Debt Consolidation Loans

A debt consolidation loan is a loan you can use to pay off various bills to combine your debt into one payment.

But before you begin shopping, you should think about the goal you’re trying to achieve. Do you want to lower your monthly payment? Do you want to speed up your debt repayment timeline? Is your main focus on reducing costs

Answering these questions will help you choose the right loan since different debt consolidation products are suitable for different purposes. We discuss the different types below.

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Editorial Disclaimer: The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities. Some of the offers below are from our partners.

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Compare Multiple Offers in MinutesLendingTree
Terms of Loan24 to 60 months
Est. APR5.99%
To
35.99%
Est. Monthly Payment$304?per month

Credit ScoreMinimum 500 FICOminimum credit score

SEE OFFERS

on LendingTree's secure website

LendingTree, MagnifyMoney’s parent company, is a loan marketplace that matches consumers looking to consolidate their debt with lenders who have products that fit the borrowers’ needs.... Read More

Pros:

  • Loans for good and bad credit
  • Debt consolidation calculator
  • Soft pull when checking credit rates
  • No fees for using the LendingTree service

Cons:

  • Not recommended if your debt is more than 50% of your income
  • No loans for those outside the U.S.
  • Can’t change the information on the loan request after it’s submitted

Whether you’d like to consolidate your debt with a personal loan, debt management plan, balance transfer credit card or a home equity line of credit, LendingTree can help. You are never obligated to accept an offer and have the freedom to negotiate directly with the lender.

Advertiser Disclosure :

Our Commitment We'll receive a referral fee if you click here. This does not impact our rankings or recommendations.

Learn more

LightStream
Terms of Loan24 to 144 *months
Est. APR3.09% *
To
14.24%

with AutoPay
Est. Monthly Payment$291?per month

Credit Score660minimum credit score

SEE OFFERS

on LendingTree’s secure website

LightStream is a division of SunTrust Bank that offers debt consolidation loans between $5,000 and $100,000.... Read More

Pros:

  • Rates as low as 5.89% with autopay
  • $100 Loan Experience Guarantee 
  • No fees or prepayment penalties
  • No appraisals or down payments
  • Rate Beat Program

Cons:

  • Can’t use the funds to refinance an existing loan with LightStream
  • Rates without autopay are 0.50% higher
  • Only for individuals with good credit
  • Hard pull when checking credit rates

Individuals with either good or excellent credit may find LightStream hard to beat, especially if they are willing to sign up for autopay for an additional discount. Its Rate Beat Program also ensures you get the best rate when applying for a debt consolidation loan.

Read Full Review of LightStream here

FreedomPlus
Terms of Loan24 to 60 months
Est. APR4.99%
To
29.99%
Est. Monthly Payment$300?per month

Credit Score700minimum credit score

APPLY NOW

on FreedomPlus's secure website

FreedomPlus offers unsecured personal loans for between $7,500 and $40,000 with terms between two and five years.... Read More

Pros:

  • More than your credit report is considered
  • No hidden fees or prepayment penalties
  • Fast approval and funding

Cons:

  • Origination fee between 0% and 5%
  • Lowest APR may be hard to get

FreedomPlus is a good option for borrowers who needs funds quickly and may not have the best credit scores. That’s because FreedomPlus considers more than just your credit report. However, those with high credit scores might not find the lender to be a competitive option. To qualify for the lowest rates, you’ll need jump through a few hoops.

Read Full Review of FreedomPlus here

RocketLoans
Terms of Loan36 or 60 months
Est. APR5.98%
To
29.99%
Est. Monthly Payment$304?per month

Credit Score640minimum credit score

SEE OFFERS

on LendingTree’s secure website

RocketLoans, a Quicken Loans family company, has personal loans with 36- or 60-month terms that are designed to help you move high interest debt to a lower rate.... Read More

Pros:

  • No hidden fees or prepayment penalties
  • Same-day funding
  • Discount for using autopay
  • Checking your options doesn’t affect your credit score

Cons:

  • Origination fee of 1% to 6%
  • Maximum 29.99% APR without autopay
  • $15 late fee each payment cycle if the loan isn’t paid on time
  • Good credit required

 

If you need funds fast, RocketLoans’ automated system and quick payout is a good choice. You’ll need to be mindful of the origination fee before accepting the loan.

