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Best debt consolidation loans in March 2023

Mar 21, 2023
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Bankrate’s top picks for debt consolidation loans considers interest rates, terms and features offered by each lender. We also go over the benefits and drawbacks of debt consolidation, as well as available alternatives. 

Debt consolidation loans allow borrowers to combine high-interest debt into a new loan, hopefully with a lower interest rate. When choosing a debt consolidation loan, there are several factors to consider.

Debt consolidation loans typically have interest rates from 6 percent to 36 percent. The actual rate you qualify for depends on your credit history, annual income and debt-to-income ratio. When applying for a debt consolidation loan, it is important that you find a lower rate than what you are currently paying.

 
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4.6

Bankrate Score
APR from

9.99- 25.99%*

with Autopay
Loan Amount

$5k–$100K*

Term: 2-7 yr*
Min. Credit

Not disclosed

Apply on partner site

4.7

Bankrate Score
APR from

8.24- 35.97%

with AutoPay
Loan Amount

$1k–$50K

Term: 2-7 yr
Min. Credit

560

Check rate with Bankrate

4.7

Bankrate Score
APR from

8.99- 35.99%

Loan Amount

$2k–$50K

Term: 3-5 yr
Min. Credit

600

Check rate with Bankrate

4.6

Bankrate Score
APR from

7.99- 35.99%

Loan Amount

$5k–$50K

Term: 2-5 yr
Min. Credit

620

Check rate with Bankrate

4.6

Bankrate Score
APR from

10.50- 29.99%

Loan Amount

$5k–$40K

Term: 2-5 yr
Min. Credit

640

Check rate with Bankrate

4.1

Bankrate Score
APR from

8.05- 36.00%

Loan Amount

$1k–$40K

Term: 2-5 yr
Min. Credit

Not disclosed

Check rate with Bankrate

4.1

Bankrate Score
APR from

18.00- 35.99%

Loan Amount

$1.5k–$20K

Term: 2-5 yr
Min. Credit

Not disclosed

Check rate with Bankrate

4.5

Bankrate Score
APR from

9.95- 35.95%

Loan Amount

$2k–$35K

Term: 1-5 yr
Min. Credit

Not disclosed

Check rate with Bankrate

DEBT RELIEF

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The Bankrate guide to choosing the best debt consolidation loan

Why trust Bankrate?

Bankrate has been comparing and surveying lenders and financial products for over 40 years. Hundreds of top news organizations rely on Bankrate as a trusted source of information. Bankrate strives to help you make smart, informed decisions about your finances. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is fact-checked to ensure accuracy.

A debt consolidation loan can help you manage your debts more effectively, but only if you find a loan that works for your situation. When shopping for the best debt consolidation loan, look for the lowest interest rate, a loan amount that meets your needs, an affordable and workable repayment term and low to no fees. Loan details presented here are current as of Feb. 17, 2023. Check the lenders’ websites for the latest information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.

Compare debt consolidation loan lenders in March 2023

LENDER EST. APR LOAN TERM LOAN AMOUNT BEST FOR MIN. CREDIT SCORE
Best Egg 8.99%-35.99% 3-5 years $2,000-$50,000 High-income earners with good credit 600
Happy Money 10.50%-29.99% 2-5 years $5,000-$40,000 Consolidating credit card debt 640
LightStream 9.99%-25.99%* (with AutoPay) 2-7 years $5,000-$100,000 High-dollar loans and longer repayment terms Not specified
PenFed 7.74%-17.99% Up to 5 years $600-$50,000 Smaller loans with a credit union 700
OneMain Financial 18.00%-35.99% 2-5 years $1,500-$20,000 Fair to poor credit Not specified
Discover 6.99%-24.99% 3-7 years $2,500-$35,000 Good to excellent credit 660
Upstart 6.70%-35.99% 3 or 5 years $1,000-$50,000 Consumers with little credit history No minimum

Best for high-income earners with good credit

Min. credit score:
600
Fixed APR From:
8.99% –35.99%
Loan amount:
$2,000– $50,000
Term lengths:
3 to 5 years
Min. annual income:
Not disclosed
Overview: Best Egg offers unsecured personal loans for a variety of purposes, including debt consolidation. If you have a credit score of at least 600, you may qualify based on other criteria, such as income. Best Egg's debt consolidation loans range from $2,000 to $50,000.
Why Best Egg is best for high-income earners with good credit: The best rates and terms go to borrowers who earn $100,000 or more and have a credit score of at least 700, which is “good” on the FICO scale.

