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How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
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Written by Carol Pope | Edited by Jessica Sain-Baird | Updated March 28, 2024
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
How Does LendingTree Get Paid?
LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.
| Lender | User ratings | Best for... | APR range | Loan amounts | Credit required | Repayment terms | |
|---|---|---|---|---|---|---|---|
(14) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Quick funding | 5.99% - 35.99% | $3,500 - $40,000 | Not specified | 24 to 60 months | See Personalized Results | |
| User ratings coming soon | Current Wells Fargo customers | 7.49% - 23.24% (with discounts) | $3,000 - $100,000 | Not specified | 12 to 84 months | See Personalized Results | |
(16,396) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Borrowers with bad credit | 7.80% - 35.99% | $1,000 - $50,000 | 300 | 36 and 60 months | See Personalized Results | |
(2,201) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Small loan amounts | 8.49% - 35.99% (with discounts) | $1,000 - $50,000 | 580 | 24 to 84 months | See Personalized Results | |
(278) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | No origination fees | 8.99% - 24.39% (with autopay) | $5,000 - $100,000 | Not specified | 24 to 84 months* | See Personalized Results | |
(97) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Borrowers with good credit | 8.99% - 29.99% (with discounts)* | $5,000 - $100,000 | 680 | 24 to 84 months | See Personalized Results | |
(3,639) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Peer-to-peer loans | 8.99% - 35.99% | $2,000 - $50,000 | 560 | 24 to 60 months | See Personalized Results | |
(2,495) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Borrowers with excellent credit | 8.99% - 35.99% | $2,000 - $50,000 | 600 | 36 to 60 months | See Personalized Results | |
(5,136) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Interest rate discounts | 8.99% - 35.99% | $5,000 - $50,000 | 620 | 24 to 60 months | See Personalized Results | |
(2,682) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Short repayment terms | 9.95% - 35.99% | $2,000 - $35,000 | 580 | 12 to 60 months | See Personalized Results | |
(153) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. | Credit card consolidation | 11.72% - 17.99% | $5,000 - $40,000 | 640 | 24 to 60 months | See Personalized Results |
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Read more about how we chose our picks for best debt consolidation lenders.
Reach Financial: Best for quick funding
| User ratings | (14) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 5.99% - 35.99% |
| Loan amounts | $3,500 - $40,000 |
| Loan terms | 24 to 60 months |
| Origination fee | 0.00% - 8.00% |
| Minimum credit score | Not specified |
| Pros | Cons |
|---|---|
Free monthly credit score Will send your loan directly to who you owe Can change loan payment due date | Loan may come with an origination fee Customer service not available on weekends No mobile app |
If time is of the essence, you might want to check out Reach Financial. This lender specializes in quick funding for debt consolidation and credit card refinancing. After Reach Financial approves you, your loan may be available to your creditors in as little as 24 hours.
Thanks to an ultra-competitive minimum APR, Reach Financial might be better suited to those with excellent credit. But if your borrowing history is rocky, you may have to pay an origination fee. This is a fee that Reach Financial will deduct from your loan before sending it to you.
Read our full Reach Financial personal loan review.
Reach Financial doesn’t shed much light into its eligibility requirements. However, you can prequalify online to see how likely it is that it will approve you.
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Wells Fargo: Best for current Wells Fargo customers
| User ratings | User ratings coming soon |
| APR range | 7.49% - 23.24% (with discounts) |
| Loan amounts | $3,000 - $100,000 |
| Loan terms | 12 to 84 months |
| Origination fee | No origination fees |
| Minimum credit score | Not specified |
| Pros | Cons |
|---|---|
Can consolidate up to $100,000 of debt No up-front fees Might get funds the next business day | History of legal violations May charge late fees Must be a Wells Fargo customer |
Wells Fargo Bank customers may need to look no further than their current bank if they need a debt consolidation loan. Many of the U.S.’ largest banks have gotten out of the personal loan business, but not Wells Fargo. Eligible customers could be eligible to consolidate with an APR starting as low as 7.49%.
In 2022, the Consumer Financial Protection Bureau ordered Wells Fargo to pay a $3.7 billion cash settlement for legal violations regarding auto loans, mortgages and bank accounts. Wells Fargo states it has put guardrails in place to prevent future issues.