Read Full Review of RocketLoans here

BestEgg
Terms of Loan36 or 60 months
Est. APR5.99%
To
29.99%
Est. Monthly Payment$304?per month

Credit Score660minimum credit score

SEE OFFERS

on LendingTree’s secure website

Debt consolidation loans provided by Best Egg are unsecured and made by Cross River Bank. Borrowers can choose between terms of three and five years at rates of 5.99% to 29.99%.... Read More

Pros:

  • Soft pull on your credit score
  • Receive funds in as little as one day
  • Multiple payment options
  • Rates as low as 5.99%

Cons:

  • No short-term loan options
  • Origination fee from 0.99% to 5.99%
  • Need a credit score of at least 700 to get the best rate
  • $15 late fee if not paid within the three-day grace period

Best Egg is worth a look if you need a few years to pay back your debt, but borrowers should be aware that the company may charge a $7 processing fee each month if you decide not to use the automatic payment option.

Read Full Review of BestEgg here

Peerform
Terms of Loan36 or 60 months
Est. APR5.99%
To
29.99%
Est. Monthly Payment$304?per month

Credit Score600minimum credit score

SEE OFFERS

on LendingTree’s secure website

Peerform debt consolidation loans are offered by Cross River Bank using a marketplace lending platform.... Read More

Pros:

  • No hidden fees or prepayment penalties
  • Good and bad credit accepted
  • Checking eligibility won’t impact your credit score
  • Free application with fast decision

Cons:

  • Origination fee between 1% and 5%
  • Consolidation loans are invite-only
  • Loans not available in Connecticut, Iowa, North Dakota, Vermont, West Virginia or Wyoming

If you’ve had trouble getting a debt consolidation loan elsewhere, Peerform is a good alternative. You won’t need to put up any collateral and you’ll have a fixed monthly payment that is easy to include in your household budget.

Read Full Review of Peerform here

LendingClub
Terms of Loan36 or 60 months
Est. APR6.16%
To
35.89%
Est. Monthly Payment$305?per month

Credit Score600minimum credit score

SEE OFFERS

on LendingTree’s secure websit

LendingClub is another alternative lender that connects borrowers with investors through an online marketplace.... Read More

Pros:

  • Checking your rate won’t affect your credit score
  • No prepayment penalties
  • Resource center with tips for protecting yourself against scams and identity theft

Cons:

  • Origination fee between 1% and 6%
  • $7 processing fee for each monthly payment made by check
  • Late payment of either $15 or 5 percent of the unpaid balance

While you can get a rate quote within minutes, it will take about a week before you have access to the funds, so you may want to opt for a different lender if you need the money fast. You’ll also want to keep an eye on the rates, which are slightly higher than other financial institutions.

Read Full Review of LendingClub here

loanDepot
Terms of Loan36 or 60 months
Est. APR6.17%
To
29.00%
Est. Monthly Payment$305?per month

Credit Score640minimum credit score

APPLY NOW

on loanDepot’s secure website

Besides its online presence, loanDepot operates out of over 150 locations nationwide. Its loan officers are ready to assist you with personal loans of up to $35,000 that can be used to consolidate debt.... Read More

Pros:

  • Applications can be done online or by phone
  • Soft inquiry that doesn’t affect your credit score
  • Knowledge Cafe for staying educated on finance
  • Can get both a personal loan and a home loan 

Cons:

  • Origination fee of 1% to 5%
  • $15 late fee after the 15-day grace period

Customer service is important to loanDepot, which makes this company a good fit for consumers who have questions or borrowers who prefer to deal with a human when taking out a loan. 