Best for consolidating credit card debt

Min. credit score:
640
Fixed APR From:
10.50% –29.99%
Loan amount:
$5,000– $40,000
Term lengths:
2 to 5 years
Min. annual income:
$30,000

Overview: Happy Money is specifically designed for borrowers who want to pay off their credit card debt. The application and approval process are completed online, and borrowers can get free monthly FICO updates.

Why Happy Money is the best for consolidating credit card debt: Happy Money's personal loans can be used only to consolidate credit card debt, and you can do so without unnecessary fees.

Best for high-dollar loans and longer repayment terms

Min. credit score:
Not disclosed
Fixed APR From:
9.99% –25.99%
Loan amount:
$5,000– $100,000
Term lengths:
2 to 7 years
Min. annual income:
$50,000

Overview: LightStream offers personal loans for a variety of purposes, including debt consolidation. It stands out for offering loans up to $100,000 and terms of up to 84 months — larger loans and longer terms than what other lenders offer. You must have excellent credit and sufficient assets and income to qualify for a jumbo-size personal loan.

Why LightStream is the best for high-dollar loans and longer repayment terms: LightStream offers unsecured, fixed-rate debt consolidation loans as big as $100,000, with up to seven years to repay.

Best for smaller loans with a credit union

Min. credit score:
700
Fixed APR From:
7.74% –17.99%
Loan amount:
$500– $50,000
Term lengths:
1 to 5 years
Min. annual income:
Not disclosed

Overview: Pentagon Federal Credit Union, known as PenFed, offers unsecured, fixed-rate personal loans for debt consolidation. While you'll need to become a member of the credit union in order to receive loan funds, you can do so by opening a savings account with a $5 initial deposit.

Why PenFed is the best for smaller loans with a credit union: You can borrow as little as $600 through PenFed, and credit unions often offer more personalized service than larger banks.

Best for fair to poor credit

Min. credit score:
Not disclosed
Fixed APR From:
18.00% –35.99%
Loan amount:
$1,500– $20,000
Term lengths:
2 to 5 years
Min. annual income:
$7,200

Overview: OneMain Financial is a bank based out of Indiana. Its loan amounts are smaller and rates are higher than typical debt consolidation personal loans, but the lender is still a good alternative to the high interest rates and hidden fees that can come with payday loans. Your credit history, income and debt load determine whether you qualify.

Why OneMain Financial is the best for fair to poor credit: OneMain's fixed-rate loans charge high rates, but borrowers with bad credit will find more favorable rates with the company than with risky payday lenders, which can charge as much as 400 percent interest.

Best for good to excellent credit

Min. credit score:
Not disclosed
Fixed APR From:
6.99% –24.99%
Loan amount:
$2,500– $35,000
Term lengths:
3 to 7 years
Min. annual income:
$25,000

Overview: Discover offers unsecured personal loans for debt consolidation, with the option to pay creditors directly. Plus, its minimum APR for the most creditworthy applicants is lower than most lenders, coming in at 6.99 percent.

Why Discover is the best for good to excellent credit: Borrowers with good credit can score one of the most competitive APRs on the market with Discover and can get their money as soon as the next business day, provided the application submitted is complete and free of errors.

Best for consumers with little credit history

Min. credit score:
Not disclosed
Fixed APR From:
6.70% –35.99%
Loan amount:
$1,000– $50,000
Term lengths:
3 to 5 years
Min. annual income:
$12,000

Overview: Upstart offers unsecured personal loans for borrowers with a less-than-perfect credit score or a thin history with its unique underwriting criteria. Instead of just basing approval on credit, the lender also looks at factors like schooling and employment history.

Why Upstart is best for consumers with little credit history: Upstart has flexible credit requirements which is great for borrowers who are just starting out.

Should you consolidate with a personal loan?

What is debt consolidation?

Debt consolidation is a process where multiple high-interest debts — like credit cards — are rolled into a single payment. Debt consolidation simplifies your repayment structure and can make it easier to keep track of your remaining debt and may help you pay it off faster. 

While there are multiple ways to consolidate your debt, borrowing a debt consolidation loan from a lender, bank or credit union is one of the most common methods.  

How does debt consolidation work?

There are several ways to consolidate debt, but the general process entails taking out a new debt — in this case, a personal loan —  to pay off multiple debts and streamline the repayment process. Borrowing a home equity loan or taking out a balance transfer credit card are also methods of debt consolidation. 

However, a debt consolidation loan is one of the most common and easiest ways to consolidate debt. With fixed interest rates and monthly payments, it's possible to save money over the life of your loan by securing a lower rate than what you had on your previous debts. 

