Young Americans have significant debt. According to Experian, in 2022, Americans carried an average of $5,910 in credit card debt and $18,255 in personal loan debt.
One step toward becoming debt-free may be to consolidate your debt. You can use a debt consolidation loan to transfer your obligations to one loan, often at lower interest rates than the originals. This can provide debt relief and make it easier to manage payments.
This guide to debt consolidation loans will help you know how consolidation works and whether it suits you. Read on to compare the best debt consolidation loans available.
In this guide:
- Compare the best debt consolidation loans
- How to know which loan is the best for you
- Is a debt consolidation loan a wise choice for combining debt?
- How to know when you’re ready to apply for a debt consolidation loan
- How to apply
- FAQ
Compare the best debt consolidation loans
| Lender | Editorial rating | Recommended credit score | Benefits |
| Happy Money | Best for credit card debt (4.8 out of 5) | 640+ | Option to make direct payments to creditors. Autopay. No prepayment penalty. |
| LightStream | Best for excellent credit (4.8 out of 5) | 660+ | No fees and low APR. Longer repayment terms. Fast funding. |
| Upgrade | Best for fair credit (4.9 out of 5) | 580+ | Makes direct payments to creditors. Fast funding. Accepts fair credit scores. |
| Upstart | Best for thin credit (4.8 out of 5) | 300+ | Grace period for late payments. Get approved with poor credit. Makes direct payments to creditors. |
| SoFi | Best for good credit (5 out of 5) | 660+ | Autopay, direct deposit, and direct pay discounts. Co-applicant option. Repayment forbearance. |
| LendingPoint | Best for changing payment date (4.9 out of 5) | 585+ | Good for fair credit scores. Fast funding. Biweekly or monthly payment options. |
| Best Egg | Best for a secured loan (4.8 out of 5) | 640+ | Secured loan option. No prepayment penalties. Fast funding. |
Best debt consolidation loans
We’ve researched the best debt consolidation loans for purposes including credit card debt, secured loans, and changing your payment date.
No matter your credit score, we’ve ranked the best debt consolidation loans for bad, fair, good, and excellent credit.
Click the link below to jump to our review of each lender.
- Best for credit card debt: Happy Money
- Best for excellent credit: LightStream
- Best for fair credit: Upgrade
- Best for thin credit: Upstart
- Best for good credit: SoFi
- Best for changing payment date: LendingPoint
- Best for a secured loan: Best Egg
Best for credit card debt: Happy Money
Editorial rating: 4.8 out of 5
- Personal loan focused on credit card consolidation and payoff
- Checking your rate is free and won’t affect your credit score
- Loan amounts from $5,000 to $40,000
Happy Money, formerly known as Payoff, offers an unsecured installment loan that’s ideal for consolidating credit card debt, with an option to make direct payments to creditors. It provides shorter repayment terms (two to five years) than many other lenders, with a lower loan amount (minimum of $5,000) and higher APR.
The only fee Happy Money charges is an origination fee of 0% to 5%, depending on your loan term. Happy Money provides grace periods for late payments, the option to use autopay (but no autopay discount), and the option to pay off your debt early without penalties.
The approval process takes about seven business days, after which it will take three to six business days to fund your loan. It will release loan funds via direct payments to your credit cards or direct deposit to your personal bank account.
- Credit score category: Fair (640+)
- Soft credit pull to check rates? Yes
- Deposit time: 3 – 6 business days after approval
- Origination fee: 0% – 5%
- Late fee: $0
- Rates (APR): 10.50% – 29.99%
- Discounts: None
- Repayment terms: 24 – 60 months
Best for excellent credit: LightStream
Editorial rating: 4.8 out of 5
- Rate Beat program: Will beat a competitor’s offer by 0.10% APR if approved for a lower rate elsewhere
- Unique satisfaction guarantee: Borrowers who are not satisfied with their loan experience can get a $100 refund
- Loan amounts: $5,000 – $100,000
LightStream offers a loan solution for borrowers with good to excellent credit scores looking to consolidate their debt. It offers lower interest rates than many other lenders and longer repayment terms—up to 144 months.
It also doesn’t charge fees and offers a 0.50% interest rate reduction for enrolling in autopay. There are no prepayment penalties, and you can make extra payments online anytime.
