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Personal loans for debt consolidation

You can use an unsecured personal loan to consolidate debt or finance large purchases. Interest rates and terms can vary, based on your credit score and other factors. Compare loans from multiple lenders and learn more about personal loans.

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Debt Consolidation Loans: What You Need to Know

November 18, 2020

What is a debt consolidation loan and how does it work?

A debt consolidation loan is a single loan you use to pay off multiple debts, such as balances on high-interest credit cards, medical bills or other unsecured debt. It’s a strategy that can lower the total interest you owe on the debt and help you pay it off faster.

Online lenders, some banks and credit unions offer debt consolidation loans. If you qualify, the lender deposits the loan into your bank account, and you use that money to pay off your debts. Some lenders will send your loan proceeds directly to your creditors, saving you that step.

Once you pay off your other debts, you make monthly payments toward the debt consolidation loan. Payments are fixed for the life of the loan, typically two to seven years. Creating a budget that accounts for your loan payments is an important step toward successful consolidation.

Debt consolidation is one of several strategies for paying off debt. Debt consolidation won’t work if you have too much debt or haven’t fixed underlying spending issues.

How do I qualify for a debt consolidation loan?

Almost all lenders require you to be 18 years or older and a legal U.S. resident with a verifiable bank account and not in bankruptcy or foreclosure.

Borrowers with good or excellent credit (690 or higher on the FICO scale) and low debt-to-income ratios may qualify for interest rates at the low end of lenders’ ranges. Strong credit may also qualify you for larger loan amounts.

Someone with bad or fair credit (300 to 689 on the FICO scale), but steady income may still be able to qualify, but expect a higher interest rate. It can pay to shop around and compare rates on debt consolidation loans if you have bad credit.

What rate should I expect?

Debt consolidation loans work best if the loan has a lower interest rate than the combined interest on your existing debts. Rates vary from lender to lender and depend heavily on your credit history and ability to repay. Here is what interest rates on personal loans look like, on average:

How's your credit?

Score range

Estimated APR












27.2%; lowest scores unlikely to qualify

Source: NerdWallet lender survey

Debt consolidation vs. balance transfer card

For borrowers with good credit, a balance transfer credit card is an alternative to a debt consolidation loan. Such cards have an introductory 0% interest rate, which increases after a promotional period, usually no more than 21 months.

The amount of credit card debt you can transfer is typically up to $15,000. Once the introductory period expires, the rate on a balance transfer card is usually higher than on a personal loan. In addition to paying off your balance before the rate increases, you’ll want to avoid making further charges.

A personal loan offers some advantages over balance transfer cards. Fixed payments ensure you’ll pay off debt on a set schedule. Borrowing limits are typically higher; some lenders offer loans of $50,000 or more.

A personal loan balance is reported as installment debt, which is treated differently in credit scoring formulas than revolving debt such as credit cards.

Lenders that offer debt consolidation loans

NerdWallet has reviewed more than 30 lenders to help you compare and choose one that’s right for you. Below is a list of some of our most popular reviews of lenders that offer debt consolidation loans.


Annual Percentage Rates (APR), loan term and monthly payments are estimated based on analysis of information provided by you, data provided by lenders, and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers' credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term, and credit history. All loans are subject to credit review and approval.