Plus, a debt consolidation loan is an unsecured debt, meaning you don't need to secure the loan with collateral and run the risk of losing your assets, like your home, if you're unable to make the monthly payments. If debt consolidation isn't an option, working with a credit counseling agency to establish a debt management plan may be a better way of dealing with your debt.

How to apply for a debt consolidation loan

Applying for a debt consolidation loan is like applying for any other lending product, but you'll want to pay special attention to each lender's interest rates. Debt consolidation only makes sense if you can secure a lower rate than that of your previous debts.

Start by prequalifying with lenders, banks and credit unions to check your predicted rates and eligibility odds without impacting your credit. Look through the eligibility requirements of each lender and sift through the predicted rates, terms and fees to find the best loan for your situation. 

Once you've narrowed down your search, look into each loan's benefits and potential drawbacks. Look for perks like autopay discounts or member benefits that will add to the value of your loan, and be on the lookout for value detractors, like origination fees. From there, you can find the best loan for your credit situation and apply online, or depending on the lender, you may be able to complete the process in person at a brick-and-mortar location.

Where to get a debt consolidation loan

Debt consolidation loans are offered through online lenders, banks and credit unions. While most applications can take place completely online, there are some in-person lenders that may require you to go to a physical location for the application process.

Pros and cons of debt consolidation loans

Before signing on the dotted line, it's important to be aware of the potential benefits and drawbacks that come with a debt consolidation loan. Here's what you need to know.

Pros

  • Checkmark

    Simplified payments: Debt consolidation turns multiple payments into one fixed monthly payment. Only having to make one payment a month — as opposed to four or five — can help encourage healthy repayment habits.

  • Checkmark

    Lower rates: Borrowers with above-average credit can qualify for lower interest rates and save money in interest over the life of the loan.

  • Checkmark

    Improve credit health: Consolidating your debts into one payment can help you grow your credit faster through simplifying the repayment process.

Cons

  • Potential fees: Many loans come with fees, like prepayment and origination fees that can eat into the overall value of your loan.

  • Doesn't pay down debt: While consolidation can help make your debt more manageable, it doesn't actually pay it down, and you'll still have to make the monthly payments.

  • Doesn't solve overspending: If you run up revolving accounts, like credit cards, or continue to live outside your means a debt consolidation loan may only offer temporary relief.

How do I choose the best debt consolidation loan lender?

It's important to find a debt consolidation loan that fits your budget and helps you reach your goal of eliminating debt. Many lenders offer prequalification, which gives you a prediction of the rate, loan amount and loan term that you could qualify for without making a hard credit inquiry.

You can then use the offers to compare options and decide which is best for you based on several factors.

  • Annual percentage rates: Your APR is determined by your credit score and other financial factors. This is the amount charged on top of your principal amount every month.
  • Loan cost: When you shop, compare the total cost of each loan, including origination fees and other charges. A large number of fees can outweigh the benefits of a low APR.
  • Lender features: Potentially helpful features to search for are benefits like direct creditor payments, credit monitoring, hardship programs and 24/7 customer service availability.

Why consolidate your debt?

Debt consolidation has many potential benefits.

  • Potentially lower interest rates: If you have several credit cards with double-digit interest rates and you qualify for a debt consolidation loan at a lower rate, you can potentially save thousands in interest and fees.
  • Pay off debt sooner: Combining all the debt into one bucket can make it easier to pay the debt off sooner because you don’t have to balance separate payments.
  • Simplified finances: Credit card rates are variable and your monthly payments differ depending on your balance, so it can be hard to know when your debts will be paid off. Debt consolidation puts all of your payments in one place so you can keep track of it easier.
  • Set repayment schedule: A debt consolidation loan combines multiple debts into one monthly payment with a fixed rate and a set repayment term, so your monthly payments stay the same. You don’t have to worry about multiple due dates or varying payment amounts.
  • Credit score improvement: Credit scoring models, like FICO and VantageScore, place a lot of weight on your credit utilization ratio. When a new consolidation loan lowers your credit utilization ratio, your credit score might climb as a result.

Generally, a debt consolidation loan is a good idea if you can pay off the new debt, you have a high credit score to get good rates and you like the stability of a fixed monthly payment.

Although a debt consolidation loan can be helpful for many people, it won't solve your financial problems on its own. To reap the full benefits and avoid further issues, you’ll need to avoid making late payments and keep balances low on your recently paid off credit card accounts.

Alternatives to a debt consolidation loan

Home equity

One popular way people pay off debt is to use the equity in their homes. Home equity loans and home equity lines of credit (HELOCs) let borrowers use their homes as collateral in exchange for financing. Just be sure to factor in the risks if you’re considering this option. The lender can seize your home if you can't make the payments.