Read Full Review of loanDepot here

PenFed Credit Union
Terms of Loan60 months
Est. APR6.49%
To
0.00%
Est. Monthly Payment$306?per month

Credit Score700minimum credit score

APPLY NOW

on PenFed Credit Union's secure website

Hard credit pull

PenFed Credit Union strives to educate, encourage and assist its members in achieving their financial goals.... Read More

Pros:

  • Bill consolidation calculator
  • No origination fee for fixed loans up to $25,000
  • Fast approval process

 

Cons:

  • Must become a member to apply for a loan
  • All loans come with a minimum $50 monthly payment
  • Late payment between $5 and $25

To take advantage of PenFed Credit Union’s bill consolidation loan, you’ll need to meet the member eligibility requirements. This could be through your employer, an association membership, a military affiliation or a volunteer position.

Read Full Review of PenFed Credit Union here

Upgrade
Terms of Loan36 or 60 months
Est. APR6.87%
To
35.97%
Est. Monthly Payment$308?per month

Credit Score620minimum credit score

SEE OFFERS

on LendingTree’s secure website

Upgrade uses the latest technology and a digital platform to keep costs lower than traditional banks.... Read More

Pros:

  • Soft credit pull to check your rates
  • No prepayment fees
  • Fast funding
  • Free credit monitoring

Cons:

  • Origination fee of 1% to 6%
  • $10 failed payment charge
  • Late fee of up to $10 

All loans through Upgrade are made through WebBank, which is Federal Deposit Insurance Corp. (FDIC) insured. But before accepting a loan offer to consolidate debt with Upgrade, it is important that consumers factor in the origination fee to determine if the loan will still save you money in the long run.

Read Full Review of Upgrade here

Earnest
Terms of Loan36 to 60 months
Est. APR6.99%
To
18.24%
Est. Monthly Payment$309?per month

Credit Score660minimum credit score

SEE OFFERS

on LendingTree’s secure website

Earnest issues personal loans for $5,000 to $75,000 for consumers in need of debt consolidation.... Read More

Pros:

  • No origination, prepayment or hidden fees
  • Ability to choose your preferred monthly payment
  • Resource library with articles and guides
  • Soft credit pull for checking rates

Cons:

  • Only approves lower-risk clients
  • $8 charge for returned payments
  • Stamp tax of 0.35% for documents executed in Florida

Borrowers with good and excellent credit would be a good match for Earnest, which has low interest rates and no origination fees. Funds are also distributed within one to two business days after acceptance.

Read Full Review of Earnest here

Santander Bank, N.A
Terms of Loan24 to 60 months
Est. APR6.99%
To
16.99%
Est. Monthly Payment$309?per month

Credit Score680minimum credit score

APPLY NOW

on Santander Bank, N.A's secure website

Hard credit pull

Santander Bank gives customers the opportunity to apply for a personal loan to consolidate their debt either online or at any one of its 600-plus branches.... Read More

Pros:

  • Handy debt consolidation calculators
  • No origination or prepayment fees
  • Simple 10- to 15-minute application

Cons:

  • Without ePay, the loan increases by 0.25 percentage points 
  • Good to excellent credit required
  • Only available in the following states: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island and Vermont, as well as Washington, D.C.

Consumers who prefer to apply for a loan in-person and who live in one of the approved states or Washington, D.C., would do well to consider Santander Bank for their debt consolidation. The omission of fees and the ePay discount make the loan more affordable.

Read Full Review of Santander Bank, N.A here

Discover Personal Loans
Terms of Loan36 to 84 months
Est. APR6.99%
To
24.99%
Est. Monthly Payment$309?per month

Credit Score660minimum credit score

SEE OFFERS

on LendingTree’s secure website

Discover has a personal loan for debt consolidation. When applicants select “debt consolidation” as the purpose for the loan, 70% of the approved funds must be paid to creditors.... Read More

Pros:

  • Funds can be disbursed within 24 hours
  • No prepayment, origination or application fees 
  • Debt consolidation calculator

Cons:

  • Funds can’t be used to pay off secured loans
  • Funds can’t be used to pay for postsecondary education
  • Late fee of $39

As long as you have a household income of $25,000 or more, are 18 or older and are a U.S. citizen or permanent resident, you can apply for Discover’s personal loan. You’ll still need to meet certain credit requirements, although these minimums are not publicly disclosed.

