Top Debt Consolidation Loans of 2024

A debt consolidation loan is a path to relief for a lot of people struggling to manage high-interest debt.

Debt consolidation replaces your existing debts with a single loan, usually with more favorable terms. This could include a lower interest rate that’ll save you money or a lower monthly payment and longer repayment period that gives you more breathing room.

These loans are a common debt payoff strategy, because they can often help you save money, pay off debt faster or both. If you feel like you’re drowning in debt, they could extend the time it takes you to pay and take the stress off of keeping up with multiple monthly payments.

Debt consolidation loans are available from lenders as personal loans, sometimes marketed specifically as “debt consolidation loans” and sometimes simply as personal loans.

We’ve reviewed some of the top personal loan lenders online to help you find the best debt consolidation loans available for your financial situation and goals. You’ll also learn how to choose the right one and key factors to consider during the decision-making process. 

What Is a Debt Consolidation Loan and How Does It Work?

A debt consolidation loan is a type of personal loan you take out to pay off existing debts. It’s most commonly used to pay off high-interest credit card debt.

The reason this is beneficial, even though you still have to repay the same amount of debt, is that personal loans come with much lower interest rates than most credit cards. You might have a few credit card balances accumulating interest at around 16% to 25%, while personal loans usually come with interest rates closer to 5% to 12%.

Debt consolidation loans work exactly like personal loans on paper, except many lenders send loan funds directly to creditors for you. If they don’t, you could still take out a personal loan and use the funds to pay off debts yourself.

To make a debt consolidation loan worth it, you should receive at least one of these benefits:

• A lower interest rate (lower than the average of the debts you’re paying off).
• A lower monthly payment than the total of what you pay now. This could come with a higher interest rate and/or longer repayment period, but it might be what you need for now to stay above water. You could refinance in the future for a better rate.
• Quicker payoff. A debt consolidation loan might come with a higher monthly payment. But if you can manage it, that could simplify your debt management, help you save on interest and get you out of debt faster.
• Longer repayment. If you’re consolidating or refinancing existing loans with short repayment terms, a new loan could extend the time you have to repay by lowering your monthly payment. You’ll likely pay more in interest this way, but it could ease your monthly commitments.

Benefits of Using a Debt Consolidation Loan

Debt consolidation loans offer benefits such as reduced interest rates, lower monthly payments and simplified debt management. With these loans, you ideally take a new loan with a lower interest rate to pay off existing debts. Doing so reduces the amount of interest you pay over the life of the loan. This can lead to significant savings, especially if you are consolidating multiple high-interest accounts.

As for lower monthly payments, this occurs when the loan extends the repayment period and/or you secure a loan with a lower interest rate. This benefit helps to free up cash flow and add some breathing room in your monthly budget.

Plus, instead of juggling multiple payments, you’ll consolidate all of your debts into a single payment. That makes it easier to track your progress and manage your debt.

And a debt consolidation loan can improve your credit score as long as you manage the loan responsibly. As you pay down your credit card debt, you’ll lower your credit utilization ratio. This ratio is the percentage of your available credit that you’re using. You’ll also make on-time payments, which improves your payment history (a significant factor in your credit score). 

How to Choose the Best Debt Consolidation Loan

Before you commit to any debt consolidation option, shop around to see what lenders can offer you. Your available terms could vary quite a bit from lender to lender because of how they evaluate your credit history and what kind of borrowers they’re targeting.

Online lending marketplaces like Credible or MoneyLion make it easy to quickly compare pre-qualified offers from lenders side-by-side, so they could save you some time.

