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If you’re ready to take control of your finances, debt consolidation can be an effective way to streamline payments and potentially reduce your interest charges. It also may lower your monthly debt payments.
This is because, unlike credit cards, medical loans and other forms of debt, personal loans often come with lower interest rates—especially if you have good to excellent credit. Many lenders also offer direct payments to third-party creditors, so you won’t have to worry about the logistics of consolidating your other debts.
The best personal loans for debt consolidation offer low annual percentage rates (APRs) and flexible repayment terms, while avoiding fees like prepayment penalties, so you can retire debt early without having to pay a fee.
Related: Compare Personal Loan Rates
680
4.99% to 19.63%
with autopay
$5,000 to $100,000
SoFi is an online lending platform that offers unsecured fixed-rate personal loans in every state except Mississippi. Founded in 2011, SoFi has extended over $50 billion in loans and stands out for allowing high loan amounts and its availability of extended loan terms.
Loans are available between $5,000 and $100,000, making SoFi a great option for those with excellent credit who need to borrow a large amount of money. Loan amounts available may vary by the state you live in. Repayment terms range from two to seven years, making SoFi an incredibly flexible option for those with sufficient credit (minimum 680) and annual income (at least $45,000). SoFi also lets prospective borrowers submit joint applications—although co-signers are not permitted.
Approved borrowers are rewarded with comparatively low APRs. What’s more, SoFi doesn’t charge origination fees, late fees or prepayment penalties—a stand-out feature because personal loan lenders often charge origination or late payment fees at a minimum.
However, if you’re considering a debt consolidating loan from SoFi, keep in mind that the lender does not offer direct payment to a borrower’s other creditors. This means the loan proceeds will be deposited to your bank account and you’ll have to pay off your other lenders individually. The platform does offer customers a number of other perks and discounts, including unemployment protection and the ability to change their payment due date once a year.
Eligibility: Personal loan applicants should have a minimum credit score of 680. However, many successful applicants have a score of 700 or higher. Applicants also must have an annual income of at least $45,000, though the average income of a SoFi borrower is over $100,000.
Loan uses: In general, SoFi personal loans are limited to use for personal, family and household purposes. This means a borrower can use loan funds to cover things like medical costs, credit card consolidation, home improvements and relocation costs. However, SoFi loans cannot be used to fund a new business venture, the purchase of real estate, investments and securities, post-secondary education or short-term bridge financing.
Turnaround time: Borrowers typically receive funds within a few days—or as soon as the next business day after approval and acceptance of terms. However, funding times may be longer than a few days—especially for loans over $20,000.
580
5.94% to 35.97%
$1,000 to $50,000
Upgrade provides accessible online and mobile credit and banking services in every state except Iowa, Vermont and West Virginia. Since its founding in 2017, the platform has made more than $3 billion in credit available to over 10 million applicants and continues to expand its online and mobile services. Loan funding can take up to four business days, but Upgrade makes loans available to those with poor credit history. And, perhaps most importantly, Upgrade will directly pay your other creditors if you’re using a loan to consolidate your debts.
Maximum interest rates are higher than what other lenders on our list charge. However, loan amounts start at just $1,000 and go up to $35,000, so Upgrade is still a flexible option if you want to consolidate high-interest debts. Three- and five-year loan terms are available. There’s also no prepayment penalty so you can save money if your goal is to pay off your consolidated debts quickly. Keep in mind, though, that these benefits are balanced out by Upgrade’s origination fee of 2.9% to 8% of the loan amount.
Eligibility: Upgrade applicants generally must have a minimum credit score of 580 to qualify for a personal loan. This makes it an accessible option for those with fair credit who want to consolidate their debt. What’s more, Upgrade applicants aren’t required to meet a minimum income requirement. Still, the average Upgrade borrower makes over $30,000 per year. Upgrade further increases loan accessibility by allowing both co-signers and co-borrowers.
Loan uses: Loans from Upgrade must be used to pay off credit cards, consolidate other debt, make home improvements or pay for other large purchases. Unlike some other lenders, Upgrade also offers direct payment to third-party creditors, though it can take longer for these funds to be processed.
