Debt consolidation could be a great way to get out of debt and improve your financial picture, but it is not right for everyone. This guide will help you understand which types of debt can benefit most from debt consolidation and which solution might be right for you. You'll also learn how debt consolidation can impact your credit score.
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
Edited by
Aylea WilkinsLoans Editor, Former Insurance Editor
Aylea Wilkins is an editor specializing in student loans. She has previously worked for Bankrate editing content about personal and home equity loans and auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information.
Founded in 1976 as the Bank Rate Monitor, a print publisher for the banking industry, Bankrate has a long track record of helping people make smart financial decisions.
We’ve maintained this reputation over four decades by prioritizing facts and experience over hype and hearsay, and quickly responding to economic trends that offer our users a more relevant experience.
From our product comparison tools to award-winning editorial content, we provide objective information and actionable next steps to help you make informed decisions. It’s why over 100 million people put their trust in us every year.
The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money.
What is debt consolidation?
It can be difficult to manage debt payments, especially if you have multiple high interest debts. Debt consolidation is the process of combining several debts into one new loan. The goal of debt consolidation is to streamline debt and thereby reduce monthly payments, pay less in interest and pay off your debt more quickly.
You can consolidate several different types of debt, including credit cards, auto debt, medical debt, personal loan debt and student debt. Combining different types of debt into one loan makes it easier to keep up with monthly payments, and it can save you a lot of money. If you want to consolidate your debt, there are four major debt consolidation methods to consider.
Ways to consolidate your debt
There are a variety of ways to consolidate debt and the right method for you depends on your unique financial situation. It is important to understand and compare your options before making a decision.
Balance transfer card
A balance transfer credit card allows you to transfer your existing debt balances with an introductory 0 percent APR.
To figure out if debt consolidation is right for you, add up your outstanding loan amounts, credit card balances and other debts. The calculator below will help you determine how debt consolidation would impact your overall monthly payment, and how much you would save on interest.
Pros and cons of debt consolidation
Before deciding on a lender, make sure that consolidating your debt is the right decision for your situation.
PROS
Consolidating your debt can help you qualify for a lower interest rate
Combining multiple payments into one makes it easier to make monthly payments on time
Making on-time debt consolidation loan payments can help you boost your credit score
CONS
There are often upfront costs such as loan origination fees, balance transfer fees, closing costs and annual fees
You might not qualify for a lower interest rate
If you miss payments or make them late, you could end up spending more money overall
Types of debt you can consolidate
Consolidating your credit card debt
Credit cards are easier to qualify for than other credit products, but they typically come with higher interest rates. If you are looking to consolidate credit card debt, it is important to find a product with a lower interest rate than the one you’re currently paying. Personal and home equity loans generally have lower interest rates than credit cards. If you choose to refinance with a 0 percent balance credit card, make sure you know how long the interest rate will stay 0 percent and what rate you will qualify for once the introductory rate ends.
You are generally not responsible for your spouse’s credit card debt unless you are a co-signer for the card or it is a joint account. But some state laws vary and you may be liable for this debt.
American credit card balances rose to $986 billion in the last quarter of 2022. Here’s a look at credit debt in the U.S. and how to start paying your balance down.
You are generally not responsible for your spouse’s credit card debt unless you are a co-signer for the card or it is a joint account. But some state laws vary and you may be liable for this debt.
American credit card balances rose to $986 billion in the last quarter of 2022. Here’s a look at credit debt in the U.S. and how to start paying your balance down.
Don’t let imperfection impede your progress toward your 2023 goals.
5 min read
Jan 26, 2023
Consolidating your student loan debt
If you have multiple student loans and want to consolidate them, you can either refinance through a private lender or, if you have federal student loans, you can apply for the U.S. Department of Education’s Direct Consolidation Loan. If you apply for the federal loan, you will have more flexible repayment options and access to federal benefits. If you refinance through a private lender, you might be able to secure a lower interest rate.