Who this is best for: Borrowers who have built up equity in their homes.

Who this is not good for: Those unsure of their ability to maintain the monthly payments. 

Home equity loan versus debt consolidation loan: Home equity loans and HELOCs may offer lower rates than debt consolidation loans, though they come with more risks, since your home is used as collateral.

Debt relief services

Debt relief services, including debt settlement companies, offer another way to deal with your debt if you can’t qualify for a consolidation loan. These companies reach out to creditors and debt collectors on your behalf and try to settle the debt for a lesser amount.

If you decide to pursue debt relief services (perhaps as an alternative to bankruptcy), be aware that the fees these companies charge can be steep. Take your time to fully research fees, reviews and other details before applying. It’s also wise to compare multiple debt relief companies before you commit.

Who this is best for: Borrowers who are experiencing financial hardship and cannot pay their debt.

Who this is not good for: Those with a thin credit history or less-than-stellar credit score.

Debt relief services versus debt consolidation loan: Unlike debt consolidation loans, debt relief services aim to eliminate some of your debt without you having to pay it. With that said, pursuing debt relief is a risky move, and it can damage your credit score.

Credit counseling

Another option that can help you get debt under control is credit counseling. Credit counseling companies are often (though not always) nonprofit organizations. In addition to debt counseling, these companies may offer a service known as a debt management plan, or DMP.

With a DMP, you make a single payment to a credit counseling company, which then divides that payment among your creditors. The company negotiates lower interest rates and fees on your behalf to lower your monthly debt obligation and help you pay the debts off faster.

DMPs are rarely free, though, even if they’re done by a nonprofit credit counseling service. You may have to pay a setup fee of $30 to $50, plus a monthly fee (often $20 to $75) to the credit counseling company for managing your DMP over a three- to five-year term.

Who this is best for: Borrowers who need help structuring their debt payments.

Who this is not good for: Those with little wiggle room in the budget. 

Credit counseling versus debt consolidation loan: With a debt consolidation loan, you're in control of your payoff plan, and you can often apply with few fees. With credit counseling, a third party manages your payments while charging setup fees.

Balance transfer credit card

With a balance transfer card, you shift your credit card debt to a new credit card with a 0 percent introductory rate. The goal with a balance transfer card is to pay off the balance before the introductory rate expires so that you save money on interest. When you calculate potential savings, make sure you factor in balance transfer fees.

Keep in mind that paying off existing credit card debt with a balance transfer to another credit card isn't likely to lower your credit utilization ratio like a debt consolidation loan would.

A debt consolidation loan is also going to offer higher borrowing limits, enabling you to pay off more debt, as well as fixed monthly payments, which make it easier to budget and stay disciplined with paying off debt.

Who this is best for: Borrowers who can pay off existing debt quickly.

Who this is not good for: People with a young credit history or a less-than-average score. 

Balance transfer credit card versus debt consolidation loan: Balance transfer cards are often the best choice for borrowers who have the means to pay off their debt within 18 months, which is a standard 0 percent APR period. If you need longer to pay off your debt, or if you have a lot of debt, a debt consolidation loan is a better choice.

How Fed rate hikes affect debt consolidation loans

In an effort to combat rising inflation, the Federal Open Market Committee (FOMC) raised interest rates seven times in 2022. Most recently, the Fed hiked rates by 0.25 percent during the first Fed meeting of 2023. These rate hikes have caused interest rates on personal loans to rise.

Most personal loans have fixed rates, meaning that borrowers who already have a personal debt loan for debt consolidation do not need to worry. However, those looking to take out a new loan may face higher rates.

If you are in the market for a debt consolidation loan and want to ensure you get the best rate possible, there are some steps you can take.

  • Prequalify if possible.
  • Check your credit score before applying.
  • Apply with a co-borrower.
  • Shop around and compare rates.

FAQs about debt consolidation loans

Methodology

To select the top debt consolidation loan lenders, Bankrate reviewed 33 lenders across the personal loan space. Several factors related to consolidation were considered, including a variety of credit profiles accepted, loan amounts, terms and whether the lenders had specialized consolidation loan products or services. 

Bankrate star ratings rely on 15 data points broken into three categories: availability, affordability and customer experience. Availability covers how fast you can get a loan, how much you can borrow and the income and credit requirements. Affordability includes fees, the range of interest rates offered and penalties. Lastly, customer experience is an evaluation of online applications, online account access, customer service hours and apps. 

Among the top features evaluated for debt consolidation loans were the availability of online applications, flexible repayment options and customer discounts.