Turnaround time: Once an Upgrade loan is approved, it generally takes up to four business days for a borrower to receive the funds. However, if Upgrade is directly paying off a borrower’s loans to a third-party lender, it can take up to two weeks for the funds to clear.
600
7.04% to 35.89%
$1,000 to $40,000
LendingClub is a peer-to-peer lender and the largest online lending platform for personal loans. The platform issues loans in every state except Iowa and has worked with over 3 million customers and funded more than $55 billion in loans since its founding in 2007. And, while LendingClub does not offer the fastest funding time, it will directly pay your creditors so you don’t have to worry about the logistics of debt consolidation.
What’s more, applicants can borrow from $1,000 to $40,000, which makes it easier to pay off outstanding debts, even if you have high balances. That said, LendingClub has higher APRs than other lenders (topping out at 35.89%) and loan terms are limited to three or five years. This means that LendingClub may be a less flexible debt consolidation option—especially if you can qualify for better rates elsewhere. Borrowers also are charged an origination fee between 2% and 6% of the total loan amount, so you’ll need to take this into consideration when evaluating how much you stand to save by consolidating loans.
Eligibility: To qualify for a LendingClub personal loan, applicants must have a minimum credit score of 600 and a minimum credit history of three years. We also confirmed that applicants should have a debt-to-income ratio of less than 40% for single applicants and 35% for joint applicants. These factors, including proof of income, help LendingClub’s platform of investors decide who they want to lend to. Co-applicants (you live in the same home) are permitted but co-signers are not.
Loan uses: LendingClub personal loans can be used for a number of personal uses—including debt consolidation. In fact, LendingClub makes it even easier for borrowers to consolidate debt by offering direct payment to third party lenders. As with many other lenders, LendingClub borrowers are restricted from using funds for postsecondary education, the purchase of investments, gambling and illegal activities.
Turnaround time: LendingClub borrowers typically receive their loan funds as soon as four days after loan approval. However, this timeline may vary if an application is complete or if the lender requires additional documentation or verification.
620
7.99% to 29.99%
$7,500 to $40,000
FreedomPlus is an indirect lending platform that offers personal loans underwritten by Cross River Bank or MetaBank. Founded in 2014, the lender is one of our top picks for debt consolidation loans because of the flexible loan terms (two to five years) and loan amounts ($7,500 to $40,000). These characteristics make it easier to consolidate a large amount of debt while spreading payments out over a lengthy period of time and reducing monthly payments.
Like some of our other top picks, FreedomPlus also offers direct payment to creditors. In fact, borrowers who put 85% of the total loan amount toward debt consolidation via direct payment are more likely to qualify for a loan.
That said, depending on the interest rates on your current debts, the potentially high APR FreedomPlus charges may make it more difficult to save money by consolidating. Likewise, the origination fee of between 1.99% and 4.99% of the loan amount can make the loan more expensive. If you’re considering FreedomPlus for debt consolidation, it’s important to do the math before you sign on the dotted line.
Eligibility: Applicants must have a credit score of at least 620 to qualify for a FreedomPlus personal loan. Prospective borrowers also should have a minimum gross income of $21,500, keeping in mind that FreedomPlus will not lend more than 35% of the borrower’s annual income. If you want to consolidate your other loans but don’t have a great credit score, FreedomPlus allows both co-signers and co-applicants, with about 30% of borrowers having joint loans.
Loan uses: FreedomPlus loans can be used to cover home improvement costs, wedding and travel expenses, medical costs, moving expenses and, most importantly, debt consolidation.
Turnaround time: FreedomPlus says you could be approved for your loan on the same day you apply. You may be able to receive your funding in as little as 48 hours.
640
5.99% to 24.99%
$5,000 to $40,000
Founded in 2009, Payoff is an online lending platform that connects prospective borrowers with fixed-rate credit card debt consolidation loans in every state except Massachusetts, Mississippi, Nebraska and Nevada. Payoff specializes in helping borrowers eliminate their high-interest debt, and will pay off members’ outstanding credit balances directly.
