Best Debt Consolidation Loans to Reducing High-Interest Debt
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- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
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The average American carries $7,951 in credit card debt. Cutting the interest rate almost in half and lowering your monthly payment with a debt consolidation loan can make carrying that debt easier and help pay it off faster.
Credit cards are the most common type of high-interest debt that debt consolidation loans are used for. These personal loans take unsecured debt such as credit card balances and put them in one repayment plan that’s cheaper than the higher interest rates many credit cards charge.
Borrowers can get the best rates if a credit check shows they have good or excellent credit. The interest rate on this type of debt consolidation loan averages 9.41%, compared to an average credit card interest rate of around 16%.
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Here are some of the best personal loans we’ve found for debt consolidation.
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Overview of the best debt consolidation loans
Lender | Best for |
Upstart | Fair credit |
Best Egg | Easy application |
Discover | 0% origination fee |
LightStream | 0.50% lower rates with autopay |
Rocket Loans | Good to excellent credit |
SoFi | Unemployment protection |
Avant | Secured loans |
Peer-to-peer lending | |
Prosper | Online application |
Legit debt consolidation loans
Upstart
Upstart says its interest rates for personal loans are 40% lower than traditional models. The company uses artificial intelligence and machine learning to improve qualified borrowers and estimates it has approved 27% more borrowers than under a standard lending model.
It allows a minimum credit score of 600, considered fair credit, so you don’t have to have excellent credit to get loan offers from Upstart.
Upstart offers a range of loan amounts, from $1,000 to $50,000. If you’re borrowing at the lower end to consolidate your debts and expect to pay the loan off within a year or so, it may not be worthwhile to consolidate your loans.
Upstart charges up to 12% in origination fees, which can easily eat into any savings from switching to a lower-interest loan. You may be better off keeping the original loan and paying it off in a year or less if you can.
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- Subject to qualification and approval. $1,500 monthly income required.
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Best Egg
Best Egg can be a good option if you’re looking to get a loan funded quickly with its easy application process. Filling out an online Best Egg personal loan application takes only a few minutes. Loan approval and funding can take one to three business days, though same-day financing is possible.
Its personal loans can be used for almost any purpose, including a debt consolidation loan and credit card consolidation. However, a balance transfer credit card with 0% interest can be a better solution. Like many other personal loan lenders, Best Egg doesn’t allow the money to be used for postsecondary educational expenses such as student loans, securities, or any illegal activity.
Best Egg doesn’t directly pay off creditors, which you’ll have to do alone. It doesn’t have prepayment penalties, so you can pay off the loan early.
Applicants don’t have to have excellent credit. Loan offers can be made to borrowers with a minimum credit score 640.
Discover
Discover doesn’t charge an origination fee or prepayment penalties, which can make it a more affordable loan than borrowers may find elsewhere.
Discover offers the option to pay loan funds directly to third-party creditors, which can save you time and make getting your personal finances into order a lot easier.
With installment loan options of up to seven years, borrowers may qualify for a lower interest rate and reduce their monthly payment by extending the loan over a more extended period.
Personal loans from Discover can be used for many personal uses, including debt management. They can also be used for small business expenses, which isn’t typical among most online lenders.
LightStream
LightStream offers an autopay discount that can lower the interest rate on its fixed-rate loans from 7.99% to 25.49%. That’s the lowest rate among lenders we reviewed. Without the autopay discount, interest rates at LightStream are 0.50% higher.
LightStream may not expect an excellent credit score from applicants. Still, it makes it clear on its website that a track record of financial responsibility and several years of good credit history with various account types is preferred to qualify for its lower interest rate loans.
It also looks for plenty of assets, manageable revolving credit card debt, stable and sufficient income, and a good payment history with few delinquencies or other problems repaying debts.
LightStream requires loans to start at $5,000, which may be more money than you need to borrow. But it also has some of the highest loan amounts, at $100,000, which may be much more than you need to borrow.
Use AmONE to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- With personal loan interest rates rising, now could be a great time to find a personal loan. Through our partner AmONE, you could get matched to a lender who could offer as much as a $50k loan with rates as low as 5.99% APR.