Read our full Wells Fargo personal loan review.
Wells Fargo doesn’t disclose its minimum credit score requirements, but you must be a current customer to borrow.
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Upstart: Best for borrowers with bad credit
| User ratings | (16,396) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 7.80% - 35.99% |
| Loan amounts | $1,000 - $50,000 |
| Loan terms | 36 and 60 months |
| Origination fee | 0.00% - 12.00% |
| Minimum credit score | 300 |
| Pros | Cons |
|---|---|
Don’t always need credit to qualify 15-day grace period for late payments Quick approvals | Doesn't offer joint loans Only two loan terms to choose from Hefty origination fee possible |
It can be hard to get a debt consolidation loan when you have bad credit. With a credit score minimum of just 300, online lending platform Upstart has one of the lowest score requirements around. You might even qualify if you have no credit (but you must have a college degree or be currently enrolled).
Still, between possible fees and a high maximum APR, getting a bad credit debt consolidation loan won’t come cheap. You also can’t add a second person to your loan (also called a joint loan).
Read our full Upstart personal loan review.
Upstart’s eligibility requirements are transparent. Outside of citizenship, age and credit score requirements, Upstart also requires you to have:
- A job, a job offer with a start date within six months or another source of income
- A maximum debt-to-income ratio (DTI) of 50% (45% in Connecticut, Maryland, New York and Vermont)
- No bankruptcies within the last year
- No current delinquencies
- Fewer than six inquiries on your credit report (not including those for mortgages, auto loans or student loans)
Also, Upstart may cancel your loan if your credit score drops significantly in between the time it approves you and sends your funds.
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Upgrade: Best for small loan amounts
| User ratings | (2,201) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.49% - 35.99% (with discounts) |
| Loan amounts | $1,000 - $50,000 |
| Loan terms | 24 to 84 months |
| Origination fee | 1.85% - 9.99% |
| Minimum credit score | 580 |
| Pros | Cons |
|---|---|
Has a user-friendly mobile app Discount for allowing Upgrade to pay your creditors for you Could get your loan the day after you apply | Charges an origination fee (1.85% - 9.99%) Might find lower rates with another lender if you have excellent credit Won’t qualify if you have bad credit |
A debt consolidation loan can be helpful even if you don’t have tens of thousands of dollars to consolidate. However, not all lenders offer small loans. Some lenders have their minimum loan amount set to $5,000, but you can borrow as little as $1,000 with lending platform Upgrade.
If you have stellar credit, you could get a cheaper loan elsewhere. Although Upgrade is open to borrowers with at least fair credit, its minimum APR isn’t the lowest.
Read our full Upgrade personal loan review.
You need to have a credit score of at least 580 to get a loan from Upgrade. It also requires you to:
- Be at least 18 (or 19, in some states)
- Be a U.S. citizen, permanent resident or live in the U.S. with a valid visa
- Have a verifiable bank account and email address
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LightStream: Best for no origination fees
| User ratings | (278) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.99% - 24.39% (with autopay) |
| Loan amounts | $5,000 - $100,000* |
| Loan terms | 24 to 84 months* |
| Origination fee | None |
| Minimum credit score | Not specified |
| Pros | Cons |
|---|---|
No fees May beat competitors’ rates Same-day loans possible | Won’t know if you qualify unless you take a hard credit hit No small loans Must have good-to-excellent credit |
A debt consolidation loan might save you money on interest, but fees can add up. Luckily, LightStream is a zero-fee company. Also, if another lender offers you a lower APR, LightStream might beat it by .10 percentage points through its Rate Beat Program.
On the downside, you can’t check rates without a hard credit pull. This may be inconvenient since LightStream doesn’t disclose its minimum credit score requirements.
Read our full LightStream personal loan review.
First, you must have good-to-excellent credit to qualify. LightStream doesn’t specify its exact credit score requirement, but states that it tends to approve those with:
- At least five years of credit history with a mix of accounts
- Assets such as savings, retirement and investment accounts
- An acceptable debt-to-income ratio
- A positive payment history with no delinquencies
*Your loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 5.99% APR with a term of 3 years would result in 36 monthly payments of $304.17. Truist Bank is an Equal Housing Lender. © 2024 Truist Financial Corporation. Truist, LightStream, and the LightStream logo are service marks of Truist Financial Corporation. All other trademarks are the property of their respective owners. Lending services provided by Truist Bank.