Loans are available from as little as $5,000 up to $40,000, making it a flexible option even for borrowers who need to consolidate high credit card balances. Lending terms are available from two to five years. And, while Payoff charges a 0% to 5% origination fee, there are no late fees, annual fees or prepayment penalties.
Eligibility: To qualify for a Payoff debt consolidation loan, applicants must have a minimum credit score of 640, though approved applicants have an average score of 705. To be eligible, applicants also must have a minimum credit history of three years, no current delinquencies and a debt-to-income ratio under 50%. There is no minimum income requirement, but Payoff does not offer borrowers a co-signer or co-applicant option, so applicants must qualify based on their individual financial circumstances.
Loan uses: Payoff specializes in credit card debt consolidation, making it an excellent option for readers who want to take control of their finances and streamline their debt repayment.
Turnaround time: After submitting an application and all the necessary documents, underwriting may take three to seven business days. After getting approved and signing the paperwork, you will receive the funds within three to six business days, according to a representative.
640
5.99% to 35.99%
$2,000 to $50,000
Best Egg is a lending platform available to borrowers in every state except Iowa, Vermont, West Virginia and Washington, D.C. Personal loans are issued by Cross River Bank and range from $2,000 to $35,000, though offers up to $50,000 may be available. Loan proceeds can be used for debt consolidation, and payment terms are available from three to five years, so Best Egg can be a great way to consolidate your other debts and spread the payments out over time.
That said, Best Egg does not directly pay off creditors, so you’ll have to manage the repayment process on your own. What’s more, borrowers have to pay an origination fee between 0.99% and 5.99% of the loan amount. This fee is an important consideration when calculating how much you can save by consolidating your debts with a Best Egg personal loan. Borrowers can, however, pay off their loan early without incurring a prepayment penalty.
Eligibility: Best Egg applicants should have a minimum credit score of 640 to qualify for a personal loan, but the platform does not disclose a minimum income requirement. Overall, a borrower’s loan term, amount and APR will all depend on their credit score, income, debt payment obligations, loan amount, credit history and other factors.
Loan uses: As with other top lenders on our list, borrowers can use Best Egg personal loan funds to simplify their finances through debt consolidation and credit card refinancing. Still, Best Egg loans are just as flexible as those offered by other lenders, and can be used for a variety of purposes, including everything from home improvement to moving and relocation or taxes and medical expenses. As with many other lenders, however, loan proceeds cannot be used for post-secondary educational expenses, purchasing or carrying any securities or illegal activity.
Turnaround time: The application process for a Best Egg personal loan can take less than five minutes. Expect loan approval and funding to take one to three business days, although some customers may receive same-day funding.
Not disclosed, but likely 660
6.74% to 19.74%
with autopay
$3,500 to $40,000
Not disclosed, but likely 660
6.74% to 19.74%
with autopay
$3,500 to $40,000
Marcus is a subsidiary of the investment bank Goldman Sachs, and offers personal loans between $3,500 and $40,000. In addition to offering flexible loans that are available for three- to six-year terms, Marcus also assists debt consolidation borrowers by offering direct payment to third-party creditors.
Borrowers also can benefit from the platform’s on-time payment reward and flexible payment dates. Likewise, Marcus borrowers don’t have to pay any fees, including origination fees and prepayment penalties. This makes Marcus a more affordable way to consolidate your debts without incurring additional costs.
Marcus also lets applicants prequalify with a soft credit pull, so it’s easy to shop for debt consolidation rates without hurting your credit. As a prospective or current Marcus borrower, you’ll also have access to robust customer support options with service available seven days a week from 9 a.m. to 7 p.m. Eastern time.
Eligibility: Marcus personal loan applicants must have a minimum credit score of 660 to qualify; however, those with higher scores are eligible for lower rates and more favorable terms. And, while Marcus doesn’t disclose an income requirement, the platform does require applicants to have an income sufficient to cover loan repayment. Marcus doesn’t permit co-signers or co-applicants, so if you have a low credit score you may qualify for a lower rate with a co-applicant elsewhere.