It could help you qualify for nonfederal financial aid from your university.
5 min read
Mar 23, 2023
Consolidating your medical debt
If you have multiple medical debts, consolidating will give you the convenience of a single monthly payment. If your medical provider doesn't offer a payment plan, or if the monthly payments are too high, a personal loan could be a good option. Personal loans offer lower interest rates than credit cards and could help you avoid bankruptcy due to high medical bills. You could also use a 0% APR credit card if you can pay off your medical debt before the interest rate increases.
Debt consolidation can get you a lower interest rate, helping you pay down debt faster.
6 min read
Feb 27, 2023
Debt consolidation basics
There are a variety of ways to consolidate debt and the right method for you depends on your unique financial situation. It is important to understand and compare your options before making a decision.
Debt consolidation can cause your credit score to drop initially because it involves taking out a new credit product. If you work with a debt management company, you might see a bigger dip in your credit score since these programs typically require you to default on your loans. However, debt consolidation can help you improve your credit long term since it helps you pay off outstanding debts.
Debt consolidation could help you streamline and keep track of payments, pay off debt more quickly and save money overall. However, it is not right for everyone. Debt consolidation is only worth it if you find a loan product with better terms and interest rates than what you are currently paying. If you are unlikely to qualify for a better interest rate and you do not want to work with a debt management company, debt consolidation might not be right for you.
Those with good to excellent credit are more likely to qualify for the best interest rates on personal loans and balance transfer credit cards. If you have fair to poor credit, there are still bad credit debt consolidation options available, but they are more limited. There are personal loans available for borrowers with bad credit, but they tend to have higher interest rates. If you own your home, you may be eligible for a home equity loan with a reasonable interest rate. If you are drowning in debt and need relief, a debt management company may be able to negotiate your debt with your creditors.
There are several risks associated with debt consolidation, including damage to your credit score, unexpected fees, losing collateral and winding up in more debt than you started with. If you do not find a product with a lower interest rate than you are currently paying, debt consolidation could actually end up costing you more money overall.
The overall cost of debt consolidation depends on the consolidation method you choose, the interest rate you receive and any additional fees charged by the lender. Before signing up for a debt consolidation product, make sure to calculate the monthly interest rate and fees to determine if consolidating will actually save you money.
Debt consolidation can save you money, but only if you are able to secure a lower interest rate than you are currently paying. Before choosing a debt consolidation product and lender, determine what you are currently paying in interest and fees each month and make sure that the product you choose has better rates and fewer fees.
Secured loans are backed by collateral such as a house or a vehicle, and unsecured loans are not backed by collateral. Secured loans are typically easier to get and have lower rates, but you run the risk of losing your collateral if you do not pay back the loan. Compare the differences between secured and unsecured personal loans to see what's right for you.
If you are looking to consolidate a smaller debt that you will be able to pay back fairly quickly, a credit card balance transfer could be the way to go. Credit cards often come with introductory 0 interest periods during which you do not have to pay any interest. If you will be able to pay off your debt during the 0 interest period, a credit card balance transfer could be the cheapest option.
If you need to consolidate a large amount of debt that might take you years to pay off, a debt consolidation loan is likely the best option. Personal loans tend to have lower interest rates than credit cards overall and most personal loans come with fixed interest rates that do not change over the life of the loan.
Using a home equity loan to consolidate debt has benefits and risks. Home equity loans typically have lower interest rates, especially if you have a lot of equity in your home. However, you run the risk of losing your home if you do not pay back the loan.
Working with a debt relief company could be a good option if you have unmanageable debt, are unable to qualify for loan products and want to avoid bankruptcy. Debt relief requires that you default on your debt while the debt management company negotiates with your creditors, which can significantly impact your credit. There is also no guarantee that your creditors will work with a debt relief company. However, working with a debt relief company could help you significantly decrease your debt if you cannot qualify for other consolidation methods, and it is a much better option than bankruptcy.