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SoFi: Best for borrowers with good credit
| User ratings | (97) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.99% - 29.99% (with discounts)* |
| Loan amounts | $5,000 - $100,000* |
| Loan terms | 24 to 84 months |
| Origination fee | 0.00% - 7.00% (optional) |
| Minimum credit score | 680 |
| Pros | Cons |
|---|---|
Same-day loans possible No late payment fees Offers joint loans APR discount if SoFi pays your debt directly | Only offers large loans Need at least good credit to qualify Lowest rates may require an optional origination fee |
You don’t need to worry about late payment fees with SoFi. You can also get an APR discount if SoFi pays your creditors directly. If you decide to handle consolidation yourself, it’s likely you’ll get your money the same day you apply.
SoFi debt consolidation loans are competitive, but you may need to pay an optional fee for the lowest rates.
Read our full SoFi personal loans review.
You must have a credit score of at least 680 to get a SoFi debt consolidation loan. It also requires that you:
- Are a U.S. citizen, eligible permanent resident or non-permanent resident (including DACA recipients and asylum seekers)
- Have a job or job offer with a start date within 90 days, or bring in sufficient income
- Have made your last three payments on time if you have an existing personal loan with SoFi
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Prosper: Best for peer-to-peer loans
| User ratings | (3,639) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.99% - 35.99% |
| Loan amounts | $2,000 - $50,000 |
| Loan terms | 24 to 60 months |
| Origination fee | 1.00% - 7.99% |
| Minimum credit score | 560 |
| Pros | Cons |
|---|---|
Free monthly credit score Joint loans available Don’t need perfect credit | Can take up to 14 days to get your loan Origination fee applies to all loans $29 late payment fee ($40, in some cases) |
Prosper, a peer-to-peer lender, connects borrowers with investors. This type of loan is usually easier to qualify for. Prosper’s 560 minimum credit score requirement means that you might still get a loan if you have bad credit.
It can take up to 14 days for an investor to pick up your loan. It’s also possible that all available investors pass on your application, even if Prosper has approved you.
Read our full Prosper personal loan review.
To be eligible for Prosper, you must:
- Be a U.S. resident who is at least 18 years old
- Have a U.S. bank account
- Have a Social Security number
- Not live in Iowa or West Virginia
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Best Egg: Best for borrowers with excellent credit
| User ratings | (2,495) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.99% - 35.99% |
| Loan amounts | $2,000 - $50,000 |
| Loan terms | 36 to 60 months |
| Origination fee | 0.99% - 8.99% |
| Minimum credit score | 600 |
| Pros | Cons |
|---|---|
May get your loan the next day Can change your due date May get better rate if Best Egg pays your creditors | All loans have an origination fee Must have a high income and excellent credit to get best rates Mobile app only works for Best Egg credit cards |
Best Egg has a relatively low minimum credit score requirement (600). However, you must make at least $100,000 and have a score of 700 or better to get its lowest rates. If you tick those boxes, you could get a debt consolidation loan with an APR as low as 8.99%.
Unlike some lenders, Best Egg charges an origination fee on all of its borrowers, not just those with troubled credit.
Read our full Best Egg personal loan review.
If you live in Iowa, Vermont, West Virginia or a U.S. territory, you can’t get a Best Egg loan. It doesn’t disclose its other credit-related eligibility requirements (other than what we’ve already discussed).
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Achieve: Best for interest rate discounts
| User ratings | (5,136) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 8.99% - 35.99% |
| Loan amounts | $5,000 - $50,000 |
| Loan terms | 24 to 60 months |
| Origination fee | 1.99% - 6.99% |
| Minimum credit score | 620 |
| Pros | Cons |
|---|---|
Three interest rate discounts Assigned a dedicated loan consultant for assistance Will send your loan to your creditors | Loans are not offered in all 50 states Mandatory origination fee Need to have at least $5,000 of debt to consolidate |
Achieve offers three interest rate discounts. The first is especially appealing on a debt consolidation loan. If you allow Achieve to use at least 50% of your loan to pay your creditors directly, you could get a lower rate. You can also get a discount if you take out a joint loan and by having a sufficiently-funded retirement account.