Loan uses: Marcus’ personal loans can be used for debt consolidation, home improvement, moving and relocation, medical expenses, funeral costs, travel and many other personal expenses that come your way. That said, borrowers cannot use Marcus personal loans to refinance existing student loans, so keep this in mind if you’re planning to refinance school costs.
Turnaround time: An applicant’s loan may be approved in under 24 hours—quicker than some lenders, but not the fastest approval process we encountered. Once a loan is approved, funds take between one and four days after bank account verification to land in the borrower’s account. However, funding time varies depending on the financial institution and when the loan was processed.
660
6.99% to 24.99%
$2,500 to $35,000
In addition to offering customers banking, credit cards and retirement solutions, Discover issues personal loans in all 50 states. The platform stands out for debt consolidation because loans are available from $2,500 to $35,000 and terms extend up to seven years—longer than is available for many other personal loans. This means that, in addition to possibly qualifying for a lower interest rate, you may be able to reduce your monthly debt service by extending your loan over a longer period.
And, while Discover does charge a late payment fee, it does not charge any origination fees or prepayment penalties, making it competitive with other top personal loan providers. Discover also will disperse funds directly to third-party creditors, which can save time when trying to consolidate your debt and take control of your finances. Finally, Discover stands out because of its online application and mobile banking tools, well-reviewed customer support team and quick funding.
It’s also worth noting that Discover has a low 1.9-star rating on Trustpilot. However, the majority of these reviews are from credit card and banking customers—specifically, there are reports that Discover is closing credit accounts in the wake of Covid-19. Some negative loan reviews also mention high interest rates that make it difficult to pay off loan balances. That said, an online customer survey conducted by Discover revealed that 81% of customers reported saving money by consolidating debt with a Discover personal loan; 77% of debt consolidation customers reported feeling less stressed after taking out a Discover personal loan.
Eligibility: To qualify for a Discover personal loan for debt consolidation, prospective borrowers must have a minimum credit score of 660; the average Discover borrower has a score of 750. Discover does not require applicants to have a minimum credit history length, but applicants must demonstrate a minimum household income of $25,000 per year. Applicants also are evaluated based on their credit history, recent credit activities and other credit inquiries. Co-signers and co-applicants are not permitted.
Loan uses: Discover personal loans can be used for a number of personal uses—including debt consolidation. And, unlike some other personal loan providers, Discover loans can be used to cover small-business expenses. Even so, Discover is similar to other lenders in that customers cannot use a Discover loan to pay for post-secondary education, to pay off a secured loan or for illegal activity.
Turnaround time: Applicants generally receive a same-day decision. If approved, funds may be sent as soon as the next business day if the loan was funded on a weekday—and if there aren’t any typos or errors in the application. Otherwise, borrowers may not receive loan funds for up to seven days. Discover also can disperse funds directly to third-party creditors when a loan is being used for debt consolidation.
580
9.95% to 35.99%
$2,000 to $35,000
Founded in 2012 and based in Chicago, Avant is a consumer lending platform that offers secured and unsecured personal loans through a third-party bank (WebBank). Unsecured loans are available in Wasington, D.C. and every state but Hawaii, Louisiana, Nevada and South Carolina. The platform specializes in middle-income borrowers with fair to good credit and only requires a minimum score of 580 to qualify.
Maximum loan amounts are low compared to other lenders, but the low minimum amount and flexible repayment terms (two to five years) make it an accessible option for borrowers. However, as with many loans for subprime borrowers, Avant personal loans come with a price. In addition to charging an administrative fee of up to 4.75% of the loan amount, Avant’s APR range (9.95% to 35.99%) is on the high end for applicants with a good to excellent credit score—and there is no autopay discount. Still, the platform earns top marks for borrowers with less than stellar credit who need quick access to funds.
It’s also worth noting that Avant agreed to a $3.85 million settlement with the Federal Trade Commission (FTC) in April 2019. According to FTC documents, the lawsuit was filed in response to allegations that, among other things, Avant charged consumers late fees and interest they didn’t owe and collected payments from customers without permission or in amounts larger than authorized. We reached out to Avant to find out what they’ve done to adjust practices since the settlement but did not receive a response. Even so, Avant has a high 4.7 star rating on Trustpilot.
