12 Best Debt Consolidation Loans of July 2024

*Rates and APYs are subject to change. All information provided here is accurate as of July 28, 2024

Money’s Main Takeaways

• Debt consolidation loans are an effective way to pay off high interest debt when you qualify for a favorable interest rate, make your loan payments on time and don’t accrue any more bad debt in the process.
• The best debt consolidation loans offer prequalification, online approval, flexible terms, competitive interest rates, no fees and no prepayment penalties.
• This type of loan is often used to consolidate high interest credit card debt for a lower rate.
• Discover, Lightstream and SoFi offer some of the best loan options across all the companies we reviewed.

Our Top Picks for Best Debt Consolidation Loans of July 2024

The companies listed below are organized alphabetically.

• Accredited Debt Relief - Best Debt Settlement Service
• Achieve - Best Online Quote
• Avant - Best Financial Resources
• Best Egg - Best for Easy Application
• Discover - Best for Credit Card Debt
• Fiona - Best for Comparing Lenders
• Happy Money - Best for Multiple Options
• LightStream - Best for Large Loans
• OneMain Financial - Best for In-Person Service
• PenFed - Best for Small Loans
• SoFi - Best for No Fees
• Upstart - Best for Flexible Qualification

Best Debt Consolidation Loans Reviews

Why we chose it: Accredited Debt Relief is primarily a debt settlement service that helps people consolidate and renegotiate their debt.

Accredited negotiates with your creditors to reduce your debt and charges a fee of 15-25%. While that may seem high, Accredited could reduce your debt by as much as 50%, leaving customers paying much less than they originally owed. In addition, Accredited will not charge any fee until a plan has been agreed on and there is a clear path forward.

Accredited also offers debt consolidation loans if that is determined to be a better course of action for the client.

Read our full review of Accredited Debt Relief.

Why we chose it: Achieve offers an extremely simple online widget where you can receive a loan quote in one minute.

Achieve offers personal loans for debt consolidation featuring same-day approval and between one to three day funding after accepting the loan offer.

Why we chose it: Avant boasts an extensive financial blog, online resources, and multiple ways to talk to live representatives.

Avant features loan pre-approval, Autopay and a mobile app available where customers can manage their loans. Customer service is available online, via email or by phone.

Why we chose it: Best Egg offers a fast online application that enables customers to get approved in minutes.

Best Egg’s platform provides a simple and convenient online application process, facilitating access to financial assistance. Personal loan options include consolidating multiple loans into a single loan or refinancing credit card debt. The company provides personal loans ranging from $2,000 to $50,000.

Read our full review of Best Egg personal loans.

Why we chose it: Discover’s low interest rates make it our top choice for best debt consolidation loan for credit card debt.

Upon approval, Discover will pay your credit card issuers within one business day, quickly canceling your balances. Discover also doesn’t charge any origination or prepayment fees, and its personal loans have some of the lowest minimum APRs available, making them far preferable to continuing to pay high credit card interest rates.

Why we chose it: Fiona ranked as best for comparing personal loan lenders as its marketplace enables borrowers to browse and compare multiple lenders based on criteria like creditworthiness and location.

Fiona offers personal loans for debt consolidation from an array of lending partners and for all types of credit, from poor to excellent. It partners with renowned companies such as LendingClub, SoFi, Avant and Marcus by Goldman Sachs.

Read our full review of Fiona personal loans.

Why we chose it: Happy Money has a free consultation where they assess your financial situation and offer you the most suitable options based on the assessment.

Happy Money includes offers based on the best rate, lowest monthly payment and quickest repayment time. The company doesn’t charge any application, prepayment or late fees. However, it does charge an origination fee of up to 5% of the loan amount.

Why we chose it: LightStream is our top choice for large loans, considering its $100,000 limit and flexible repayment terms of two to 12 years.

LightStream offers personal loans up to $100,000. Though they are not the only lender we evaluated with this high borrowing amount, they do have the widest term range – 24 to 144 months. This makes Lightstream the most flexible option for paying back large loans. However, Lightstream requires good to excellent credit, an established credit history, various open accounts and a stable income.

Read our full review of LightStream personal loans.

Why we chose it: OneMain Financial is an ideal choice if you’d rather face to face interaction with a loan officer when deciding on a consolidation loan option.

OneMain Financial offers online and in-person banking, with branches in 44 states. It features secured and unsecured debt consolidation loans from $1,500-$20,000 and terms from 24-60 months. To obtain the lowest rate on large loans, OneMain requires collateral.