However, if you only have a small amount of debt to consolidate, Achieve might not work — its loans start at $5,000.
Read our full Achieve personal loan review.
Other than having a credit score of at least 620, Achieve doesn’t spell out what it takes to get a loan. You can prequalify online to get an idea where you stand.
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Avant: Best for short repayment terms
| User ratings | (2,682) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 9.95% - 35.99% |
| Loan amounts | $2,000 - $35,000 |
| Loan terms | 12 to 60 months |
| Origination fee | Up to 9.99% |
| Minimum credit score | 580 |
| Pros | Cons |
|---|---|
Quick loans available Accepts less-than-perfect credit Has a highly-rated mobile app | May pay an origination fee No joint loans Doesn’t specify many eligibility requirements |
The longer it takes to pay off a personal loan, the more interest you may pay. With Avant, you could get a personal loan with a 12-month term. This short term could save a significant amount of money. If you choose a longer term and pay off your loan early, you won’t be charged a fee (also called a prepayment penalty).
If you don’t qualify for Avant on your own, you can’t add a second person to help you get approved.
Read our full Avant personal loan review.
To get a debt consolidation loan from Avant, you must have a credit score of at least 580. Additionally, you should know that:
- You must put a personal checking or savings account on file
- It may call your employer to confirm details
- You must have a monthly net income of at least $1,200 ($14,400 annually)
Avant is also unavailable in Hawaii, Iowa, Massachusetts, New York, Vermont and West Virginia.
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Happy Money: Best for credit card consolidation
| User ratings | (153) User Ratings & Reviews Ratings and reviews are from real consumers who have used the lending partner’s services. |
| APR range | 11.72% - 17.99% |
| Loan amounts | $5,000 - $40,000 |
| Loan terms | 24 to 60 months |
| Origination fee | 1.50% - 5.50% |
| Minimum credit score | 640 |
| Pros | Cons |
|---|---|
Clear eligibility requirements No late payment fees Low rates for excellent credit | Can take 30 days for your loan to reach your creditors Charges an origination fee No joint applications |
Happy Money loans can only be used to consolidate credit card debt. This lending platform works with credit unions to fund its loans. The upside to this is that, by law, the highest APR a federal credit union can charge is 18.00%. You’ll see that reflected in Happy Money’s low maximum APR of 17.99%.
For borrowers with fair credit, Happy Money is competitive. At 11.72%, its minimum APR is rather high. If you have excellent credit, you can probably find a cheaper loan somewhere else.
Read our full Happy Money personal loan review.
If you meet Happy Money’s 640 minimum credit score requirement, it will also review your credit history. You have to have an acceptable debt-to-income ratio, but it doesn’t specify what that ratio is. You also cannot have any current payment delinquencies.
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Trustpilot
What is a debt consolidation loan?
A debt consolidation loan is a type of personal loan that you use to pay off multiple, existing debts (such as credit cards or medical bills). Importantly, a debt consolidation loan doesn’t get rid of your debt. Instead, consolidating restructures it.
After consolidating, you’ll have one loan payment to make rather than multiple debt bills. You may also pay less in interest if your debt consolidation loan has a lower APR than what you’re paying on your current debt.
Of all the products available on the LendingTree marketplace, debt consolidation loans are among the most popular. In the fourth quarter of 2023, 54.3% of LendingTree users sought a personal loan to consolidate debt or refinance their credit cards.
On this page
- How does a debt consolidation loan work?
- When is a debt consolidation loan a good idea?
- How will the Fed impact interest rates in 2024?
- How to get a debt consolidation loan
- 3 major benefits of debt consolidation
- How to compare debt consolidation loans
- Debt consolidation vs. debt relief: What’s the difference?
- How your credit score impacts loan rates
- Alternatives to debt consolidation loans
- Frequently asked questions
- How we chose the best debt consolidation loans
How does a debt consolidation loan work?
Let’s say you have four outstanding credit cards with a total balance of $20,000. Although you have a different APR on each card, you’re paying an average rate of 24.61%.
You’ve improved your credit score since you took out your credit cards. As a result, you qualify for an APR of 16.01% on a debt consolidation loan with a five year term. In this situation, consolidating could help you save money and pay off your debt faster.
Debt consolidation loans come with fixed interest rates (unlike credit cards, which have a variable rate). That means the APR on your debt consolidation loan will not increase due to inflation.