Eligibility: Avant aims to provide credit services to a range of customers, including those with fair credit. For that reason, Avant has a minimum credit score requirement of 580, with the average borrower score between 600 and 700. Likewise, Avant focuses on low- to middle-income borrowers and has a minimum income requirement of just $20,000, though most borrowers have an average household income of $40,000 to $100,000.
To expand eligibility, Avant also will consider more than just your employment income, including alimony and child support, and may include the income of other people within your household. That said, Avant does not allow co-signers or co-applicants.
Loan uses: As with many other personal loan providers, Avant loans can be used to consolidate debt and pay for things like medical expenses, auto repairs, home improvements moving or vacations and travel. Avant borrowers cannot use personal loan funds to cover business expenses, but the platform does allow current borrowers to refinance their existing Avant loans with another loan—possibly with a lower APR.
Turnaround time: Avant applicants who are approved for an unsecured loan before 4:30 p.m. Central time Monday through Friday may receive their funds the next business day. However, as with other lenders, the funding timeline varies depending on the borrower’s bank. It can also take longer for borrowers who take out secured loans.
600
6.86% to 35.99%
$1,000 to $50,000
Upstart has made a mark on the personal loan space because of its artificial intelligence- and machine learning-based approach to borrower qualification. In fact, Upstart estimates that it has been able to approve 27% more borrowers than possible under a traditional lending model. With competitive APRs, Upstart is not a top lender for borrowers who can qualify for more competitive rates. Even so, the platform’s minimum 600 credit score makes it an accessible option to those with fair credit.
Upstart also offers a pretty flexible range of loan options, with amounts ranging from as low as $1,000 so you don’t have to borrow (or pay interest on) more than you really need. And, while Upstart’s loans cap out at $50,000—lower than some lenders—this is likely to be enough for many prospective borrowers.
Even though Upstarts three- and five-year loan terms are more restrictive than other lenders, it’s likely to be an acceptable tradeoff for applicants who might not be approved in a more traditional lending environment. Plus, it’s available in every state except West Virginia and Iowa, so it’s as widely available as many other top lenders.
Eligibility: Upstart stands out because it uses an AI-based platform to consider a range of non-conventional variables when evaluating borrower applications. And, while the platform advertises a minimum credit score of 600, Upstart may even accept applicants who don’t have enough credit history to have a score. When evaluating prospective borrowers, Upstart considers college education, job history, residence, debt-to-income ratio, bankruptcies and delinquencies and number of credit inquiries.
Borrowers also must have a full-time job or offer starting in six months, a regular part-time job or another source of regular income—with a minimum annual income of $12,000. Co-signers and co-applicants are not permitted.
Loan uses: Upstart’s personal loans can be used for credit card and other debt consolidation, special events, moving and relocation, medical and dental costs and home improvements. In contrast to many other traditional and online lenders, Upstart also lets borrowers use personal loan funds to cover educational expenses (except in California, Connecticut, Illinois, Washington and the District of Columbia).
Upstart borrowers cannot use personal loans to finance illegal activity or purchase weapons, firearms or illegal drugs.
Turnaround time: Upstart provides next-business day funding for borrowers whose loans are accepted before 5 p.m. Eastern time Monday through Friday. Loans that are approved after 5 p.m. are typically funded the following business day, or the day after that. That said, Upstart reports that 99% of loan applicants receive their money one business day after accepting their loan terms. Loans for education-related expenses may take up to an additional three business days after loan acceptance.
Personal loans often are available online through traditional banks, credit unions and alternative lending platforms so you can apply quickly and conveniently, without having to visit a bank branch. Many of these lenders also offer competitive interest rates and flexible repayment terms, meaning you may be able to save money by consolidating your other debts.
Consider these tips when comparing personal loans:
We reviewed 15 popular lenders based on 11 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:
Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated the availability of each provider’s customer support team.
Where appropriate, we awarded partial points depending on how well a lender met each criterion.
Debt consolidation is when a borrower takes out a new loan, usually with more favorable terms (a lower interest rate, lower monthly payment or both) and then uses the loan proceeds to pay off their other individual debts. Debt consolidation loans are commonly used to help pay off credit card balances, auto loans and other personal loans.