- Approval and loan terms vary based on applicant qualifications. Not all applicants will qualify for the full amount or lowest available rates. It takes minutes to see your results. And don't worry- filling out the form won't hurt your credit score and is free, so why not give it a try?
Rocket Loans
Like LightStream, Rocket Loans has an autopay discount, though it offers a lower discount of 0.25%.
Rocket Loans offers debt consolidation loans for amount ranging between $1,000 to $50,000. However, its APR starts from 9.11% and is ideal for those with a good credit. It is suitable for applicants with a credit score of 640 and above. The loan funds can be transferred as soon as the next business day and it has a quick, online application process.
When you apply for a debt consolidation loan with Rocket Loans, there will be a soft credit inquiry but it will not affect your score. It has an origination fee ranging between 1.49% to 8.48% but there is no prepayment penalty. The origination fee will be deducted from your loan amount and you will receive the balance. It also charges a late fee of $15. The only drawback of Rocket Loans is that the repayment options are limited to two-36 and 60 months only.
SoFi
The company says if you’re paying more than 20% interest on credit cards, SoFi personal loans could help you save thousands of dollars. SoFi and LightStream have the highest maximum loan amounts of companies we reviewed, offering up to $100,000.
Its annual percentage rate starts at 8.99% APR, which includes a 0.25% autopay discount. Also, payroll direct deposits of at least $1,000 per month to a SoFi Money account must be made to qualify for the discount. SoFi Money is a cash management account.
SoFi personal loans have no fees. Specifically, no origination fees, no late fees, and no prepayment penalties.
It also offers unemployment protection. If you lose your job, SoFi will temporarily pause your payments and help you find a new job. Interest will continue accruing and be added to the principal balance at the end of each forbearance period for up to 12 months.
Pros
- Product offerings focused on savings, lending, and credit card solutions
- Competitive rewards and interest rates with its credit card portfolio
- Tech-forward solutions, which can make it even easier for everyday use
- Savings options offer high interest rates and ultra-competitive offers
Cons
- It has a limited physical presence since it’s an online-only option, which means you can’t access in-person service
- Bread Financial’s credit card accounts are generally targeted towards those with good to excellent credit, which can limit who has access to its offerings
- It doesn’t offer a checking account and its focus remains on credit card programs and savings accounts
Avant
Avant can offer you a secured loan, a type of personal loan backed by collateral you own, such as a car. Interest rates for secured loans can be cheaper than unsecured debt, making the monthly payment and the overall loan more affordable.
Its secured loans don’t require buying another piece of collateral, such as a home or car, but can be spent on anything, including debt settlement.
Paying the loan back on time each month can raise your credit score. So can use the loan to pay off your credit card debt, which lowers your credit utilization rate.
Avant has a range of repayment terms, from two to five years, making an Avant loan a good option. Its APR range, however, is on the high end for people with good to excellent credit.
Lending Club
Lending Club is a peer-to-peer lender that connects borrowers with investors who provide personal loans. Interest rates are generally lower than at a traditional bank, and qualifying might be easier if you have fair credit.
Lending Club offers the option of paying your creditors directly, so you don’t have to deal with the hassle of debt consolidation.
It has some of the highest APRs among lenders we reviewed. Joint loans are available for you and a spouse who use the same credit cards and want to consolidate them on a new, cheaper loan with a cosigner.
Borrowers typically receive loan funds within four days of loan approval. It can be extended if a lender requires more documentation or verification.
Prosper
Prosper is another peer-to-peer lending platform connecting borrowers with investors. It offers unsecured loans that aren’t backed by collateral like your home but are based on creditworthiness.
Checking your loan rate on its website won’t affect your credit score and is done through a soft credit check. A hard inquiry will be made if you’re approved for a loan, and this credit check can affect your credit score for a while.
It uses TransUnion to get an applicant’s credit score and income, a debt-to-income ratio of 50% or better, no bankruptcies in the last year, less than five credit inquiries in the last six months, and at least five credit inquiries in the last six months and three open credit lines.