Note that credit card debt isn’t the only type of debt you can consolidate. Many lenders (including most on this list) allow you to consolidate personal loans, too.
When is a debt consolidation loan a good idea?
There’s no one-size-fits-all debt management strategy. To determine that, you’ll need to take a close look at your finances.
Debt consolidation is a good idea when…
- You have debt with high (or variable) interest rates
- You can qualify for a lower APR than what you’re currently paying on your debts
- You’re struggling to manage credit card bills and loan payments
- You want to pay off debt faster on a set schedule
Debt consolidation is a bad idea when…
- You can’t qualify for a lower APR than what you’re currently paying on your debts
- You still won’t be able to afford your payments after consolidation
- Your debt burden is small
How will the Federal Reserve impact interest rates in 2024?
Insights from Jacob Channel, LendingTree senior economist
| What might happen to interest rates in 2024?“Cuts to the federal funds rate this year are possible, though they aren’t guaranteed.If the Fed does cut rates, don’t expect them to do so until summer at the earliest and don’t expect that they’ll slash rates to the bone anytime soon.” | Is now a good time to get a debt consolidation loan?“Regardless of whether the Fed starts cutting rates this year, now could still be a good time to get a debt consolidation loan.Remember that while the Fed has an influence over consolidation loan rates, they don’t directly set them. Instead, the actual rate you get will vary depending on factors like what your credit score looks like, how much you’re trying to borrow and who your lender is.” |
How to get a debt consolidation loan
- Check your credit score. Most consolidation options have certain credit requirements, such as a minimum credit score. Unsecured personal loans don’t require collateral, which means that lenders rely more heavily on your financial situation, along with other factors, to determine eligibility. Check your credit score for free using LendingTree Spring.
- Calculate how much you need to borrow. Add up all your monthly debt payments that you wish to consolidate. You can use a personal loan to pay off credit cards, payday loans and other high-interest debts. Some lenders let you borrow as much as $100,000 for a debt consolidation loan.
- Determine the APR you need in order to save money. Your APR would need to be lower than what you’re currently paying on your debts for a personal loan to be worthwhile.
- Compare APRs by prequalifying with lenders. Many lenders let you prequalify for a personal loan to get an idea of your potential APR without impacting your credit score. This lets you compare estimated loan offers before you formally apply.
- Formally apply with a lender. If you’re approved, the lender can deposit the funds directly into your bank account. What happens next? You can use that money to pay off all types of debt. In some cases, your new lender will pay off those debts directly.
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3 major benefits of debt consolidation
1. Simplifies your budget
Managing multiple due dates and accounts can add stress to your life and budget. Debt consolidation combines some, if not all, of your debt into one payment. You’ll only have to track a single account instead of multiple accounts and debt payments.
2. Saves you money on interest
If you’re able to secure a lower APR, you could save yourself hundreds (if not thousands) of dollars over the life of your loan. Your APR is the measure of how much interest and fees you’re paying on the loan.
3. Improves your credit score
As you pay off your debt consolidation loan, your credit utilization ratio will gradually decline, helping boost your credit. On top of that, your on-time payments will be reported to the credit bureaus, further increasing your credit score.
How to compare debt consolidation loans
What’s the use of getting multiple loan offers if you aren’t sure what you’re looking at? When reviewing your options, pay special attention to:
APR: Annual percentage rate — or APR — is your interest rate, plus any fees. The lower the APR, the cheaper the loan.
Loan term: This is the length of time you have to pay off your debt consolidation loan. A longer loan term usually results in lower monthly payments (since you’ll have more time to spread your balance across). However, the longer it takes to repay your loan, the more overall interest you may pay.
Loan amount: When consolidating debt, it’s important that the loan you take will cover all that you owe. If your debt consolidation loan comes up short, the only way to borrow more is to take another loan.
Fees: Debt consolidation loans can come with fees, the most common being an origination fee. Typically, the lender will deduct this fee from your loan funds before sending it to you (or your creditors).
Generally, lower-credit borrowers are more likely to see an origination fee. Origination fees can help offset some of the lender’s risk. But some lenders charge them no matter your score.
Funding timeline: A lender’s funding timeline is how long it takes to approve your loan and send you your funds. Although a lender might advertise same-day funding, that timeline might not apply to debt consolidation loans.