Why we chose it: With its $600 minimum loan amount, high customer satisfaction and low interest rates, PenFed is our top pick for best debt consolidation loan for debt under $1,000.

PenFed is a members-owned federal credit union. Becoming a member is a good idea because federal credit unions typically offer more favorable loan terms, such as

Borrowers looking for a small loan will be glad to know that PenFed has a $600 minimum you can apply for. However, PenFed is a members-owned federal credit union. You don’t have to be a member to check your rates and get pre-approved, but you will have to become a member to apply. This isn’t necessarily a bad thing as federal credit unions typically offer more favorable loan terms, such as lower interest rates and fewer fees.

Read our full review of PenFed personal loans.

Why we chose it: SoFi offers loans with no fees and many opportunities for discounts.

SoFi ‘s credit card consolidation loans don’t charge any origination, prepayment or late payment fees; additionally, they offer multiple ways to get discounts on their rates. If a borrower enrolls in Direct Pay, a service where SoFi pays creditors directly, they’ll obtain an additional 0.25% APR discount.

Read our full review of SoFi personal loans.

Why we chose it: Upstart considers other information in addition to your credit score when deciding on your application.

Upstart will look at factors such as your employment history and education when you apply, not only your credit score. Their debt consolidation loans range from $1,000-$50,000. Potential borrowers can obtain pre-approval with a soft credit pull that won’t impact their credit score. Most loans are funded the next business day after approval.

Read our full review of Upstart personal loans.

Debt Consolidation Loans Guide

In this section we'll delve into how to get a debt consolidation loan and how they work, how to choose the best option for your situation, and some other alternatives should they not be the ideal choice for you.

Read on to explore the different debt consolidation loan options available to you, and how they can help you to finally become debt-free.

• What is a debt consolidation loan?
• How do debt consolidation loans work?
• How to get a debt consolidation loan
• How to choose the best debt consolidation loan
• Alternatives to debt consolidation loans

What is a debt consolidation loan?

A debt consolidation loan allows you to refinance and combine multiple types of debt — credit card balances, auto loans, medical bills or personal loans — into a single loan. This new loan will typically have a fixed rate and allow the borrower to make one simple monthly payment, rather than the multiple ones they had been making before.

Consolidating debt can potentially reduce your overall interest rates and pay off your debts more efficiently.

It’s also common to use balance transfer credit cards to consolidate debt. If you have several sources of debt, you can learn more about all the options available to you by reading our articles on the best personal loans and best balance transfer credit cards.

How do debt consolidation loans work?

Debt consolidation loans let you combine other forms of debt into one lower interest loan with more favorable terms. Of course, your credit score and debt to income ratio will determine your rate you’ll be offered. If it’s lower than your current debt, a debt consolidation loan might be a good option so long as you factor in any fees the loan provider may charge as well.

Debt consolidation loans can simplify your financial life and reduce stress because they eliminate the need to remember multiple monthly payments. They’re most commonly used to consolidate credit card debt, as this typically has high interest rates.

Do debt consolidation loans hurt your credit?

Applying for any new credit product — whether a loan or a new card — will inevitably have an impact on your credit score because it will require a hard inquiry. However, this drop is usually minor and temporary.

In fact, if you pay off your balance without incurring more debt, a debt consolidation loan will eventually help your credit score and put you in a better financial position.

Aside from the hard inquiry, here are some other ways debt consolidation loans may positively or negatively impact your score:

• Credit age: Credit scoring models take into account the length of time each of your accounts has been open. That average is known as your credit age. Opening a new credit account in the form of a debt consolidation loan, will lower your average credit age.
• Credit history: This is somewhat similar to your credit age, but it looks at your entire history, i.e. your payment history, how much you owe, how much credit you’re using, how long each account has been open, and any recent credit inquiries. Again, taking out a new credit product will affect your credit history.

• Number of accounts: The number of accounts you have also affects your credit. In some cases, the more accounts, the merrier can be true, but too many accounts can hurt you, especially if they’re revolving credit. Additionally, a new loan can impact your eligibility for new accounts if it substantially increases your overall debt.

• Single payment: Combining all your accounts into a single payment means you’re more likely to keep better track of your finances and make on-time payments, which can improve your score.

• Credit mix: A debt consolidation loan will add variety to your credit mix which could have a positive impact on your score.

• Credit utilization ratio: If you’re using a debt consolidation loan to eliminate mostly credit card debt or other lines of credit, it will lower your overall utilization ratio as you pay off the loan and most likely improve your score.

