Debt Consolidation Loan Rates for April 2024
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Consolidating debt with a personal loan can streamline your debt payoff journey, and it can also save you money if you get an interest rate that’s lower than the combined rate on your existing debts.
Typical interest rates on debt consolidation loans range from about 6% to 36%. To get a rate at the low end of that range, you’ll need an excellent credit score (720 to 850 credit score). But even a good credit score (690 to 719 credit score) could help you get a better rate than you have now.
Borrowers with fair credit (630 to 689 credit score) and bad credit (300 to 629 credit score) may not be able to qualify for a rate lower than their current debts. Building your credit can improve your chances of qualifying in the future.
on SoFi's website
on SoFi's website
Current debt consolidation loan interest rates
Interest rates and terms can vary based on your credit score, debt-to-income ratio and other factors.
Borrower credit rating | Score range | Estimated APR |
Excellent | 720-850. | 12.64% |
Good | 690-719. | 14.84% |
Fair | 630-689. | 18.69%. |
Bad | 300-629. | 21.74%. |
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified through NerdWallet from March 1, 2024, through March 31, 2024. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
How does debt consolidation work?
If you have multiple debts — for example, if you’re carrying balances on a few different credit cards — you can get a debt consolidation loan to pay them off all at once. Then, you make one payment toward the new loan.
But how does this save you money? The key is to choose a personal loan with an annual percentage rate that’s lower than your existing debts.
Let’s say you have $9,000 in total credit card debt with a combined average APR of 22% and a combined monthly payment of $450. It will take just over two years to be debt-free, and cost $2,250 in interest.
But if you consolidate the cards into a loan with a 14% APR and a two-year repayment term, you’d save $879 in interest. Your new monthly payment would be $432, and you could apply the extra monthly savings toward the loan to pay off the debt even faster.
Use our debt consolidation calculator to plug in your current balances, interest rates and monthly payments. Then, see how much you could save with a debt consolidation loan and compare options based on your credit score.
How to choose a debt consolidation lender
A good first step is comparing what each lender can offer you. Online lenders let you pre-qualify to see what rates, repayment terms and loan amounts you may qualify for. Pre-qualifying can help you compare rates and terms, and it won’t hurt your credit score.
It’s a good rule of thumb to go with the lender that offers the lowest rate, but you should also pay attention to the repayment term. Longer terms mean paying more interest overall, though your monthly payment will be lower.
You can also look for lenders that specialize in debt consolidation. These lenders will offer perks like sending loan funds directly to your creditors and offering free financial education to help you manage debt.
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Debt consolidation loans for borrowers with bad credit
You can still get a debt consolidation loan with bad credit. Some lenders specifically target borrowers with bad credit and will weigh other factors listed on your application, like your income or education.
You can also boost your chances of qualifying with a lender by considering a joint or co-signed loan, which is when you add someone to your application — ideally someone who has a higher credit score. This person is equally responsible for the loan's repayment, and depending on the type of loan you choose, they may have equal access to the loan funds. Another option is applying for a secured loan, in which you pledge an asset, like a car or savings account, as collateral for the loan.
Still, it may be hard for some borrowers with bad credit to qualify for a rate that's lower than their current debts. If you’re struggling to find affordable loan options, consider other debt payoff methods.
on NerdWallet