Loan disbursem*nt: When a lender disburses your loan, that means it has sent it to you. You may have the option to have the lender pay your creditors directly. This might streamline the process, and some lenders (such as Achieve) may give you an APR discount for doing so, too.
Debt consolidation vs. debt relief: What’s the difference?
Whereas debt consolidation involves taking out a new loan or credit card to repay debt on better terms, debt relief seeks to reduce the amount of debt you owe through negotiation or legal means. Debt relief comes in many forms, such as credit counseling, debt settlement and bankruptcy.
Debt consolidation vs. credit counseling
Credit counseling is a nonprofit service to help you manage expenses and debt payments more effectively. A credit counselor may set you up on a debt management plan and even negotiate debts and monthly payments on your behalf.
Debt consolidation vs. debt settlement
Debt settlement involves negotiating with your creditors to lower the amount of debt you owe and reduce fees charged to your account. Some companies offer this service, but these programs may come with high fees and can severely damage your credit.
Debt consolidation vs. bankruptcy
Bankruptcy is a legal process offering debt relief for an individual or business. When you file for bankruptcy, your assets may be sold to repay your creditors, or you may be enrolled in a court-ordered debt repayment plan.
How your credit score impacts loan rates
When it comes to obtaining most types of credit, including personal loans, the higher your credit score, the better the interest rates you are likely to be offered by lenders.
In the eyes of lenders, your credit score indicates how likely you are to repay a loan on time and in its entirety. Every time a lender offers someone a loan, they are taking a risk; the higher the credit score, the lower the perceived risk.
However, even borrowers looking for a personal loan with bad credit can find lenders that are willing to work with them. Keep in mind that you may not receive that lender’s lowest interest rates.
Average APR and loan amounts by credit score
| Credit score range | Average APR | Average loan amount |
|---|---|---|
| 720+ | 16.01% | $18,594 |
| 680-719 | 25.78% | $15,302 |
| 660-679 | 37.57% | $11,160 |
| 640-659 | 51.61% | $8,088 |
| 620-639 | 71.55% | $6,300 |
| 580-619 | 112.28% | $4,397 |
| 560-579 | 152.35% | $3,071 |
| Less than 560 | 175.16% | $2,405 |
Source: LendingTree user data on closed personal loans for the fourth quarter of 2023.
Alternatives to debt consolidation loans
Debt consolidation loans may be the right choice for some borrowers, but there are other options out there that might be better suited to others. Here are a few alternative strategies to consider:
Balance transfer credit card with 0% APR
How it works: A 0% APR balance transfer credit card consolidates credit card debt with an introductory no-interest period.
| Pros | Cons |
|---|---|
No interest as long as you pay off your balance transfer card during the introductory period (which could last as long as 21 months) Non-introductory APR may still be lower than your current cards | Variable APR that goes up and down based on the economy Only works for credit card debt Usually requires good-to-excellent credit May pay a 3% to 5% balance transfer fee to move the debt from your existing cards to the balance transfer card |
Home equity loan
How it works: Tap into your home’s equity to pay off debt by using your home as collateral.
| Pros | Cons |
|---|---|
Fixed interest rates Payments are the same each month Typically lower rates than a loan that doesn’t require collateral May be able to consolidate a lot of debt, depending on your equity, credit score and property value | Must be a homeowner with equity Can lose your home if you don't pay May go underwater, which means you owe more on your home than it’s worth May require closing costs (2% to 5% of your loan amount) |
401(k) loan
How it works: A 401(k) loan involves borrowing money from your retirement savings plan.
| Pros | Cons |
|---|---|
No credit check You pay the interest back to yourself instead of losing it to a lender Won’t hurt your credit if you can’t pay back your 401(k) loan | Not all 401(k) plans allow loans Won’t earn money on investments on the money you borrow (at least until you pay it back) May need to pay back your loan in a lump sum if you leave your job If you can’t pay back your loan, you’ll have to pay income tax on what you borrowed 10% penalty if you don’t pay back what you borrowed (unless you’re older than 59.5 years old) |
Debt management plan
How it works: With the help of a certified credit counselor, create a debt management plan to repay your debt within five years.
| Pros | Cons |
|---|---|
Free or low cost Credit counselor may be able to negotiate to bring down fees and interest rates Can consolidate many types of debt Promotes healthy financial habits | Can only be used for debts that don’t require collateral Will probably have to stop using or close your credit cards Can’t open up new credit while working through the plan (which can take five years) |
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Frequently asked questions
There might be a small drop in your credit score after consolidating debt, since you are taking out a new credit product or loan. You might also see a dip in your credit score if you settle a debt or work with a debt management service.