To choose the loan that fits your financial goals, consider these features:

• Interest rate: If your main goal is to save money, look for a debt consolidation loan with an interest rate that’s lower than the average rate on your existing debts. Lenders typically offer lower interest rates with shorter repayment periods, so play with those factors to land on a rate that works for you.
• Monthly payment: Primarily, you need a monthly payment you’re comfortable with. If you’re overwhelmed by your current debt payment, refinancing or consolidating into a loan with a lower monthly payment could offer some relief. It’ll probably come with a later payoff date, which could mean you pay more in interest over time — but that lower bill could make the difference between paying on time or not.
• Repayment term: This is the number of months or years you have to repay the loan. A longer term (or period) means lower monthly payments, but often comes with a higher interest rate and will mean more time for interest to accumulate. A shorter repayment term means a quicker payoff date, so if your goal is fast debt elimination, look for lenders that offer one- or two-year terms.
• Fees: Many of the lenders we list charge no fees, but some still charge an origination fee, which lops off a small percentage of your loan up front. Some companies also charge late payment fees and a few companies even charge a prepayment penalty, which means you could pay extra if you pay off the loan early.

Debt consolidation loans come with the typical costs included with any personal loan, including:

• Interest: This is the extra you’ll repay on top of the amount you borrow. Debt consolidation loan rates could be as low as 3.5% or as high as 35.99%, depending mostly on your credit. Avoid loans with a higher interest rate than your existing debt unless consolidation feels like your only option to meet your financial goals.
• Origination fees: A lot of lenders charge a fee up front just for making you the loan. It’s usually charged as a percentage of the loan amount, around 2% or 3%, and it’s deducted from the initial funds you receive. If your lender charges an origination fee, take that into account to make sure you get the funds you need to cover your debt balances.
• Late fees: Some lenders charge a late fee if you make a payment past the monthly due date. The fee is typically a percentage of the payment due or a flat fee. Take note of these in your loan agreement if your financial situation changes and you can’t make payments on time. You might be able to avoid them by working with the lender to move your due date or ask for a deferment period.
• Prepayment penalties: Few lenders of debt consolidation loans charge these anymore, but double-check before you sign an agreement. Prepayment penalties are fees you owe if you repay ahead of schedule — either paying your loan balance off early or getting too far ahead on your monthly payments.

As you look for the right debt consolidation loan, you may find it helpful to use loan comparison tools and read customer reviews. With a loan comparison tool, make sure you’re looking at more than just the interest rate. Include the factors we’ve detailed above (repayment terms, loan terms, origination fees, late fees, prepayment penalties) in your analysis so you understand the full cost of the loan. It’s also useful to input as much accurate information about your financial status as you can such as your credit score and debt. That way, you’re seeing information that is relevant and tailored to your specific circumstances.

Don’t forget about customer service and satisfaction ratings. Good customer service is essential, especially if an issue comes up during the loan term. With customer reviews, look for patterns. A one-off poor review or stellar review won’t tell you much. But consistent issues and high praise can give you an idea of what to expect from the lender. 

Just be sure to verify the source. Ideally, reviews are coming from verified customers and the platforms have some kind of moderation process. Organize reviews from newest to oldest for an accurate reflection of the lender’s current customer service.

Universal Credit: Best for Credit Scores below 600

Universal Credit is designed especially for debt consolidation and pay off. It offers rate discounts of between one and two percentage points — pretty significant! — for borrowers who use a Universal Credit personal loan to directly pay off credit card debt. Loans are available for borrowers with fair or bad credit (minimum credit score of 560), often within one day, and have a fixed interest rate. The APR is 11.69–35.99% on loan amounts of $1,000-$50,000.

Happy Money: Best for Community-Based Lenders

Happy Money’s Payoff Loan is designed specially for credit card debt consolidation. The financial tech company works with community credit unions and mission-driven community banks to provide personal loans to pay off your debt directly. Choose the plan that works best for you, whether it’s a lower monthly payment, lower interest rate or earlier payoff date. The APR is 11.72-17.99% on loan amounts of $5,000 – $40,000, and the minimum credit score is 640.

LightStream: Best for Good to Excellent Credit

LightStream’s personal loans for borrowers with good or excellent credit (minimum credit score of 660) can help you get hold of up to $100,000 as soon as the same day you’re approved. It also eschews fees and offers to beat the rate of any competitor — just submit information about a lower rate you’re offered elsewhere, and LightStream will offer you a rate 0.10 percentage points lower through its Rate Beat program. It offers APRs ranging from 8.49% – 24.29%.

