apply for a personal loan through your bank or another lender. Once your lender approves you for a debt consolidation loan, it may offer to pay off your other debts automatically—or you will take the cash and pay them off yourself.

After your pre-existing debts are repaid with your new debt consolidation loan funds, you’ll make a single payment on your new loan every month. While debt consolidation often reduces your monthly payment, it accomplishes this by extending the loan period of the consolidated loans. Debt consolidation also streamlines payments and makes it easier to manage finances, like having a single monthly payment due date.

Does Debt Consolidation Hurt Your Credit?

Debt consolidation loans can hurt your credit, but the impacts can be temporary. Applying for a loan requires a hard credit check, which can result in a small dip in your credit score. However, the impact of the inquiry on your score will decrease over time and disappear typically after two years. Your credit score may also decrease if you take out a debt consolidation loan, pay off your credit cards and then rack up more debt on those cards.

That said, consolidating loans can be a great way to streamline your payments, reduce your monthly debt service and build healthy financial habits through regular, on-time payments. For that reason, consolidation loans can actually help you improve your credit score over time. What’s more, some lenders even offer credit tools beyond regular lending services to help you manage your credit profile.

Pros and Cons of Debt Consolidation Loans

Debt consolidation loans are a finance tool. Like any tool, it can either help or hurt you, depending on how you use it. Before you submit an application to borrow money, make sure you’ve fully considered the pros and cons of debt consolidation loans.

Pros of Debt Consolidation

• Simplifies your debt repayment
• Rates may be lower than the rates on credit card debt
• Helps you pay down debt faster if you opt for shorter-term loans
• Can improve your credit score, especially if you’re consolidating credit card debt
• Lowers your payment if you opt for long-term and/or lower-rate loans

Cons of Debt Consolidation

• Can damage your credit if you miss any loan payments
• Your options may be more limited if you have bad credit
• Can be somewhat confusing, especially as your old debts are being paid off
• Can tempt some people to run up their credit cards again once they’re paid off

How To Qualify for a Debt Consolidation Loan

Qualifying for a debt consolidation loan is similar to any other personal loan.

Shop around for lenders where you meet the minimum qualifications. If you don’t meet the credit score requirements, take steps to improve your credit score. This can include correcting mistakes on your credit report, paying credit card debt or paying down any past-due accounts.

Getting preapproval for a debt consolidation loan can verify that you’ll qualify for the loan when you submit an official loan application.

How To Get a Debt Consolidation Loan

While the process varies by lender, follow these general steps to get a debt consolidation loan:

• Check your credit score. Check your credit score for free through your credit card issuer or another website that offers free scores. This will help you understand your creditworthiness and qualification chances. Aim for a score of at least 610; however, a score of at least 720 will yield the most favorable terms.
• If necessary, take steps to improve your credit score. If your score falls below 610 or you want to boost your score to receive the best terms possible, take time to improve your score before applying, such as lowering your credit usage or paying off unpaid debts.
• Determine how much debt you need to consolidate. Once you check your credit score, calculate how much money you need to borrow to consolidate all of your debts. Remember, though, you’ll receive your money as a lump sum, and you’ll have to pay interest on the entire amount—so only borrow what you need.
• Shop around for the best terms and interest rates. Many lenders will let you prequalify prior to submitting your application, which lets you see the terms you would receive with just a soft credit inquiry and without hurting your credit score.
• Submit a formal application and await a lending decision. After you find a lender that offers you the best terms for your situation, submit your application online or in person. Depending on the lender, this process can take a few hours to a few days.

How To Get a Debt Consolidation Loan With Bad Credit

If you have bad credit, you can strengthen your application by improving your debt-to-income (DTI) ratio. You can do this by increasing your income—with a side hustle or otherwise—or by paying off some of your smaller, more manageable debts. If you choose to pay down some of your debts, this could also help improve your credit score, accomplishing two things at once.

There are debt consolidation loans for bad credit if you can’t improve your credit score enough to qualify for other loans. You may also have better luck applying for secured loans, which are more accessible to applicants with bad credit because they reduce the lender’s risk and often come with lower interest rates.

Alternatives to Debt Consolidation Loans

If you don’t qualify for a traditional debt consolidation loan or want to compare other available options, consider alternatives, including:

Is Debt Consolidation a Good Idea?

Determining whether debt consolidation is a good idea for you depends on your credit score and whether you’re taking other steps to improve your financial habits. Debt consolidation may benefit you if:

• You’re committed to paying off the full amount of your debt consolidation loan
• You have enough cash flow to cover all of your debt payments
• You’re okay with repaying your loans over a longer period of time
• You’ve improved your credit score since you took out your original loans
• You have a financial plan to avoid running up your debts again

Methodology

We reviewed 15 popular lenders based on 11 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:

• Loan cost. 35%
• Loan details. 20%
• Eligibility and accessibility. 20%
• Direct payment to creditors. 15%
• Customer experience. 10%

Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated the availability of each provider’s customer support team.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology.

Recap: Best Debt Consolidation Loans of April 2024

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