Best Debt Consolidation Loans of July 2024

Jackie Veling
Written by
Last updated on July 1, 2024
Edited by
✅ Fact checked and reviewed
Kim Lowe
Edited by
✅ Fact checked and reviewed

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Best Debt Consolidation Loans of July 2024

+ 6,900recent visits
SoFi
SoFi Personal Loan
+ 6,900recent visits
Best for Good credit
5.0
Rate discount
Est. APR
8.99-29.99%
Loan amount
$5K-$100K
Min. credit score
None
Visit Lender
on SoFi's website
on SoFi's website
Check Rate
on NerdWallet
on NerdWallet
View details
2024 Best Personal Loan for Debt Consolidation
+ 2,500recent visits
Upgrade
Upgrade
+ 2,500recent visits
Best for Best overall
Rate discount
Est. APR
8.49-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Lightstream
LightStream
Best for Low rates
4.5
Rate discount
Est. APR
6.99-25.49%
Loan amount
$5K-$100K
Min. credit score
660
Happy Money
Happy Money
Best for Paying off credit card debt
Fast funding
Est. APR
11.72-17.99%
Loan amount
$5K-$40K
Min. credit score
640
Check Rate
on NerdWallet
on NerdWallet
Achieve
Achieve Personal Loans
Best for Rate discounts
Rate discount
Est. APR
8.99-35.99%
Loan amount
$5K-$50K
Min. credit score
620
BestEgg
Best Egg
Best for Secured loan option
Secured loans
Wide range of loan amounts
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
600
Universal Credit
Universal Credit
Best for Bad credit
Fast funding
Rate discount
Est. APR
11.69-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Lending Club
LendingClub
Best for Joint loan option
Flexible payments
Est. APR
8.98-35.99%
Loan amount
$1K-$40K
Min. credit score
600
🏆 Top 3 most visited
Discover
Discover® Personal Loans
🏆 Top 3 most visited
Best for Fast funding
Fast funding
Est. APR
7.99-24.99%
Loan amount
$2.5K-$40K
Min. credit score
660
PNC Bank Personal Loan
PNC Bank Personal Loan
Best for Bank loans
Est. APR
7.49-30.49%
Loan amount
$1K-$35K
Min. credit score
None
SoFi
+ 6,900recent visits
SoFi Personal LoanBest for Good credit
+ 6,900recent visits
Est. APR
8.99-29.99%
Loan amount
$5K-$100K
Min. credit score
None
Best for Good credit
Rate discount
Visit Lender
on SoFi's website
on SoFi's website
Check Rate
on NerdWallet
on NerdWallet
2024 Best Personal Loan for Debt Consolidation
Upgrade
+ 2,500recent visits
UpgradeBest for Best overall
+ 2,500recent visits
Est. APR
8.49-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Best for Best overall
Rate discount
LightStreamBest for Low rates
Est. APR
6.99-25.49%
Loan amount
$5K-$100K
Min. credit score
660
Best for Low rates
Rate discount
Happy MoneyBest for Paying off credit card debt
Est. APR
11.72-17.99%
Loan amount
$5K-$40K
Min. credit score
640
Best for Paying off credit card debt
Fast funding
Check Rate
on NerdWallet
on NerdWallet
Achieve Personal LoansBest for Rate discounts
Est. APR
8.99-35.99%
Loan amount
$5K-$50K
Min. credit score
620
Best for Rate discounts
Rate discount
Best EggBest for Secured loan option
Est. APR
8.99-35.99%
Loan amount
$2K-$50K
Min. credit score
600
Best for Secured loan option
Secured loans
Wide range of loan amounts
Universal CreditBest for Bad credit
Est. APR
11.69-35.99%
Loan amount
$1K-$50K
Min. credit score
560
Best for Bad credit
Fast funding
Rate discount
LendingClubBest for Joint loan option
Est. APR
8.98-35.99%
Loan amount
$1K-$40K
Min. credit score
600
Best for Joint loan option
Flexible payments
Discover
🏆 Top 3 most visited
Discover® Personal LoansBest for Fast funding
🏆 Top 3 most visited
Est. APR
7.99-24.99%
Loan amount
$2.5K-$40K
Min. credit score
660
Best for Fast funding
Fast funding
PNC Bank Personal LoanBest for Bank loans
Est. APR
7.49-30.49%
Loan amount
$1K-$35K
Min. credit score
None
Best for Bank loans

NerdWallet’s guide to debt consolidation loans

Learn how debt consolidation loans work, the pros and cons of consolidating your debt and how to get a debt consolidation loan.