Read Full Review of Discover Personal Loans here

Marcus by Goldman Sachs®
Terms of Loan36 to 72 months
Est. APR6.99%
To
24.99%
Est. Monthly Payment$309?per month

Credit ScoreVariesminimum credit score

SEE OFFERS

on LendingTree’s secure website

Consumers can apply for a personal loan of up to $40,000 through Marcus by Goldman Sachs and use those funds to consolidate high-interest debt into one fixed monthly payment.... Read More

Pros:

  • Can check loan options without affecting your credit score
  • Personal loan calculator
  • No fees
  • On-time payment reward

Cons:

  • Must have a credit score of 660 or higher
  • Residents of Maryland are not eligible to apply
  • Loans can’t be used for education-related expenses 

Borrowers with good credit who pay on time are a good fit for a Marcus by Goldman Sachs personal loan. After 12 consecutive on-time payments, customers are rewarded with the ability to defer a future payment.

SoFi
Terms of Loan36 to 84 months
Est. APR7.08%
To
15.37%
Est. Monthly Payment$309?per month

Credit Score680minimum credit score

APPLY NOW

on SoFi's secure website

SoFi passes savings on to its members by being entirely digital, which also means it can review and approve applications at a faster rate.... Read More

Pros:

  • Checking your rate won’t affect your credit score
  • No origination, prepayment or hidden fees
  • Online customer service team available seven days a week 
  • Referral Program for earning extra cash

Cons:

  • Selective in who it approves for loans
  • No short-term loans
  • If you don’t use autopay, you’ll lose a 0.25% discount

SoFi is unique in that it also offers a host of member benefits. Members receive discounts on future loans, unemployment protection, career coaching, guidance from licensed financial advisers and invites to special events.

Read Full Review of SoFi here

First Midwest Bank
Terms of Loan12 to 60 months
Est. APR7.42%
To
12.44%
Est. Monthly Payment$311?per month

Credit Score680minimum credit score

APPLY NOW

on First Midwest Bank's secure website

Hard credit pull

First Midwest Bank is based in Chicago, with 125-plus branches for customers who wish to apply in person for a loan to consolidate their debt.... Read More

Pros:

  • Free online and branch workshops
  • Personal Budget Kit
  • Fraud and security awareness

Cons:

  • Hard pull on your credit
  • Good credit score required
  • $100 documentation fee

Applicants must live in one of the following 26 states to apply for a loan with First Midwest Bank: Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts, Minnesota, Missouri, Nebraska, New Hampshire, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and Wisconsin.

Read Full Review of First Midwest Bank here

Upstart
Terms of Loan36 to 60 months
Est. APR7.80%
To
29.99%
Est. Monthly Payment$312?per month

Credit Score640minimum credit score

SEE OFFERS

on LendingTree’s secure website

Upstart operates a direct-to-consumer lending platform that provides borrowers with quick decisions and fast funding.... Read More

Pros:

  • Soft pull when checking rates
  • No prepayment penalties
  • Funding within 24 hours of acceptance
  • Convenient loan calculator

Cons:

  • Interest rates are higher than those of other lenders
  • Origination fee of 0% to 8% of the target amount
  • Late fee of $15 or 5 percent of the past-due amount, whichever is greater
  • $15 returned check fee

Upstart lenders fund the debt consolidation loans except for in the following states: Alaska, Arizona, Hawaii, Maine, Maryland, Massachusetts, Nebraska, New Mexico, North Carolina, North Dakota, Oklahoma and Vermont. Cross River Bank provides loans in these states.

Read Full Review of Upstart here

Wright-Patt Credit Union
Terms of Loan60 months
Est. APR7.99%
To
17.99%
Est. Monthly Payment$313?per month

Credit Score710minimum credit score

APPLY NOW

on Wright-Patt Credit Union's secure website

Hard credit pull

If you’re looking to get a debt consolidation loan from a company that is known for generously donating its time and talents to various community charities, Wright-Patt Credit Union is an excellent choice.... Read More

Pros:

  • Debt consolidation calculator
  • Skip-a-Pay Program
  • Convenient mobile login

Cons:

  • Late fee of 5% of the payment due
  • Hard pull on your credit

To get a loan with Wright-Patt Credit Union, you must first become a member. The company states that most residents of the Miami Valley and Columbus, Ohio, are eligible.