Credible: Best for Low Loan Amounts

Credible is a lending marketplace that can help you find debt consolidation loans as low as $600. You don’t have to worry about Credible selling your information like other comparison sites — it only gets paid when you accept a loan offer, so it won’t help lenders pester you. You can use the site to compare loan offers side by side and click through to the lender’s site to officially apply. The APR is 6.99%-35.99% on loan amounts from $600 – $100,000 with a minimum credit score of 560.

Upstart: Best for Non-Traditional Credit History

Upstart is technically a technology company, not a lender or a marketplace. Its platform uses proprietary AI to connect you with partner lenders, and you manage the loan entirely through the platform. Upstart uses more than a traditional credit score to assess your creditworthiness, so factors like your education and income could help you get a loan even if you have a low or no credit score. The APR is between 7.8%-35.99% on loan amounts from $1,000 – $50,000 and a minimum credit score of 580.

SoFi: Best for SoFi Customers

SoFi is an online bank that offers financial services ranging from banking to student loans to investing. It offers debt consolidation loans with no fees, and you can apply and manage your account right from its convenient app. You can qualify for a discounted interest rate if you’re an existing SoFi member with a free SoFi bank account or other product in the app. The APR is between 8.99% – 29.49% on loan amounts from $5,000 – $100,000 with a minimum credit score of 600.

Upgrade: Best for Raising Credit Score

Upgrade is a financial tech platform designed to help you raise your credit score through checking, credit cards, credit monitoring and personal loans. It offers debt management and payoff in one platform, and you may qualify for a debt consolidation loan with a fair or bad credit score as low as 580. There also are zero repayment penalties. The APR is 9.99% – 35.99% on loan amounts from $1,000 – $50,000

Rocket Loans: Best for Transparent Process

Rocket Loans lets you apply online for a debt consolidation personal loan in minutes. The online application starts with a transparent overview of the process, so you know what to expect at each step as you await your loan. You can verify your income and identity entirely online, so you don’t have to worry about phone calls or snail mail slowing down the process. Enjoy no prepayment penalties and same-day funding. The APR is 9.116% – 29.99% on loan amounts from $2,000 – $45,000 with a minimum credit score of 610. 

Discover: Best for Flexible Repayment Options

Discover’s debt consolidation loans are fee-free and available to borrowers with a credit score as low as 660. Its repayment assistance options are robust compared to many competitors: If your financial situation changes, you could apply for payment deferral, a short-term shift to interest-only payments or extend your repayment period for lower monthly payments. The APR is 7.99%-24.99% on loan amounts from $2,500 – $35,000.

LendingClub: Best for Bad Credit Loans

LendingClub calls itself an “online marketplace bank.” It offers checking accounts and personal loans, including loans for debt consolidation, up to $250,000 for terms of three to five years. It can be a good option if you have a low credit score; loans may be available for lenders with scores as low as 600. You’ll get funds within 48 hours and there are no repayments penalties. The APR is 8.98% to 35.99% on loan amounts as low as $1,000 with a minimum credit score of 600.

Prosper: Best for Peer-to-Peer Borrowing

Prosper is one of few peer-to-peer lending platforms left — individuals and financial institutions can invest in personal loans to support borrowers and earn a little bit of a return. You don’t have to deal with investors directly; Prosper manages the application and loan origination. Loans are available from $2,000 to $50,000 with a credit score as low as 600. The APR is 8.99%-35.99% with no prepayment penalty.

Avant: Best for Fair Credit Loans

Avant offers personal loans up to $35,000, with funding as soon as the next business day after approval. The lender’s minimum credit score is just 580; most borrowers have FICO scores between 600 and 700. The APR is 9.95–35.99% on loan amounts from $2,000 – $35,000.