What are debt consolidation loans and how do they work?

Debt consolidation loans are a type of personal loan that combine multiple unsecured debts — such as credit cards, medical bills and payday loans — into one fixed monthly payment, making it easier to get out of debt.

As long as the interest rate on the debt consolidation loan is lower than the average rate of your existing debts, you’ll save money on interest and potentially pay off your debt faster.

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Online lenders, banks and credit unions offer debt consolidation loans. Once you’re approved, the lender deposits the loan into your bank account, and you use that money to pay off your debts, so you’re left with only the new loan. Some lenders even pay off your creditors for you.

You then make monthly payments toward the debt consolidation loan until all your debt is paid off. Payments are fixed for the life of the loan, typically two to seven years.

» MORE: How do debt consolidation loans work?

Ask NerdWallet: Should I use a debt consolidation loan to pay off my credit card debt?

“Consolidating credit card debt is usually a smart move, because credit cards have really high interest rates, and when you carry a balance, you end up paying interest on interest. A debt consolidation loan has a fixed interest rate, so it stops the cycle of compounding interest, and rates tend to be lower.

It also gives you a plan. If you’ve only been able to make the minimum payments on your credit cards each month, you probably aren’t making much progress on your debt. A consolidation loan has a clear endpoint, as long as you make the monthly payments on time.”

Jackie Veling, Lead Writer on Debt Consolidation

Are debt consolidation loans a good idea?

A debt consolidation loan is a good idea if you can get a lower annual percentage rate than what you're currently paying on your other debts. The best debt consolidation loan interest rates are reserved for borrowers with good or excellent credit (690 or higher credit score).

Like with all financial decisions, you should carefully weigh the pros and cons of consolidating your debts before you apply for a loan. Here are the main benefits and drawbacks of debt consolidation loans to help you make an informed decision.

Pros of debt consolidation loans

  • You pay less in interest: By getting a debt consolidation loan at a lower rate than your current debts, you’ll save money on interest, which can make your debt more manageable.

  • You may get out of debt faster: Because you’re saving money on interest, you can use that savings to make larger payments on your loan and get out of debt even faster.

  • You have only one payment: Unlike juggling multiple credit card bills, you’ll have only one monthly payment if you combine your debts under a consolidation loan.

  • You have a clear finish line: A debt consolidation loan gives you an exact date you’ll be debt-free, which can help you stay motivated as you make the payments.

Cons of debt consolidation loans

  • You may not qualify for a low enough rate: Not all consolidation loans come with low interest rates, and if you have bad credit (a score below 630), you may not get a rate that’s lower than your current debts.

  • You still have debt you need to manage: Consolidating debt is a smart choice for many, but it’s important to remember the debt doesn’t disappear — it goes somewhere else. Most debt consolidation loans offer terms of two to seven years, so be prepared to stick to your monthly payments over that time period.

  • Consolidation won’t fix core spending issues: If you’re in debt because you struggle to stick to your monthly budget, a debt consolidation loan won’t fix that. It may even make things worse if you use your newly freed credit cards to rack up additional debt.

How to choose the best debt consolidation loan

Check that the available loan amounts and terms match your debt: Debt consolidation loans come in a wide range of loan amounts ($1,000 to $50,000) and repayments terms (two to seven years). Look for a lender whose loan product meets your debt payoff needs.

Look for an annual percentage rate lower than your existing debts: The loan's annual percentage rate, or APR, represents its true annual cost and includes interest and any fees. Choose a low rate with monthly payments that fit your budget.

Avoid origination fees if you can: Some lenders charge origination fees to cover the cost of processing your loan. This one-time fee typically ranges from 1% to 10% of the loan amount and is deducted from your loan proceeds or added to the loan balance.