Payoff
Terms of Loan24 to 60 months
Est. APR8.00%
To
25.00%
Est. Monthly Payment$313?per month

Credit Score640minimum credit score

SEE OFFERS

on LendingTree’s secure website

Payoff is dedicated to helping customers reach their financial goals by offering products that focus on personality and financial behavior.... Read More

Pros:

  • McAfee-certified security technology
  • Checking your rate won’t hurt your credit score
  • No application or prepayment fees
  • No late or returned check fees

Cons:

  • Origination fee ranges from 0% to 5%
  • No short-term loan options

Borrowers looking for a community and not just a bank loan will love Payoff. As a community member, consumers are rewarded with free FICO score updates, job loss support and the proactive support of the Member Experience Team.

Read Full Review of Payoff here

Tower Federal Credit Union
Terms of Loan12 to 72 months
Est. APR8.74%
To
11.74%
Est. Monthly Payment$317?per month

Credit Score580minimum credit score

APPLY NOW

on Tower Federal Credit Union's secure website

Hard credit pull

To take advantage of competitive loan rates that will help you consolidate your debt, you’ll need to become a member of Tower Federal Credit Union.... Read More

Pros:

  • Free accelerated debt payoff calculator
  • Quick five- to 10-minute loan application
  • No origination fee

Cons:

  • $20 late payment fee
  • $9 charge to make a payment over the phone
  • Hard credit pull when checking rates

Tower Federal Credit Union has a higher starting APR rate than many of its competitors. But a membership comes with other benefits that may make using its debt consolidation loan worth the added expense. For example, you’ll get free checking with no minimum balance, investment management, vehicle protection and a credit card with rebate rewards.

USAA Bank
Terms of Loan12 to 84 months
Est. APR8.99%
To
10.99%
Est. Monthly Payment$318?per month

Credit Score700minimum credit score

APPLY NOW

on USAA Bank's secure website

Hard credit pull

USAA Bank provides personal loans for debt consolidation at competitive rates for its members. To join, you’ll need to be affiliated with the military or a qualified family member.... Read More

Pros:

  • Easy loan application with same-day funding
  • Has loans for all credit types
  • Membership is free
  • No application or prepayment fees

 

Cons:

  • Can’t use funds to pay off higher education expenses
  • High starting interest rates compared to those of its competitors

If you qualify for membership and your credit is less than perfect, USAA Bank may be your answer. To determine if consolidation with USAA Bank is worth it, you’ll need to compare the offered interest rate with the rates you’re paying on your debt.

Read Full Review of USAA Bank here

SAFE Credit Union
Terms of Loan60 months
Est. APR8.99%
To
14.49%
Est. Monthly Payment$318?per month

Credit Score600minimum credit score

APPLY NOW

on SAFE Credit Union's secure website

Hard credit pull

SAFE Federal Credit Union offers a personal loan that can be used to consolidate debt, as well as fund vacations and recreational vehicles.... Read More

Pros:

  • SAFE Payment Protection
  • No origination or prepayment fees
  • Handy personal loan calculators
  • Flexible terms

Cons:

  • $4 inactivity fee if bill pay isn’t used for 60 days
  • Late fee of 6% of the payment due
  • $30 returned loan payment charge
  • Hard credit pull

To become a member and take advantage of SAFE Federal Credit Union’s additional benefits, you’ll need to reside, work or worship in the following California counties: Sacramento, Placer, El Dorado, Yolo, San Joaquin, Contra Costa, Solano, Yuba, Sutter, Butte, Nevada, Alameda or Amador.