How long will a debt consolidation loan stay on your credit report?

Debt consolidation loans that are closed and in good standing affect your credit positively and can remain on your report for up to ten years. However, any late payments to debt consolidation loans can remain as negative marks on your credit for up to seven years.

Pros and cons of debt consolidation

While it can potentially save you money on interest and simplify your financial life, you should be aware of all the facts before committing to a debt consolidation method. Here are some of the pros and cons of debt consolidation.

Is a debt consolidation loan right for you?

Debt consolidation loans are a great option if you can get rates and terms that are more favorable than your current debt structure. This will usually require a better than average credit score. People carrying a large, high interest debt load may not have the minimum credit score requirements to truly take advantage of the benefits of debt consolidation loans. In these cases it would be useful to explore some of the many available alternatives.

How to get a debt consolidation loan

1. Check your credit by requesting your reports from one or all three credit bureaus. This can help you get a better idea of the interest rate you might get before risking a hard pull on your credit.

2. Add up your debt and determine the interest rate you’re currently paying on your credit cards and other outstanding debt. This will help you determine the interest rate you’d need from a debt consolidation lender in order for the loan to be worthwhile.

3. Take some time to research and compare lenders, interest rates, loan terms and fees.

4. Use a loan or a debt-to-income ratio calculator to get an idea of the rate you can get, given your credit score.

5. Choose a lender offering a lower interest rate and lower fixed monthly payments than what you currently have.

6. If the pre-approved offers involve a higher interest rate than what you’re currently paying, consider whether you have a friend or family member with a higher credit score who's willing to act as co-signer.

7. Apply for the loan.

8. Make sure to read the offer's fine print before accepting it.

9. Obtain the loan funds and pay your debts or, if the lender has a direct payment option, have the lender pay your creditors on your behalf.

How to get a debt consolidation loan with bad credit

Some lenders work with customers with poor credit; however, most lenders will require at least a 620 FICO score (i.e. a “fair” score). Bear in mind that lenders will invariably charge borrowers with little to no credit history their highest annual percentage rates. If you have bad or fair credit, here are three tips to help you get a debt consolidation loan:

• Get a secured debt consolidation loan. You can use collateral, such as your car or your home, to guarantee the payment of a secured debt consolidation loan. This type of loan may be easier to get approved for if you have bad credit.
• Add a co-signer. If you have a friend or family member with good credit, they may be willing to cosign on your debt consolidation loan. Adding a co-signer may also get you a lower interest rate.
• Work with a credit counseling agency. An agency can help you negotiate lower interest rates with your creditors. They can also create a debt management plan (DMP) for you.

Whether you finally get loan approval or your loan application continues to be denied because of poor or no credit, the next step should be to improve your credit score and credit history. To fix your credit, you can also utilize a credit repair service.

How to choose the best debt consolidation loan

Picking the right debt consolidation loan will depend on your financial goals and how much of a monthly payment you can afford.

When choosing a debt consolidation loan, consider the following:

Interest rates

• APRs typically range from 6.99% to 24.99%.

• Your interest rate will depend on your credit score (FICO or VantageScore), current income, and debt-to-income ratio, among other factors.

• Aim to find an APR lower than your current interest rates. For example, if you have a 15% average APR on your credit card debt, only consider lenders that offer lower APRs to consolidate your debt.

Fees

• Lender fees may include origination, late payment, and prepayment penalties.

• Origination fees usually range from 0% to 10% of the loan amount.

• Late payment fees can range from $25-$45.

• Prepayment penalties can be a fixed fee, a percentage of the loan balance, or the interest amount the lender loses by the early payment.

• Compare lender fees. Not all lenders charge all fees — and some lenders don’t charge any fees at all.

Loan terms and repayment options

• Most repayment options range from one to seven years.

• Many lenders offer the option of paying creditors on your behalf.

• Different repayment options include via mobile app, website, over the phone and setting up direct deposit.

• Look into repayment options and additional perks such as credit score and identity theft monitoring.

Alternatives to debt consolidation loans

Although debt consolidation loans are effective and can have a positive impact on your financial health, they aren’t the only way to get out of debt. If you cannot qualify for a debt consolidation loan with a better APR than your existing debt, the good news is there are several other options available to you.

Debt management

Debt management plans are a service offered by credit counseling agencies. They aim to get you out of debt, but also provide a multidisciplinary approach to improving your spending habits and budgeting skills.