Prosper doesn’t charge a prepayment penalty for making partial prepayments.
Relieve $25k+ in Credit Card Debt or Personal Loan Debt With TurboDebt
- Relieve $25k+ in credit card debt or personal loan debt with this special relief program.
- TurboDebt has a Trustpilot rating of 5/5 based on 1288 reviews
- Subject to qualification and approval. $1,500 monthly income required.
- Apply in 5 minutes. If you qualify, chat online with a friendly online debt representative.
Summary of the best debt consolidation loans
Lender | APR range | Loan amount | Loan term | Origination fee |
Upstart | 5.2% - 35.99% | $1,000- $50,000 | 3 & 5 years | Up to 12% |
Best Egg | 8.99% - 35.99% | $2,000 - $50,000 | 3-5 years | 0.99% - 8.99% |
Discover | 7.99% - 24.99% | $2,500 - $40,000 | 3-7 years | 0% |
LightStream | 7.99% - 25.49% | $5,000 - $100,000 | 2-7 years | 0% |
Rocket Loans | 9.11% - 29.99% | $1,000 - $50,000 | 3-5 years | 1.49%-8.48% |
SoFi | 8.99% - 25.81% | $5,000 - $100,000 | 2-7 years | 0% |
Avant | 9.95% - 35.99% | $2,000 - $35,000 | 1-5 years | 4.75% |
9.57%-35.99% | $1,000 - $40,000 | 2 & 5 years | 3% - 8% | |
Prosper | 6.99% - 35.99% | $2,000 - $50,000 | 2 & 5 years | 1% - 7.99% |
FAQs
When is a debt consolidation loan a good idea?
Debt consolidation loans are based mainly on your creditworthiness. If your credit report shows a good credit score of 670 or higher, you’ll likely qualify for a loan with an interest rate that’s at least 50% lower than the annual percentage rate you pay on your credit cards. Consolidating high-interest debt can save you a lot of money if you pay off the debt entirely with a new loan and then pay that loan off as quickly as possible.
Will it help me stick to a repayment plan?
It should. An installment loan through a personal loan has a set repayment plan that requires a specific payment each month. The loans are due in two to seven years, with the same payment amounts due each month. On the other hand, credit cards are revolving credit that doesn’t have a set repayment plan. You can use the card and pay the minimum amount due each month, and you could be in debt forever.
When should I not get a personal loan?
If you don’t think you can stick to a budget or can’t afford the monthly loan payments, you may not want to get a personal loan. Having fair or bad credit is another reason to avoid a personal loan because the lender will likely charge you the highest interest rate. Lastly, if you have a credit card balance that you think you can pay off within the next 12 months, then the savings from a debt consolidation loan won’t be worth it.
Why you should use a debt consolidation loan?
A debt consolidation loan can be a good way to cut in half the loan interest rate you pay on your credit cards and instead have one monthly payment that’s less than what you pay on multiple credit cards. Many lenders offer such loans, including to people with fair or poor credit, and provide installment loans with the same monthly payments that last two to seven years. You can not only save money with a debt consolidation loan through lower interest rates and set due dates each month, but you may be able to pay the debts off quicker than you would with credit card bills that seem like they can go on forever. Know what your credit score is before you apply for a personal loan. The lower your credit score, the more likely you are to be charged a higher interest rate over the life of the loan. Also, check if an origination fee is charged, which lenders charge for their work and can run as high as 12% of the loan value. Most personal loans don’t have prepayment penalties but ask the lender to ensure you won’t be charged if you pay the loan off early.
The bottom line
Being in credit card debt is no fun. It’s especially no fun if it’s not useful debt, such as a loan for a car or home.
Credit card debt can add up fast. When you pay it off, you may have long forgotten what you bought with it.
Debt consolidation loans won’t help refresh your memory, but they can make paying off credit card debt cheaper and more manageable while improving your financial situation. Shop for the best interest rates and make sure the total cost of the new loan is a lot less than paying off the existing debt.
Once you’ve paid off the new loan and have this debt behind you, you may realize that your spending habits didn’t match your income and aren’t worth keeping up for years of debt.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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