With LightStream, you can consolidate your debts quickly thanks to its fast approval and funding process, which can take as little as one business day. Get your loan funds via wire or ACH transfer to your bank account. However, LightStream doesn’t make direct payments to your creditors.
- Credit score category: Excellent, good (660+)
- Soft credit pull to check rates? No
- Deposit time: As soon as the same day
- Origination fee: None
- Late fee: None
- Rates (APR): 9.99% – 25.99%
- Discounts: 0.50% autopay discount
- Repayment terms: 24 – 144 months
Best for fair credit: Upgrade
Editorial rating: 4.9 out of 5
- Credit health tool to monitor your credit score and get personalized recommendations
- Loan amounts: $1,000 – $50,000
- 15-day grace period before late fee is assessed
Upgrade offers low-interest-rate personal loans you can use to consolidate your debts. It’s an appealing choice for those with fair to bad credit. If your credit score is in the high 500s or better, Upgrade may be suitable.
Upgrade might assess late fees and origination fees, but it doesn’t charge prepayment penalties if you want to pay off your debt ahead of schedule. Upgrade’s approval process and release of funds are fast (as little as one business day), and it will make direct payments to your creditors on your behalf.
- Credit score category: Fair, bad (580+)
- Soft credit pull to check rates? Yes
- Deposit time: As soon as the next day
- Origination fee: 1.85% – 9.99%
- Late fee: $10
- Rates (APR): 8.49% – 35.97%
- Repayment terms: 24 – 84 months
Best for thin credit: Upstart
Editorial rating: 4.8 out of 5
- Uses artificial intelligence to provide competitive rates based on unique creditworthiness
- Checking your rate won’t affect your credit score
- Loan amounts: $1,000 – $50,000
Upstart personal loans allow consumers with bad or no credit history to take advantage of debt consolidation. Upstart will pay your creditors, often within one business day. Education-related loans require a three-day waiting period before disbursement.
With Upstart, you can pay off your loan early because it doesn’t penalize prepayments. However, these loans have significant origination fees that may cost you hundreds of dollars. The lender also allows a 15-day grace period for late payments, after which it charges a late fee.
- Credit score category: Fair, bad
- Soft credit pull to check rates? Yes
- Deposit time: As fast as one business day
- Origination fee: 0% – 10%
- Late fee: $15 or 5% of past due amount (whichever is higher)
- Rates (APR): 6.70% – 35.99%
- Repayment terms: 36 – 84 months
Best for good credit: SoFi
Editorial rating: 5 out of 5
- Unemployment protection allows pausing loan payments in case of job loss
- Fast, easy application: Get a decision in minutes
- Loan amounts: $5,000 – $100,000
SoFi’s debt consolidation loan is a terrific option for borrowers with good credit scores. What sets this option apart from other lenders is that you can have a co-applicant, which may help you qualify for a lower interest rate. SoFi also offers repayment forbearance in cases of sudden unemployment.
These loans offer larger loan amounts with competitive rates and manageable repayment terms. SoFi also has a 0.25% autopay rate discount and a 0.25% direct deposit rate discount if you deposit at least $1,000 monthly into a SoFi checking, savings, or Money account.
You can complete the application and receive approval in as little as one business day. SoFi will make direct payments to creditors with Direct Pay, which includes a 0.25% rate discount if it makes direct payments to your creditors with at least 50% of your loan.
- Credit score category: Excellent, good
- Soft credit pull to check rates? Yes
- Deposit time: Same-day processing
- Origination fee: 0% to 6%
- Late fee: None
- Rates (APR): 8.99% – 23.43% with discounts
- Discounts: 0.25% interest rate reduction for enrolling in autopay, 0.25% direct deposit rate discount, and 0.25% rate discount for direct payments to creditors
- Repayment terms: 24 – 84 months
Best for changing payment date: LendingPoint
Editorial rating: 4.9 out of 5
- Simple application to see payment options with no impact on credit score
- Proprietary smart technology can paint a more complete picture of you in seconds
- Loan amounts: $2,000 – $36,500
LendingPoint does not look solely into your credit history to determine your creditworthiness; instead, it uses proprietary technology to assess your “credit potential” and loan rate.