Apple Federal Credit Union
Terms of Loan60 months
Est. APR9.24%
To
16.99%
Est. Monthly Payment$319?per month

Credit Score560minimum credit score

APPLY NOW

on Apple Federal Credit Union's secure website

Hard credit pull

Consumers are welcome to apply for a personal loan at one of Apple Federal Credit Union’s 20 northern Virginia branches, while members have the added ability to apply online.... Read More

Pros:

  • More than 10 personal finance calculators
  • Learning Center with videos and free seminars
  • Skip-A-Pay option for $25
  • All credit types considered

Cons:

  • Interest rates are higher than those of competitors 
  • Hard credit pull
  • $15 returned loan payment fee

 

Although the starting interest rates are a bit higher than those of some other lenders, Apple Federal Credit Union works with all credit types, which is great news for borrowers with less-than-perfect credit. It looks at the whole picture and considers things such as repayment history, desire to repay and length of a person’s credit history.

Affinity Federal Credit Union
Terms of Loan60 months
Est. APR9.25%
To
18.00%
Est. Monthly Payment$319?per month

Credit Score525minimum credit score

APPLY NOW

on Affinity Federal Credit Union's secure website

Hard credit pull

To take advantage of Affinity Federal Credit Union’s debt consolidation loan, you’ll need to first become a member.... Read More

Pros:

  • Free credit counseling service
  • Loan payment calculator
  • No annual, application or prepayment fees
  • Decision not based solely on credit

Cons:

  • Hard credit pull
  • Loan investigation research fee of $20 an hour
  • Interest is 0.25% higher if you want to pay by check

With the ability to stretch payments as far as 120 months, Affinity Federal Credit Union may be a good option for borrowers who need a fixed low monthly payment. But it is important to keep in mind that taking advantage of this option will result in paying more interest than you would if you paid off the loan with a shorter term.

Avant
Terms of Loan24 to 60 months
Est. APR9.95%
To
35.99%
Est. Monthly Payment$322?per month

Credit ScoreVariesminimum credit score

SEE OFFERS

on LendingTree’s secure website

Avant makes getting a debt consolidation loan easy by using an online platform for the entire process.... Read More

Pros:

  • Soft credit pull when checking rates
  • No hidden fees or prepayment penalties 
  • Mobile app available on iOS and Android

Cons:

  • Administration fee of up to 4.75%
  • Fees charged for late and dishonored payments
  • Customers are required to have a checking or savings account on file

Avant branded credit products are issued by WebBank, member FDIC. It is a good choice for consumers who need money fast. But borrowers need to be mindful of the administration fee and high interest rates before signing on the dotted line.

Read Full Review of Avant here

Northwest Federal Credit Union
Terms of Loan84 months
Est. APR11.65%
To
18.00%
Est. Monthly Payment$330?per month

Credit Score581minimum credit score

APPLY NOW

on Northwest Federal Credit Union's secure website

Hard credit pull

Northwest Federal Credit Union is a nonprofit credit union, which allows the company to offer lower interest rates than many of its competitors.... Read More

Pros:

  • Free financial counseling
  • Host of payment options available
  • Membership benefits that include free checking and car-buying services

Cons:

  • Hard credit pull when applying
  • Returned check fee of either $15 (second or third party) or $32.50 (member checks)
  • 2% processing fee when paying with a debit card via the payment center

To get a loan at Northwest Federal Credit Union, you’ll first need to become a member by meeting the eligibility requirements and opening a savings account. Those who work for certain federal government agencies, one of the associated local or national businesses or one of the company’s partner organizations are eligible for membership.

Chartway Federal Credit Union
Terms of Loan60 months
Est. APR11.99%
To
16.50%
Est. Monthly Payment$332?per month

Credit Score640minimum credit score

APPLY NOW

on Chartway Federal Credit Union's secure website

Hard credit pull

Chartway Federal Credit Union’s Personal Signature Loan can be used for anything, including debt consolidation.... Read More

Pros:

  • “Skip payments” available in July and December
  • Option to add loan protection
  • Free Balance Financial Fitness Program

Cons:

  • High interest rates
  • $30 nonsufficient funds and stop payment fees
  • $5 fee if you opt to pay over the phone

Personal loans for debt consolidation are only available to Chartway Federal Credit Union members who are 18 and older. There are several ways to become a member. You can live, work, go to school or worship near one of its many branches, work for one of 750 approved companies, have a family member who is a Chartway Federal Credit Union member or donate $10 to the We Promise Foundation.