Avoid loans that include this fee to keep costs down, unless the APR (which includes the origination fee) is still lower than loans with no origination fee.

Look for special debt consolidation features: Some lenders offer consumer-friendly features like direct payment to creditors, which means the lender pays off your debts once your loan closes, saving you that task. Other lenders may offer free credit score monitoring.

How to get a debt consolidation loan

1. Add up current debts and calculate the combined interest rate

The first step in getting a debt consolidation loan is having a clear picture of your current debt. You can use NerdWallet’s debt consolidation calculator to see your total balance, total monthly payment and combined interest rate across all debts.

Keep two numbers in mind moving forward: Your total debt, because this is the loan amount you need to apply for, and your combined interest rate, because you’ll want a lower interest rate on your consolidation loan.

2. Pre-qualify and compare loan options

One of the best ways to compare loan offers is to pre-qualify with multiple lenders, which lets you see your potential loan terms, including APR, without any effect on your credit score. Though not all banks or credit unions offer pre-qualification, most online lenders do.

3. Apply for a debt consolidation loan

Once you’ve decided on a lender, it’s time to apply for the loan.

Most loan applications are online and ask you to supply personal information like your Social Security number, address and other contact details. You also may be asked to provide proof of identity, employment and income.

Once you’ve submitted your application, the lender will make an approval decision. If you’re approved, you’ll sign the loan agreement and receive the funds. Funding time varies among lenders, but some lenders can fund the same day you’re approved.

4. Pay off creditors

Here’s the most important step: Use the loan proceeds to pay off your existing debts. Some lenders send the funds to your creditors for you, so you’ll need to provide account information about your existing debts — and check the accounts to make sure they’re paid off.

If a lender doesn’t offer direct payment, they’ll deposit the funds in an account of your choosing or mail a check, if you prefer. It’ll be up to you to make sure the right amount goes to each debt.

5. Begin making payments on your new loan

Once your existing debts are paid, you’re left with your new loan. Personal loan payments are monthly, though there’s usually no fee for paying off a loan early. Make a plan now to manage your personal loan payments.

As you make progress on paying off your loan, try to keep your credit card balances at or near zero until you’re debt-free. But avoid closing the accounts, which can lower your credit score.

Does getting a debt consolidation loan hurt your credit?

Debt consolidation loans can help — and hurt — your credit score. When you use the loan to pay off your credit cards, you lower your credit utilization, which measures how much of your credit limit is tied up. Lowering your credit utilization can help your credit.

On the other hand, applying for a loan requires a hard credit check, which can temporarily ding your credit score. And if you turn around and rack up new credit card debt, your credit score will suffer.

Making late payments on your new loan can also hurt your credit score, while on-time payments can help.

Ultimately, if you use the debt consolidation loan to pay off your debts and then pay off the new loan on time, the overall effect on your credit should be positive.

Boost your approval odds for a debt consolidation loan

Build your credit: Loan approval is based mainly on your credit score and ability to repay. It may be possible to get a debt consolidation loan with bad credit, but borrowers with good to excellent credit have more loan options and may qualify for lower rates.

If you have fair or bad credit (689 credit score or lower), it can pay to build your credit before seeking a consolidation loan.

Apply for a joint, co-signed or secured loan: Adding a co-borrower or co-signer to your application can help you qualify for a debt consolidation loan that you wouldn’t be able to on your own because of poor credit or low income. In a joint loan, both borrowers have equal access to the funds, unlike a co-signed loan, in which only the main applicant does. Co-borrowers and co-signers are on the hook for missed payments.

Some lenders may also offer a secured loan, which means you can back it with collateral, like your car or an investment account, to boost your chances of approval or get a better loan offer. But you risk losing the asset if you fail to repay the loan.

Consider different types of lenders: Compare offers from banks, credit unions and online lenders before choosing the best debt consolidation loan. While banks tend to have some of the lowest rates, credit unions and online lenders may look more favorably on bad-credit applicants.

What to know about debt consolidation loans for bad credit

You can still get a debt consolidation loan if you have bad credit (a 629 credit score or lower).