Debt management plans are often offered by nonprofit agencies so they may be frees aside from a setup or monthly fee. Certain eligibility requirements must also be met.

Debt settlement

Debt settlement (or debt relief) refers to the process of negotiating with creditors to get them to take less than what you owe. They do this by first instructing you to stop paying your accounts and let them lapse. Then you pay an agreed-on monthly amount to the debt settlement company which they collect in a dedicated bank account.

Faced with the prospect of receiving nothing, the creditor then agrees to accept a smaller amount paid from said dedicated bank account.The debt settlement company cannot charge you until this agreement has been reached and there is a clear plan forward. The fee is usually around 15-25% of your enrolled debt. While you’ve effectively paid less than you owe, the late payments, missed payments and closed accounts will have a negative effect on your credit that could last for years to come.

Debt settlement should only be used in cases where customers already have a low credit score and can’t avail themselves of debt consolidation loans or balance transfer credit cards.The best debt relief companies may be able to get your debt eliminated in as little as a year.

Negotiating with your creditors

Whether you're dealing with your original creditors or a debt collection agency, it is possible to negotiate your debt on your own. But it can be a frustrating and time-consuming process, requiring tenacity and hard work.

Some credit card companies have hardship programs that can lower your interest rate and/or monthly payments. They might also have a forbearance program, which can eliminate your monthly payment for a set period of time. While these options may alleviate your immediate financial burden, they'll also extend the duration of your debt.

You can also try negotiating with the creditor directly to get them to accept a lower amount than you owe. But they generally won’t even agree to discuss this unless you are delinquent in your payments, and this will have serious credit implications.

Here, you can find a more detailed guide on how to negotiate with debt collectors.

Home equity loans and home equity lines of credit

Home equity loans and home equity lines of credit (HELOCs) let the customer borrow money against their home equity. Home equity is the difference between the value or amount your home could be sold for and what you owe the mortgage lender.

With a loan, the proceeds are disbursed as a lump sum. Lines of credit, on the other hand, have revolving credit. You can withdraw money as needed during its draw period; when that ends, you pay back whatever you used in monthly installments during the repayment stage.

If this sounds like the right choice for you, check out Money’s best home equity loans and best no-appraisal home equity loans for more information.

Bankruptcy

Bankruptcy is a legal action taken by people or businesses that have reached a point where they’re unable to pay back their debt. It should be a last resort for dealing with creditors and debt issues as it negatively impacts your credit score and ability to obtain future credit. There are two main types of bankruptcies:

• Chapter 7: When a trustee takes control of your property to sell it or turn it into a profit to pay your creditors. Depending on where you live, you might be able to keep some of your property.

• Chapter 13: A court approves a repayment plan where you agree to pay part of your wages to your creditors. A trustee will be appointed by the court to collect the money from you and make sure the payment plan is completed.

Not all debt can be discharged by the court when you file for bankruptcy. Some debt that cannot be discharged includes:

• Child support
• Student loans
• Court fines
• Most taxes

A bankruptcy will appear on your credit report for around ten years, making it more challenging to apply and be approved for credit in the future.

If your situation calls for this measure, read our guide on how to file for bankruptcy for more information.

How We Chose the Best Debt Consolidation Loans

To select the best debt consolidation loans, we took into consideration the following:

• Rates. We chose lenders that offered some of the lowest APRs on the market.

• Variety of loan terms. We favored lenders that offered a wide array of repayment terms, from six months to more than five years.

• Customer service. The best debt consolidation lenders should have accessible customer service and loan specialists, as well as a variety of ways to reach them — phone, email and chat.

• Streamlined application process and fast funding. While some lenders do require customers to call or visit a bank branch, we favored those that made the application and funding process as quick and painless as possible.

• Few or no fees. Most lenders charge fees; we looked for those that charged the least, if at all.

Summary of Money’s Best Debt Consolidation Loans of July 2024

The companies listed below are organized alphabetically.

• Accredited Debt Relief - Best Debt Settlement Service
• Achieve - Best Online Quote
• Avant - Best Financial Resources
• Best Egg - Best for Easy Application
• Discover - Best for Credit Card Debt
• Fiona - Best for Comparing Lenders
• Happy Money - Best for Multiple Options
• LightStream - Best for Large Loans
• OneMain Financial - Best for In-Person Service
• PenFed - Best for Small Loans
• SoFi - Best for No Fees
• Upstart - Best for Flexible Qualification