It also doesn’t restrict how you use your loan funds, so it’s easy to refinance various loan types. LendingPoint offers lower loan amounts than other lenders, and loan funds are disbursed via direct deposit to your personal bank account as soon as the next business day.
LendingPoint offers competitive interest rates, minimal fees, no prepayment penalty, and autopay options (but no interest rate discount). Unlike most lenders, it also has flexible payment date options, with the ability to choose biweekly or monthly payments and to adjust your payment date.
- Credit score category: Fair (585+)
- Soft credit pull to check rates? Yes
- Deposit time: As fast as one business day
- Origination fee: 0% – 8%
- Late fee: None
- Rates (APR): 7.99% – 35.99%
- Repayment terms: 24 – 72 months
Best for a secured loan: Best Egg
Editorial rating: 4.8 out of 5
- 20% APR discount for a secured loan
- Personal loans of $2,000 – $50,000
- Use for almost anything, including significant purchases and vacations
Best Egg offers secured and unsecured loans for borrowers with good or excellent credit. To be eligible for its best interest rates, your credit score must be above 700. To get a secured loan, you will use the fixtures attached to your home (such as built-ins, shelves, vanities, and light fixtures) as collateral.
Best Egg has an autopay option but no interest rate discount. It handles late payments on a case-by-case basis, does not disclose potential late fees, and charges a significant origination fee (minimum 4.99% for a five-year loan). Best Egg offers the flexibility to change your loan due date and pay off your loan early without facing prepayment penalties.
The approval and disbursement process is also fast and easy, but Best Egg doesn’t offer direct payments to creditors. You can expect loan funds to hit your personal bank account in one to three business days.
- Credit score category: Excellent, good
- Soft credit pull to check rates? Yes
- Deposit time: As fast as one business day
- Origination fee: 0.99% – 8.99%
- Late fee: Not disclosed
- Rates (APR): 5.99% – 29.99% (secured)
- Repayment terms: 36 – 60 months
How to know which debt consolidation loan is the best for you
Lenders offer different types of personal debt consolidation loans, so it’s crucial to weigh your options to find the best one. When comparing lenders, consider the following factors:
- Credit score requirements: Many lenders require a minimum credit score to qualify for a loan or offer better terms. If you don’t have good credit, you may need to shop around for a lender that is more lenient or allows a co-applicant.
- Interest rates: Compare each loan’s annual percentage rate (APR). The lower the APR, the less you’ll pay in interest over the life of the loan.
- Loan terms: Consider the length of each loan and any prepayment penalties associated with paying off your loan early. Shorter terms may mean higher monthly payments, but you’ll save money on interest over the life of the loan.
- Loan amount: Each lender’s maximum loan amount will vary. If you need to consolidate significant debt, ensure you find a lender that offers loan amounts high enough to cover your total debt.
- Repayment options: Many lenders offer flexible repayment options, such as setting up autopay, changing due dates, or choosing between biweekly or monthly payments. Choose a lender with the payment frequency and options that best fit your budget.
- Fees: Some lenders charge origination fees, processing fees, and late fees, which can increase the overall cost of your debt consolidation loan. Your creditors may charge prepayment penalties for early debt payoff.
- Customer service: Check reviews and ratings to see how lenders’ customer service and support stack up against competitors. It’s best to go with a lender known for top-notch customer service.
- Discounts: Lenders may offer additional interest rate discounts for setting up autopay, direct deposit, or paying creditors. These can save you money and time.
Why can a debt consolidation loan be a wise choice for combining debt?
Debt consolidation loans provide borrowers with several benefits that make them an attractive choice for combining debt. If you carry significant debt from various sources, a debt consolidation loan may be suitable for several reasons.
Lower interest rates
A debt consolidation loan often has a lower APR than the loans you consolidate, which can help you save money on interest. When you pay less interest, you can pay off your debt faster.
For example, if you have five credit cards with an average interest rate of 18% and a combined balance of $10,000, you could consolidate this debt into a single $10,000 loan with an interest rate of 12% and one fixed payment. This would reduce your monthly payments and save you money.
Simplified payments
Debt consolidation loans eliminate the need to keep track of multiple payment due dates and lenders because they combine all your debt into one loan.
This makes it easier to stay organized, keep track of your payments, and progress toward becoming debt-free. Simplified payments can also help you avoid late fees and save time when managing your finances.