To start consolidating debt, apply for a personal loan through your bank or another lender. Once your lender approves you for a debt consolidation loan, it may offer to pay off your other debts automatically—or you will take the cash and pay them off yourself.
After your pre-existing debts are repaid with your new debt consolidation loan funds, you’ll make a single payment on your new loan every month. While debt consolidation often reduces your monthly payment, it accomplishes this by extending the loan period of the consolidated loans. Debt consolidation also streamlines payments and makes it easier to manage finances, like having a single monthly payment due date.
Personal loan interest rates depend on several factors, including the borrower’s creditworthiness, lender, loan amount and repayment term. Typically, however, personal loan interest rates range from around 5% to 36%, with the lowest rates reserved for borrowers with excellent credit.
Consolidation loans have the potential to affect your credit score in a number of ways. Applying for a loan requires a hard credit check, which can result in a small dip in your credit score. However, the impact of the inquiry on your score will decrease over time and disappear typically after two years. Your credit score may also decrease if you take out a debt consolidation loan, pay off your credit cards and then rack up more debt on those cards.
That said, consolidating loans can be a great way to streamline your payments, reduce your monthly debt service and build healthy financial habits through regular, on-time payments. For that reason, consolidation loans can actually help you improve your credit score over time. What’s more, some lenders even offer credit tools beyond regular lending services to help you manage your credit profile.
The best way to consolidate debt typically varies for each individual and their unique financial situation. Here are some of the best options to consider:
Rank | Company | Score out of 100 possible points | Forbes Advisor Rating |
---|---|---|---|
1 | SoFi | 84.6 | |
2 | Upgrade | 78.8 | |
3 | LendingClub | 76.8 | |
4 | FreedomPlus | 73 | |
5 | Payoff | 66.8 | |
6 | Best Egg | 66.8 | |
7 | Marcus | 65.8 | |
8 | Discover | 64 | |
9 | Avant | 61.8 | |
10 | Upstart | 61 |
Falling behind on debt payments can have a damaging effect on your credit score and may ultimately result in repossession of collateral or accounts being sent to collections. If you’re struggling to make payments on all of your individual debts, consider taking out a personal loan to streamline your payments and increase the repayment term—thereby reducing your monthly payment.
A debt consolidation loan also may be a good option if your credit score has improved since you applied for your loans. By qualifying for a lower interest rate on a debt consolidation loan, you’ll be able to reduce how much you pay over the life of your loans.
Determining whether debt consolidation is a good idea for you really depends on your credit score and whether you’re taking other steps to improve your financial habits. Debt consolidation may benefit you if:
If you have bad credit, you can strengthen your application by improving your debt-to-income (DTI) ratio. You can do this by increasing your income—with a side hustle or otherwise—or by paying off some of your smaller, more manageable debts. If you choose to pay down some of your debts, this could also help improve your credit score, accomplishing two things at once.
You may also have better luck applying for a secured loan, which are more accessible to applicants with bad credit because they reduce the lender’s risk and often come with lower interest rates.
Related: Can I Get A Debt Consolidation Loan With Bad Credit?
Approval turnaround times typically vary per institution. For example, some online lenders may approve your loan within a matter of minutes, while banks may take a few days or up to a week to process. Once your loan is approved, funding can arrive within 24 to 48 hours or up to one week, depending on your lender.
Also, keep in mind that once you are approved for a debt consolidation loan, it might take several weeks to pay off your existing debts, depending on the lender. They will likely still hold you responsible for any payment due dates within that waiting period.
Kiah Treece is a licensed attorney and small business owner with experience in real estate and financing. Her focus is on demystifying debt to help individuals and business owners take control of their finances.
Jordan Tarver is the assistant editor for loans at Forbes Advisor. Before joining Forbes Advisor, Jordan was an editor and writer for multiple finance sites, focusing on loans, credit cards and bank accounts. His goal is to create actionable content that enables people to make sound personal financial decisions. When he is not working on personal finance content, Jordan is a self-help author and world traveler who helps people experience the world and discover themselves.