Best Debt Consolidation Loans in November 2024

SoFi and Upgrade have the best debt consolidation loans due to fast funding, low rates, and potential rate discounts. This may be welcome news if you're struggling to pay off credit cards or other debt.

When you consolidate debt, you replace multiple debts with a single loan. Ideally, the loan has a lower interest rate so that more of your money goes toward paying off the loan’s principal. This means you can pay off your debt faster or reduce your monthly payments. If you use a loan to pay off a single credit card bill, it's called credit card refinancing. 

Here's what to know about consolidating debt and where to find the best debt consolidation loans for your financial profile. 

Best debt consolidation loans

Why trust Credible

The Credible editorial team is independent and unbiased, which means that partners do not influence our editorial content. To help you find the best personal loan for your situation, we analyzed over 800 personal loan data points across 30 lenders. Using data-driven methodologies, we scored criteria that are important to you. This approach allows us to objectively rank personal loans. To learn more, read our methodology below.

Methodology

Credible evaluated the best personal loans for debt consolidation based on customer experience, minimum and maximum interest rates, origination fees, minimum and maximum loan amounts, minimum and maximum loan terms, discounts, the availability of secured loans, whether cosigners are accepted, and more. Special consideration was given to lenders that offer rate discounts for direct payments to creditors, as well as those who serve a range of credit profiles.

Learn more about how Credible rates lenders by exploring our Personal Loans Lender Rating Methodology.

How to compare debt consolidation loans

Before you compare loans, prequalify for several. Prequalifying can provide personalized quotes based on your financial information. Plus, your credit won’t be impacted until you officially apply for a loan.

With quotes in hand, compare the following:

• APRs: The annual percentage rate (APR) expresses a loan’s overall cost based on its interest rate and upfront fees. Note that loans with shorter terms often have lower APRs.
• Loan amounts: Most lenders offer loan amounts that range from $1,000 to $50,000. Factors like your credit, income and current debt dictate how much you can borrow.
• Repayment terms: In general, repayment terms range from 1 to 7 years. A shorter term can help you save on interest, while a longer term can lower monthly payments.
• Fees: Some lenders charge upfront fees on debt consolidation loans, like origination fees or administrative fees. Many charge late fees or insufficient funds fees. If you get a loan with an origination fee, the amount is deducted upfront from the loan proceeds — meaning you (or your creditors) will receive less than the full loan amount.
• Co-applicant option: If you have a low credit score, applying for a debt consolidation loan with a cosigner or with a co-applicant can increase your chances of approval or help you get a lower interest rate. But keep in mind that not all lenders accept either.
• Funding time: Funding times vary by lender. You can expect same-day funding with some lenders if the money is going directly into your account. But funds sent to creditors may take three to five business days.

What is debt consolidation? 

A debt consolidation loan is any type of loan you can use to pay off other debts. As a result, you end up with one single debt payment instead of several and, ideally, a lower interest rate and lower monthly payments (or faster debt payoff). 

Debt consolidation loans are offered by banks, credit unions, and online lenders; personal loans, home equity loans and balance transfer credit cards are commonly used to consolidate debt. Here, we focus on personal loans since they don’t require that you have home equity to qualify or even that you have good credit. Plus, they have much lower APRs than credit cards, on average — 12.33% compared to 21.76%, respectively, per Federal Reserve data. 

Once you take out a personal loan, you’ll receive a lump sum of money and can use it to pay off debts. Or, the funds will be delivered directly to your creditors — some lenders, like Universal Credit and Upgrade, even offer a rate discount if you go this route. Then, you’ll repay the loan in fixed monthly payments over time. 

How does a debt consolidation loan work?

A debt consolidation loan works best when you take high interest debt from multiple creditors and wrap it into one loan with a lower interest rate. Here’s an example:

Since credit cards charge compound interest, they can be particularly pesky to pay off. What this means is that when you keep a balance on a credit card, interest is assessed daily and added to the new balance. So additional interest charges are assessed on interest you haven’t paid yet. That’s one reason why, in this example, debt payoff takes over 14 years. 

Instead, you could apply for a personal loan for $15,000. For example, if you could qualify for an 18% interest rate on a 7-year term, you’d have about the same monthly payment, but would pay off the loan over seven years faster and save almost $16,000. 

Average rates on personal loans to consolidate debt

Debt consolidation loan rates vary by credit score, but generally range between 7% and 36%. Here are average debt consolidation rates according to Credible marketplace data for November 2024:

When is debt consolidation a good idea?

Debt consolidation is often a great idea in the following situations:

• If you have high-interest debt: Qualifying for a lower interest rate on a new loan can lower your monthly payments or help you pay off debt faster. 
• If you’re struggling to make payments: It can make sense to get a debt consolidation loan with an equal or even slightly higher rate if it lowers your monthly payments. This can help you avoid missing payments or making them late, and thereby avoid damage to your credit. 
• If you want to quickly boost your credit score: Paying off credit card debt with a debt consolidation loan lowers your credit utilization. Since credit utilization can contribute up to 30% to your score, you can see big gains as soon as your creditors report the new balances — often within one month. 