Improves your credit score
By consolidating your debt and making consistent payments, you can demonstrate a good payment history to the credit bureaus and improve your credit score.
The hard inquiry that comes with opening a new loan account may decrease your credit score, but paying on time will help improve your score even more. A better credit score can help you qualify for more favorable interest rates.
How to know when you’re ready to apply for a debt consolidation loan
Before applying for a debt consolidation loan, ensure you’re ready and have considered all your options. Ask yourself the following questions before applying for a debt consolidation loan.
How much do I owe?
Calculate your total debt to determine the loan amount you need to consolidate. Do this by adding up all your credit cards and other higher-interest debts.
Consider the interest rates on your outstanding loans to compare them to the consolidation loan rates. You’re more likely ready for a debt consolidation loan if you have a solid understanding of your financial situation and know how much you owe and to whom.
What is my credit score?
Knowing your credit score will help you understand what loan options are available. You can use a free online service, such as Credit Karma or Credit Sesame, to find out your credit score. You can view your credit report—but not your score—for free at AnnualCreditReport.com.
A higher credit score means more options and better loan terms. However, getting a debt consolidation loan with a low credit score is possible.
How much can I afford to pay each month?
Calculate your monthly budget to determine how much you can afford to pay based on your income and expenses. Consider how much you’ll pay for the loan compared to what you’re spending on the debts you want to consolidate.
It’s essential your cash flow can support your monthly payments. This can help you determine what loan amount you can afford when consolidating your debt and the best loan repayment term length for your situation.
What are the loan terms?
Ensure you understand all the details of the loan you’re considering, such as the interest rate, repayment terms, and any associated fees.
To find out your specific interest rate based on your credit score, it’s wise to prequalify. During prequalification, most lenders run a soft credit check (which does not affect your credit score) and ask questions about your income, debts, and other financial information.
If you prequalify, you may have a better chance of approval, and you’ll know the terms the lender will offer, such as the interest rate on the loan. If you don’t prequalify, you can still get approved, but you may be subject to a more in-depth review beforehand.
How to apply for a debt consolidation loan
To apply for a debt consolidation loan, you must provide personal and financial information to your chosen lender, as well as supporting documentation. The specific steps will depend on each lender, but you can expect to:
- Choose a lender and loan type
The two main types of loans for debt consolidation are secured loans and unsecured loans:
- Secured loans require some form of collateral, such as a house or car. Secured loans often have lower interest rates and more extended repayment periods, but they come with the risk of losing your collateral if you default on the loan.
- Unsecured loans don’t require collateral, but many have higher interest rates and shorter repayment periods.
Determine which type of loan works best for your financial situation, and compare lenders to find the most favorable terms.
- Gather the required documents
You’ll often need to submit the following supporting documents during your application:
- Proof of income: This can be in the form of pay stubs and W-2 forms.
- Proof of assets: Bank statements can help prove you have the means to repay your loan.
- Proof of identity: You may need to present a government-issued ID such as a driver’s license or passport.
- Proof of residence: This could be a utility bill in your name to assure the lender your address is valid.
- Proof of insurance: This will depend on the lender, but some may require you to present evidence of insurance for any collateral you’re using.
- Debt and credit information: You might need to provide a list of your debts, including the amount owed and interest rate, as well as your credit score.
- Get prequalified
Prequalification helps you understand what loan terms you may be eligible for and the amount you can borrow. You can do this by applying for prequalification with a lender, which will run a soft credit check.
However, successful prequalification does not guarantee approval. It’s just a step to help you understand your eligibility and loan terms.
- Submit the loan application
Once you’ve completed the necessary steps, you can submit your loan application. During this process, the lender may require you to authorize a hard credit check (which can affect your credit score) and provide additional documentation or information.
The length of the approval process will depend on the lender. If it approves your application, you’ll get your loan funds through disbursement to your creditors or direct deposit to your bank account.
FAQ
How do debt consolidation loans work?
Debt consolidation loans combine multiple debts into a single loan with one fixed monthly payment. When you get a debt consolidation loan:
- You may get a lower interest rate.
- You only have one payment to make.
- Your lender may repay your creditors or send you the funds.
Does debt consolidation hurt your credit?