LendingPoint: Best for Fair Credit Borrowers

LendingPoint assesses creditworthiness with a proprietary algorithm that looks beyond traditional FICO scores, so it’s able to lend to borrowers with scores as low as 600. Its loans are available in every state except Nevada and West Virginia. The APR is 7.99% – 35.99% on loan amounts from $1,000 – $36,500.

How to Apply for a Debt Consolidation Loan

Ready to apply for a debt consolidation loan? Here’s a step-by-step guide on how to do so:

Assess Your Financial Situation

Start by making sure you understand your current financial situation. List out all of your current debts, from credit card balances to auto loans and student loans. Jot down the outstanding amounts, interest rates and minimum monthly payments. Then, calculate your total debt so you know how much debt you need to consolidate. 

Finally, assess your monthly income and essential expenses. You want to determine how much you can afford to pay each month on your new loan. 

Check Your Credit Score

Don’t skip this step. Your credit score plays a key role in determining your eligibility for a debt consolidation loan and the interest rate you’ll be offered. You can request a copy of your credit report from major credit bureaus, and you’re entitled to one free report per year from each bureau through AnnualCreditReport.com.

As you review your credit score, look for any inaccuracies. You can dispute errors with the corresponding credit bureau. If you have any overdue accounts, do what you can to get those taken care of before applying for a loan. 

Do Your Research

Use online comparison loans and articles like this one to compare interest rates, fees, loan terms and reviews. Look for the most favorable terms and rates that will work with your credit score and needs. You may find some lenders have prequalification options where you can see your potential terms without requiring a hard inquiry on your credit. This is a good avenue to pursue to narrow down your options.

Get All Your Ducks in a Row

Before you apply, make it easy on yourself by gathering the following documents:

• Personal identification (e.g. driver’s license, passport, social security card)
• Proof of income such as recent pay stubs and tax returns
• Statements and documentation for the debt you want to consolidate
• Recent bank statements

Choose Your Lender and Apply

Once you’ve narrowed down your options and selected your lender, fill out your application. Be as thorough and as accurate as possible. You may need to upload or scan documents into the application. Make sure you understand every aspect of the loan and its conditions before signing and submitting. Monitor the application status via email or through the lender’s portal. If you’re approved, you’ll receive details via a final loan offer. This information should be reviewed carefully to ensure it matches what was offered during the application process.

Factors to Consider When Comparing Loans

As you consider debt consolidation loan options, there are some factors to be aware of that will impact the total cost of the loan. Here’s what to keep in mind:

Interest Rates

Interest rates are first on this list for a reason. The interest rate you receive on your loan will significantly impact the total amount you end up repaying. You’ll want to understand if you have a fixed or variable interest rate as well as the annual percentage rate (APR). A fixed interest rate will remain constant throughout the life of your loan so your monthly payment will be predictable. A variable rate, on the other hand, can change over time based on market conditions. As for the APR, this figure tells you the total cost of borrowing, including the interest rate and any additional fees. 

When looking at debt consolidation loans and interest rates, research current rates before applying and consider how your credit score will affect what you’re offered. 

Loan Terms

The loan term is the length of time over which you’ll repay the loan. The term will affect your monthly payment and the amount of interest you paid. Usually, a shorter term leads to higher monthly payments but lower total interest costs. You accrue less interest this way because you are paying off the principal at a faster rate. 

With a longer term debt consolidation loan, your monthly payments will be lower. However, you’ll pay more total interest because you are paying down your principal at a slower rate. 

Fees and Penalties

Debt consolidation loans typically have origination fees. This is a fee charged by the lenders to process your application. It is generally a percentage of the loan amount and can be deducted from the loan or paid by you upfront. You may also encounter prepayment penalties if you pay off your loan before the loan term ends. Likewise, it’s good to be aware of potential late fees for missed or late payments. Consider setting up automatic payments to avoid this fee. 

Credit Score Requirements

Lenders use your credit score to determine your eligibility for the loan. It will impact how much you are approved to borrow, the terms and interest rates. Generally, the higher your credit score, the more favorable terms and rates you will receive. Before applying for a loan, do what you can to improve your score by avoiding other hard inquiries as well as late or missed payments.