How to get a debt consolidation loan in 3 easy steps
1.Answer a few questions
It only takes a few minutes to enter your information and see what loan offers you may qualify for. Answer a few questions about yourself and the loan you need, and we can match you with potential lenders. This service is free and will not affect your credit score.
Many lenders require a good credit score. Make sure you have good credit, look into a cosigner or find a lender that works with bad credit borrowers.
2.Compare your offers
Get prequalified and compare loan product offers based on important factors like APR and minimum monthly payments.
Take your time and check with multiple lenders to ensure you get the best deal possible.
3.Lock in your rate
Choose a lender and visit its website to complete the application process. If you’re approved, you could get funding within a few weeks.
Make sure you have financial documents regarding existing loans, income verification, etc.
Get prequalified loan offers in two minutes or less - with no impact on your credit score.
The listings that appear on this page are from companies from which this
website receives compensation, which may impact how, where and in what
order products appear. This table does not include all companies or all
available products. Bankrate does not endorse or recommend any companies.
|
Filters
Check Your Personal Loan Rates
Check personalized rates from multiple lenders in just 2 minutes
Explore loans ranging from $500 to $100,000
This will NOT impact your credit score
Bankrate’s scores for personal loan lenders evaluate 11 data points related to loan costs and terms, as well as customer experience.
The annual percentage rate (APR) includes your interest rate, plus any loan fees. It reflects the total cost of borrowing.
The range of loan amounts that a lender will service. The maximum value is the largest amount a lender will give although this amount may not be available to borrowers who don’t have good or excellent credit. Amount ranges may vary for non-loan products. Term refers to the amount of time you have to repay the loan.
The minimum credit score typically required to qualify for a loan with a given lender. Exact thresholds are not always disclosed by a lender and in certain cases the minimum score is the best estimate based on publicly available information. Credit score refers to FICO 9.0 unless otherwise stated.
Fixed rates and payments with a clear pay off date.
Flexible loan options: explore multiple options and pick the loan amount and term that best fits your budget and timeline.
Fast Funding. Money is sent to your bank account within a day of clearing any verifications. *
Automatic payments and ability to customize the due date: manage your account online or via the mobile app. No prepayment penalties.
Access to free credit score monitoring, educational tools, and personalized recommendations to help you understand and make the most of your credit.
Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.97%. All personal loans have a 1.85% to 8.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/.
Get a personal loan up to $50,000 with a fixed APR from 7.99% to 35.99%
Get money in as little as one business day, upon approval and verification
Join more than 450,000 customers at a trusted company with an A+ BBB rating
Use it for almost anything: consolidate debt or other unexpected expenses
GENERAL AFFILIATE DISCLOSURE UPDATE AS OF 03.2023
*Trustpilot TrustScore as of December 2022. Best Egg personal loans, including the Best Egg Secured Loan, are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender or Blue Ridge Bank, a Nationally Chartered Bank, Member FDIC, Equal Housing Lender. “Best Egg” is a trademark of Marlette Holdings, Inc., a Delaware corporation. All uses of “Best Egg” refer to “the Best Egg personal loan”, “the Best Egg Secured Loan”, and/or “Best Egg on behalf of Cross River Bank or Blue Ridge Bank, as originator of the Best Egg personal loan,” as applicable.