Pros and cons of debt consolidation

Pros

• Interest savings: Debt consolidation could help you secure a lower interest rate than the rates you’re currently paying on your debts.
• Single monthly payment: By consolidating your debt, you’ll typically only have one payment with one due date to keep track of. 
• Lower monthly payment: You can lock in a fixed monthly payment that’s lower than what you pay now, especially if you get a lower interest rate or get a long repayment term.
• Faster payoff: If you can lock in a lower interest rate, you may use the money you save on interest to repay your debt faster. A shorter repayment term can expedite the process even more.
• Improved credit: If a debt consolidation loan makes it easier for you to make timely payments or lowers your credit utilization, you could improve your credit score.

Cons

• Potential fees: Some debt consolidation loans come with fees. These may include origination fees or application fees that reduce the amount available for creditors.
• May not solve debt problems: Debt consolidation can help you get out of debt, but it won’t help you stay out of debt if you’re tempted to run up your credit cards, for example.

What are the requirements for a debt consolidation loan?

While eligibility criteria for a debt consolidation loan can vary by lender, these are a few of the typical requirements:

• Good-enough credit: Many lenders look for good credit or better, typically defined as a FICO score of 670 or higher. However, some lenders are more likely to approve borrowers with fair or bad credit, especially for debt consolidation loans. However, these loans usually come with higher interest rates and may require collateral.
• Verifiable income: Some lenders have minimum income requirements, while others don’t set strict guidelines. But even if a lender doesn’t specify a minimum income, you’ll likely have to provide proof of income when applying so it knows you can pay off your loan.
• Low-enough debt-to-income ratio (DTI): Your DTI shows the amount you owe in monthly debt payments already compared to your income. Lenders prefer a DTI no higher than 35%, but since you’re consolidating debt (instead of adding new debt), a debt consolidation loan could actually reduce your DTI and make lenders more willing to approve you.

How to apply for a personal loan to consolidate debt

If you’d like to take out a debt consolidation loan, follow these steps:

1. Compare lenders

Not all debt consolidation loans are created equal. Shop around and compare lenders for interest rates, terms, fees, available loan amounts, available repayment terms, and minimum credit score requirements.

2. Prequalify

Once you’ve narrowed down the options, prequalify with lenders either individually on their websites or using a loan marketplace like Credible. Prequalification isn’t an offer of credit, but it won’t hurt your credit and can help you gauge the monthly payment, APR, and loan amount you might qualify for. 

3. Pick a loan option

Choose the loan quote with the lowest interest rate and best monthly payment for your budget. A loan with a shorter term will help you become debt free faster, just make sure you can afford the payment.

4. Complete the application 

Most lenders allow you to apply for a debt consolidation loan online. Be prepared to share financial details and submit documents like pay stubs and a government-issued ID to verify the details you provided.

5. Review the loan agreement and get your funds

If approved, you’ll receive a loan agreement to review and sign. Pay attention to the loan’s APR, whether there are origination fees and in what amount, the monthly payment, and repayment term. Once signed, it could take a few hours to a few business days to get your funds. Direct deposit is usually the fastest method.

Additional strategies to get out of debt

If you decide that a debt consolidation loan doesn’t work for you, consider these alternative strategies.

Balance transfer credit card

With a balance transfer credit card, you can transfer your debt and repay it without interest for a promotional period of six to 21 months, depending on the card. During the 0% interest promotional period, you won’t accrue interest and can make progress on repaying your debt without extra fees. But after it ends, the card’s standard rate will apply to the balance.

Increase your income

Boost your income with a part-time job or a side hustle. Then, use the extra earnings to repay debt. Even a few hundred dollars each month from small jobs like dog-walking or light office work could help you pay off debt years faster.

Debt avalanche and snowball methods

With the debt avalanche method, you pay off highest-interest debts first to save the most on interest. The debt snowball method, on the other hand, prioritizes your smallest debts so that you can pay off individual balances quicker.

Negotiate with your lender

Don’t be afraid to reach out to your lender to find out if it can help lighten your load. Some lenders may offer a lower interest rate or different repayment term to qualifying borrowers, especially if you’ve already been struggling to make payments.

Credit counseling 

You could pursue a debt management plan (DMP) through a credit counseling agency. A credit counselor can negotiate with your creditors to lower your interest rates or waive certain fees. You then make monthly payments to the credit counseling agency, which remits them to your creditors.

To find a reputable credit counselor, limit your search to the U.S. Department of Justice’s list of approved agencies, counselors with the National Foundation for Credit Counseling (NFCC), and counselors with the Financial Counseling Association of America (FCAA).

Debt settlement 

Debt settlement is not a recommended approach. Debt settlement companies attempt to negotiate a lower payoff amount from your creditors, but may require that you stop making payments first in order to do so. As a result, debt settlement arrangements can have a severe impact on your credit and are not guaranteed. 

Alene Laney contributed to this article.

Related Articles:

• How To Pay Off Debt Fast
• What Is Debt Consolidation?
• Types of Debt Consolidation Loans
• How To Get a Debt Consolidation Loan With Bad Credit
• Debt Consolidation vs. Personal Loan