Credit Card Consolidation Loans vs. Personal Loans

A credit card consolidation loan typically involves transferring outstanding balances from multiple credit cards to a single credit card with a lower interest rate. They may also offer 0% APR rates for a certain period of time as an incentive to perform a balance transfer. 

The advantages of credit card consolidation loans include:

• Lower interest rates than existing credit cards
• Promotional offers such as 0% APR 
• One single payment

The following disadvantages are important to be aware of:

• High interest rates post promotion
• Balance transfer fees (typically 3 to 5% of the transferred amount)
• Credit limits, which may not be enough to cover your full balance
• Impact to credit as they require a hard inquiry

A personal loan, on the other hand, is an unsecured loan provided by a bank, credit union or other lender. It is used to pay off or down debts. The borrower then makes monthly payments on the loan at a fixed interest rate. Here are the pros to this means of debt consolidation:

• No transfer fees
• Fixed interest rates
• May allow you to borrow a larger amount than with a credit card
• Consolidated payments

Compared to credit card consolidation loans, personal loans have some cons:

• Higher interest rates if you have a low credit score
• May have origination fees
• Shorter repayment terms

To determine which is right for you, consider your outstanding debt, income and credit score. If you have a high credit score and relatively low balance, a credit card consolidation loan may be a better choice. If you have a lower credit score and more debt to pay off, a personal loan may be the better option.

Alternatives to Debt Consolidation Loans

Debt consolidation loans aren’t the only avenue for tackling your debt. Consider these other options and their effect on your credit score and financial goals before committing to a loan:

Balance transfer cards: These credit cards let you transfer the outstanding balance of an existing card or several, so you pay it off to the new creditor. It’s a way for a credit card company to entice you away from a competitor. Balance transfer cards usually offer an interest-free period of about a year. If you expect to be able to repay your credit card debt within that period, your balance could become less manageable than you expected.

Refinancing: If you have a single loan with unfavorable terms, you could return to the lender and ask to refinance. This could get you a lower interest rate or different monthly payment, depending on your financial situation and needs.

Debt forgiveness: A debt management plan usually comes with some amount of forgiven debt, which could offer a tremendous amount of relief. You might also be able to negotiate a reduced repayment amount on your own directly with your creditors. This kind of settlement usually shows up on your credit report as a negative mark.

Deferment: Check the terms of your existing debt to see if your lender offers deferment or other flexible repayment options. You may just need a month or two off of monthly payments or interest to get back on track, and that could save you the trouble of applying for a whole new loan.

Tips for Getting the Best Debt Consolidation Loan

To get the best debt consolidation loan for your financial needs, focus on the following:

• Your credit. By now, you’ve hopefully obtained a copy of your credit report and checked for any inaccuracies. These errors should be disputed and resolved before applying for a loan, if possible.
• Pay bills on time. Set up reminder or automatic payments to maintain your bill payment history. Catch up on any overdue accounts.
• Keep balances low. Try to keep your credit utilization ratio to 30% or lower. 
• Avoid hard inquiries. Each hard inquiry (credit check when applying for credit) can lower your credit score at least temporarily.
• Cut unnecessary expenses. Curb spending as much as you can so you’ll have more funds to put toward repaying your loan.
• Shop around. Look at potential offers from banks, credit unions and other lenders to get a full picture of your options. Use prequalification where available and search for promotional rates. 
• Avoid common pitfalls. Don’t forget to factor in origination fees, prepayment penalties and the total cost of the loan as you make your decision.
• Negotiate terms and rates. If you have good credit and multiple offers, you can potentially negotiate the repayment terms and rates with lenders. You may also want to consider asking the lender to waive the application or origination fee. 
• Look for red flags. Avoid lenders that have extremely high fees or interest rates. Always read the fine print, and don’t be afraid to walk away from lenders that use high-pressure tactics. It’s also wise to verify licensing and check for any complaints raised by other borrowers. 

Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine. Freelancer Veronica Matthews contributed to this post.