The term, amount, and APR of any loan we offer to you will depend on your credit sc¬ore, income, debt payment obligations, loan amount, credit history and other factors. Your loan agreement will contain specific terms and conditions. About half of our customers get their money the next day. After successful verification, your money can be deposited in your bank account within 1-3 business days. The timing of available funds upon loan approval may vary depending upon your bank’s policies. Loan amounts range from $2,000– $50,000. Residents of Massachusetts have a minimum loan amount of $6,500 ; Ohio, $5,000; and Georgia, $3,000. TO REPORT A PROBLEM OR COMPLAINT WITH THIS LENDER, YOU MAY WRITE OR CALL Joseph Walsh – Operations Manager, Email: ccrt-resolution@bestegg.com, Address: P.O. Box 42912, Philadelphia, PA 19101, Phone: 1-855-82-6353. This lender is licensed and regulated by the New Mexico Regulation and Licensing Department, Financial Institutions Division, P.O. Box 25101, 2550 Cerrillos Road, Santa Fe, New Mexico 87504. To report any unresolved problems or complaints, contact the division by telephone at (505) 476-4885 or visit the website https://www.rld.nm.gov/financial-institutions/. For a second Best Egg loan, your total existing Best Egg loan balances cannot exceed $100,000. Annual Percentage Rates (APRs) range from 8.99%–35.99%. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0.99%–8.99% of your loan amount, which will be deducted from any loan proceeds you receive. The origination fee on a loan term 4-years or longer will be at least 4.99%. Your loan term will impact your APR, which may be higher than our lowest advertised rate. You need a minimum 700 FICO® score and a minimum individual annual income of $100,000 to qualify for our lowest APR. For example: a 5‐year $10,000 loan with 9.99% APR has 60 scheduled monthly payments of $201.81, and a 3‐year $5,000 loan with 7.99% APR has 36 scheduled monthly payments of $155.12. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth, and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents. Best Egg products are not available if you live in Iowa, Vermont, West Virginia, the District of Columbia, or U.S. Territories.
All loans available through Achieve Personal Loans (NMLS ID #227977) are originated by Cross River Bank (a New Jersey state chartered commercial bank) or Pathward, N.A. (Equal Housing Lenders) and may not be available in all states. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Minimum loan amounts vary due to state-specific legal restrictions – please call an Achieve Personal Loans consultant for further details. Loan amounts generally range from $5,000 to $50,000 including origination fees, and are offered based on loan purpose and underwriting conditions. Repayment periods range from 24 to 60 months. APRs range from 7.99% to 35.99% APR and include applicable origination fees. Example loan: four-year $20,000 loan with a rate of 15.49% and corresponding APR of 18.34%, would have an estimated monthly payment of $561.60 and a total cost of $26,956.80. To qualify for a 7.99% APR loan, a borrower will need excellent credit, a loan amount for $12,000.00 or less, and a term of 24 months. Loan origination fees vary from 1.99% to 6.99%. Adding a co-borrower with sufficient income; using at least 85% of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could also help you qualify for lower rates. Average interest savings for personal loans range from 0% - 6% based on closed loans that qualified for one or more of our rate discounts in July 2022. †Times noted are estimates and can vary for a loan request from Achieve Personal Loans (NMLS #227977). Same day approvals assume that a fully completed application with all required supporting documentation is provided early enough on a day that our offices are open. Achieve Personal Loans consultants are available Monday–Friday 6AM to 8PM MST and Saturday–Sunday 7AM to 4PM MST.
The only personal loan with added peace of mind to cover your monthly loan payment (Loan Payment Insurance) for up to 3 months due to job loss or disability – continuing to reduce your principal balance on every Happy Money loan
Quickly check your rate without affecting your credit score
No prepayment, late, or check-processing fees
Overview: Happy Money (formerly Payoff) offers low APRs of 10.50 percent to 29.99 percent, making it an ideal lender for borrowers trying to consolidate credit card debt at a lower interest rate. This lender also offers free monthly FICO updates and reports payments to major credit bureaus in order to help borrowers build credit.