Look specifically for lenders that let you pre-qualify with a soft credit check — that way you can check if you meet the lender’s requirements without taking a hit to your credit score. This will also help you check if the rate you qualify for is lower than your existing debts.

Some online lenders specifically offer debt consolidation loans for borrowers with bad credit. If you’re not sure where to begin, your local credit union is also a good first stop.

Alternatives to debt consolidation loans

A debt consolidation loan isn’t your only option for paying off debt.

0% balance transfer credit card

For borrowers with good to excellent credit, transferring debts to a 0% balance transfer card is a great option — as long as you can pay it off during the introductory period, which can last up to 21 months.

This is sometimes called credit card refinancing, and it's similar to a consolidation loan. But because you pay no interest during the introductory period, you can get out of debt even faster.

🤓

Nerdy Tip

Balance transfers work best if you can qualify for a card that covers the amount of your debt, and the savings in interest outweigh the balance transfer fee, which is typically 3% to 5% of the total amount transferred. Aim to pay off the balance in full before the zero-interest promotion expires and the APR resets to its normal, higher rate.

Credit counseling

Nonprofit organizations offer credit counseling, which includes helping you create a debt management plan. Similar to other consolidation products, these plans roll your debts into one manageable payment at a reduced interest rate.

DIY debt payoff strategies

If you’re not sure how to tackle debt, you may not need to consolidate. The debt snowball and debt avalanche methods are two common and effective strategies for paying off debt.

The snowball method focuses on paying off your smallest debt first, building momentum as you go. The avalanche focuses on paying off the debt with the highest interest rate first, then applying the savings elsewhere. Both can boost your payoff speed.

Debt relief

If you have significant debt (40% or more of your income) and no plan to pay it off, you may want to explore other strategies, like debt settlement or bankruptcy. Both of these options help eliminate unsecured debts, but they hurt your credit and are typically a last resort.

Frequently asked questions about debt consolidation

  • Debt consolidation is a good reason to get a loan, as long as you use the loan to successfully pay off your debts at a lower rate, make on-time payments to your new loan and safely manage debt in the future. Use a debt consolidation calculator to see what you can save.

  • You can apply for most debt consolidation loans online, including loans from banks and credit unions. A loan application will ask for details about the loan you want, your personal and contact information, and information about your income and any debts. It may require additional documentation, like proof of identity and proof of income.

  • The minimum credit score for a debt consolidation loan varies by lender. Bad-credit lenders may accept borrowers with credit scores of 629 or less.

  • To qualify you for debt consolidation, a lender typically looks at your credit score, credit history, income and any existing debts. There are ways to boost your chances of getting approved for a loan, like building your credit and paying off small debts.

  • You can still use your credit cards after debt consolidation. Consolidating your debts doesn’t close your credit cards, it just pays them off, but be careful about increasing your overall credit utilization and ending up in more debt than before.

  • Debt consolidation loan interest rates depend on your credit score and debt-to-income ratio. The average consolidation loan interest rate for consumers with good credit (690 to 719 credit score) is currently 12.70%, according to aggregate, anonymized offer data from users who pre-qualified for a personal loan through NerdWallet.

Last updated on July 1, 2024

Methodology

NerdWallet’s review process evaluates and rates personal loan products from more than 35 technology companies and financial institutions. We collect over 50 data points from each lender and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.

Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.

NerdWallet does not receive compensation for our star ratings. Read more about our ratings methodologies for personal loans and our editorial guidelines.

To recap our selections...

NerdWallet's Best Debt Consolidation Loans of July 2024

  • SoFi Personal Loan: Best for Good credit
  • Upgrade: Best for Best overall
  • LightStream: Best for Low rates
  • Happy Money: Best for Paying off credit card debt
  • Achieve Personal Loans: Best for Rate discounts
  • Best Egg: Best for Secured loan option
  • Universal Credit: Best for Bad credit
  • LendingClub: Best for Joint loan option
  • Discover® Personal Loans: Best for Fast funding
  • PNC Bank Personal Loan: Best for Bank loans
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