Debt consolidation can have positive and negative effects on your credit score. On the one hand, by moving your debt from credit cards to a personal loan, your credit utilization ratio will decrease, which is better for your credit score.
On the other hand, the hard credit inquiry associated with taking out a loan will have a minor negative impact on your score.
What types of debt can I combine with personal loan consolidation?
You can consolidate almost any type of debt using a personal loan, such as credit card debt, student loans, medical debts, home repair debt, and other personal loans.
Specific personal loan lenders restrict the loan purpose from paying off certain types of debt. Mortgage refinancing and student loan consolidation, for example, require particular types of refinancing loans.
It’s wise to consider your interest rates so you don’t consolidate low-interest-rate debt to a higher-rate loan.
How long does it take to get funds?
Personal loans for debt consolidation are funded within one to six business days.
The table below indicates the funding time for seven debt consolidation loan companies. SoFi provides same-day funding; five other lenders send funds as soon as the next business day.
| Lender | Funding time |
| Happy Money | 3 – 6 business days |
| LightStream | 1 business day |
| Upgrade | 1 business day |
| Upstart | 1 – 3 business days |
| SoFi | Same-day |
| LendingPoint | 1 business day |
| Best Egg | 1 business day |
Are all my monthly payments combined into one?
Yes, a debt consolidation loan combines all your monthly payments with a fixed interest rate.
Will my lender pay off my other debt?
Some lenders disburse the funds to your creditors to pay off your debts. Other lenders release funds via a direct deposit to the borrower, meaning you are responsible for paying off your debts.
Once you make the payments, your lenders will close loan accounts and mark them as paid in full, while credit card companies will keep your accounts open unless you request to close them.
How much will a debt consolidation loan save me?
The amount you can save with a debt consolidation loan depends on your current interest rates and total balance. A debt consolidation loan with a lower interest rate and a similar term to your debts will often help you save money on interest.
Imagine you have three credit cards:
| Card 1 | Card 2 | Card 3 | |
| Balance | $5,000 | $3,000 | $2,000 |
| APR | 20% | 15% | 18% |
| Minimum monthly payment | $200 | $100 | $50 |
Consolidating these debts into a single $10,000 loan at 10% APR will lower your minimum monthly payment to $323 (from $350) and save you almost $2,000 in interest by the time you pay off the new loan.
You can use free online debt consolidation calculators to help determine the savings from consolidating your debt.
Can you get a debt consolidation loan with bad credit?
Some lenders offer debt consolidation loans to borrowers with bad credit. However, the interest rate and terms may be less favorable than for someone with good credit.
The loan amount may also be smaller, and the repayment period may be shorter than what’s available to borrowers with higher credit scores.
Should you take out a debt consolidation loan?
A debt consolidation loan may be a good choice if:
- You have multiple debts you want to pay off faster.
- You can get a lower interest rate than your current debts.
- You have good credit and can qualify for better terms.
- You have the financial capability to pay off your loan within the agreed terms.
- You want a single payment on your debts instead of several.
Depending on your financial situation, other debt-relief options may make more sense. Consider speaking to a financial advisor or credit counselor to determine the best option.
Do I have other options for debt consolidation?
Unsecured personal loans are often easy to apply for and qualify for, even with rough spots on your credit report, and they provide fast funding. This can make them ideal for debt consolidation.
But you may wish to consider other financing options:
- Secured debt consolidation loans: If you have equity in your home, you can use it as collateral for a secured loan. This may give you lower interest rates, more significant loan amounts, and longer repayment terms. However, your home could be repossessed if you fail to make payments, and the application process may be longer.
- Balance transfer credit cards: You can transfer your outstanding debt to a new 0% APR balance transfer credit card, giving you months or even years of no interest payments. This option could be a suitable choice if you can pay off your debt before the promotional period ends. However, balance transfer fees may apply.
- Debt settlement: If you owe more than you can pay off, debt settlement involves negotiating with your creditors to reduce the amount you owe. However, you’ll need to make lump-sum payments to settle your debt, the process can be lengthy, and it may affect your credit score.
- Debt management plans: A credit counseling agency can help you negotiate lower interest rates and payments with your creditors under a debt management plan. However, you must make one payment each month to the credit counseling agency, and the process could take years.