This offer does not constitute a commitment to lend or an offer to extend credit. Upon submitting a loan application, you may be asked to provide additional documents to verify your identity, income, assets, or financial condition. The rate and terms you may be approved for will be shown to you during the application process. Loans subject to an origination fee, which is deducted from the loan proceeds. Refer to full borrower agreement for all terms, conditions and requirements. Only loans applied for and issued on or after January 23, 2023, are covered under the TruStage™ Payment Guard Insurance Policy. Please refer to the certificate of insurance, provided to you with your loan origination documents, for terms and conditions of the coverage. Some exclusions apply. Claims must be submitted for review and approval to CUMIS Specialty Insurance Company, Inc. TruStage™ Payment Guard Insurance is underwritten by CUMIS Specialty Insurance Company, Inc and not by Happy Money. CUMIS Specialty Insurance Company, our excess and surplus lines carrier, underwrites coverages that are not available in the admitted market. Product and features may vary and not be available in all states. Certain eligibility requirements, conditions, and exclusions may apply. Please refer to the Group Policy for a full explanation of the terms. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by any financial institution. Corporate Headquarters 5910 Mineral Point Road, Madison, WI 53705.
We’ve helped over 4 million members start their journey out of debt
Get your cash in as little as 48 hours 1
Check your rate with no impact to your credit score 2
Take advantage of unique offerings—balance transfer loans, joint applications, auto loans, and other member perks.
Overview: LendingClub allows borrowers to add co-signers to their loans, making this a good fit for those who may not be able to qualify for a loan on their own, or who haven’t had a chance to build up their credit history yet
Personal and auto loans from $1,500-$20,000 (GA minimum $1,500 existing customers for new loans $3100 for others)
A quick decision on your loan request
Clear loan terms with no hidden fees and no prepayment penalties
Apply online, by phone or at your local branch.
You must apply for this offer and continue to meet the criteria used to select you for this offer. Loan approval and actual loan terms depend on your ability to meet our credit standards (including a responsible credit history, sufficient income after monthly expenses, and availability of collateral). OneMain charges origination fees where allowed by law. Depending on the state where you open your loan, the origination fee may be either a flat amount or a percentage of your loan amount. Flat fee amounts vary by state, ranging from $25 to $500. Percentage-based fees vary by state ranging from 1% to 10% of your loan amount subject to certain state limits on the fee amount. Visit omf.com/loanfees for more information. Maximum APR is 35.99%, subject to state restrictions. APRs are generally higher on loans not secured by a vehicle. Loan proceeds cannot be used for postsecondary educational expenses as defined by the CFPB’s Regulation Z such as college, university or vocational expenses; for any business or commercial purpose; to purchase cryptocurrency assets, securities, derivatives or other speculative investments; or for gambling or illegal purposes.
Current OneMain Customers: The above offer assumes that you do not have a current loan with OneMain or one of its affiliates. If you apply for the offer, a OneMain representative will discuss options available for current customers.
Additional conditions for secured loans: Secured loans require a first lien on a motor vehicle that meets our value requirements, titled in your name with valid insurance. Active duty military, their spouse or dependents covered by the Military Lending Act may not pledge any vehicle as collateral. If you are covered by the Military Lending Act, you are not eligible for secured offers.
Time to Fund Loans: Funding within one hour after closing through SpeedFunds must be disbursed to a bank-issued debit card. Disbursement by check or ACH may take up to 1-2 business days after loan closing.
Competitive rates from 9.95% - 35.99% APR and terms from 24 to 60 months
Checking your loan options has no impact to your credit score.
Fast Decisions, see your loan options in minutes
Funding as soon as next business day
Overview: Avant is a popular lender for borrowers with fair to poor credit. Its minimum credit score requirement is 580 FICO and 550 Vantage, lower than many other lenders. Avant is also a good choice for borrowers who haven’t built up much credit yet.
Check rate with Bankrate
DEBT RELIEF
A debt relief program can help you pay off your debts through
balance transfers, debt management plans, credit counseling, settlement or a
combination of the four.
Please Note: JGW Debt Settlement, LLC does not offer loans. They provide debt resolution services. You must have $10,000 in unsecured debt to qualify. Not all debts are eligible for enrollment. This service is not provided in all states and is subject to additional terms and conditions.