Some borrowers see their credit score increase by consolidating debt, particularly credit card balances. Paying off credit card balances lowers your credit utilization ratio, which can give your credit score a boost.
Whatever the initial effect on your credit score, debt consolidation can help you increase your credit score over the long term. If you choose an option with affordable payments, you can build up a healthy payment history, which is central to a good credit score.
Applicants with good credit will have a wider range of debt consolidation options. They can get approved more easily for balance transfer credit cards with introductory 0% APR periods and personal loans with lower APRs.
Still, there may be options for consolidating debt if you have bad credit. You could try a secured loan, such as a home equity loan, which may come with a lower APR. There are also 401(k) loans, which let you borrow money from your own retirement fund without a credit check.
That will depend on your financial situation. There are a few primary methods of debt consolidation, including personal loans, balance transfer credit cards and home equity loans. You may also consider a 401(k) loan or debt management plan to consolidate debt. To learn about your credit card refinancingoptions, talk to a credit counselor who can provide free or low-cost guidance on your debt relief options.
It always costs money to borrow money, which is why you want to find the debt consolidation option with the lowest APR to save yourself the most money in the long run.
Different debt consolidation options come with their own set of interest rates and fees. For example, some personal loan lenders charge origination fees (upfront, administrative charges) or prepayment penalty fees (for paying off a loan before the term ends). If you go with a balance transfer card, it can come with a balance transfer fee.
Debt consolidation has the potential to save you money, but it’s not guaranteed. To save money, you’ll have to consolidate your debt into another form of financing that has a lower APR than what you’re currently paying on your debts. Before you consolidate debt, it’s important to take a look at your current credit card and loan agreements to determine the APR you’re paying, so you can shop around for financial products that will save you money.
If your goal is to get out of debt faster, consolidating your debts can be a smart move. Consolidating with a personal loan, for example, can give you the option to choose a short loan term, so your debt will be paid off sooner. And if you get a lower APR than what you’re currently paying on your debts, then you can pay off your debt faster even if you pay the same amount of money toward your debt each month.
When it comes to debt consolidation loans, the higher your credit score, the lower the APR you’ll likely receive on your loan. This is because your credit score indicates to lenders how likely you are to repay a loan. A high credit score indicates a lower risk to lenders, especially since debt consolidation loans are typically unsecured.
How we chose the best debt consolidation loans
We reviewed more than a dozen lenders that offer debt consolidation loans to determine the overall best 11 lenders. To make our list, lenders must offer competitive annual percentage rates (APRs). From there, we prioritize lenders based on the following factors:
- Accessibility: Lenders are ranked higher if their personal loans are available to more people and require fewer conditions. This may include lower credit requirements, wider geographic availability, faster funding and easier and more transparent prequalification and application processes.
- Rates and terms: We prioritize lenders with more competitive fixed rates, fewer fees and greater options for repayment terms, loan amounts and APR discounts.
- Repayment experience: For starters, we consider each lender’s reputation and business practices. We also favor lenders that report to all major credit bureaus, offer reliable customer service and provide any unique perks to customers, like free wealth coaching.
LendingTree reviews and fact-checks our top lender picks on a monthly basis.
*Pricing Disclosure:
Fixed rates from 8.99% APR to 29.99% APR reflect the 0.25% autopay interest rate discount and a 0.25% direct deposit interest rate discount. SoFi rate ranges are current as of 02/06/2024 and are subject to change without notice. The average of SoFi Personal Loans funded in 2022 was around $30K. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. Loan amounts range from $5,000– $100,000. The APR is the cost of credit as a yearly rate and reflects both your interest rate and an origination fee of 0%-7%, which will be deducted from any loan proceeds you receive. Autopay: The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Autopay is not required to receive a loan from SoFi. Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interest rate reduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of your Loan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account. You are not required to enroll in direct deposits to receive a Loan.