LendingPoint
Terms of Loan24 to 48 months
Est. APR15.49%
To
35.99%
Est. Monthly Payment$349?per month

Credit Score585minimum credit score

SEE OFFERS

on LendingTree’s secure website

LendingPoint offers loans for debt consolidation in 34 states and Washington, D.C.... Read More

Pros:

  • Soft credit pull when checking rates
  • All credit types are considered 
  • Quick approval and time to funding
  • No fees for early payoff

 

Cons:

  • Origination fees from 0% to 6%
  • High interest rates

Individuals with less-than-perfect credit who have a difficult time getting a loan through a bank will find LendingPoint as a good resource. Of course, borrowers will want to take into consideration the high interest rates and origination fee before making a final decision.

Read Full Review of LendingPoint here

OneMain Financial
Terms of Loan24 to 60 months
Est. APR16.05%
To
35.99%
Est. Monthly Payment$352?per month

Credit ScoreVariesminimum credit score

APPLY NOW

on OneMain Financial's secure website

Hard credit pull

OneMain Financial operates more than 1,600 branches out of 44 states.... Read More

Pros:

  • Handy personal loan calculator
  • No prepayment fees
  • Customer support

Cons:

  • High interest rates
  • Must visit a branch and meet with a loan specialist
  • Hard credit pull 

 

Due to its high interest rates, OneMain Financial isn’t the best choice for borrowers who have good to excellent credit. Additionally, if you don’t live near one of the company’s branches, getting the loan isn’t convenient. 

Read Full Review of OneMain Financial here

How Debt Consolidation Loans Work

Debt consolidation loans are installment loans you can use to pay off other debt. Some loan products are marketed specifically as “debt consolidation loans.” However, most often debt consolidation loans are simply personal loans with a fixed rate and fixed term.

There are two types of personal loans that can be used for debt consolidation — unsecured personal loans and secured personal loans.

Unsecured personal loans

An unsecured loan is one that you can get approved for without pledging collateral such as a car or home. A lender reviews your credit history and income to determine whether you qualify. Your signature on the loan agreement is enough to secure funds.

Lenders typically verify your income and employment by requesting pay stubs (or bank statements if you’re self-employed) and other documentation. Many alternative lenders, banks and credit unions offer unsecured personal loans online, so you may be able to take care of the entire application process without stepping into a physical location. Funding can happen within a few days.

Unsecured personal loan products are available for borrowers who have good credit and even those who have less-than-stellar credit. As you can see in the loan comparison table above, borrowers with a score in the low 600s may be able to qualify for an unsecured personal loan to consolidate debt but most likely at a higher interest rate.

Secured personal loans

Secured personal loans are backed by something valuable like a car, home or savings. Pledging collateral to back your loan means the lender has the right to take possession of the asset if you don’t repay it. Collateral reduces risk for the lender.

Some banks offer a lower interest rate for personal loans that use your CD or savings account as collateral.

Here’s how it works: During the period of the loan, the lender will block withdrawals from the account you used to back your loan. The downside is that the lender can seize this account should you fail to repay the loan. But successfully repaying the loan may show your lender you’re a reliable customer and have a positive impact on your credit score.

Online lenders

Secured personal loans are less popular in the online lending space. However, these products may be offered to borrowers who aren’t able to qualify for an unsecured loan and therefore tend to have higher interest rates. If your score isn’t great and you can’t qualify for an unsecured product, handing over the title to your car may be the only way to qualify, but be careful.

There are reputable companies like OneMain Financial offering secured loans, and then there are title lenders. Title loan companies offer the short-term secured loans that you may see advertised on storefronts and commercials.

“At OneMain, you may get a 36% interest rate on a $5,000 loan with your car provided as collateral. Title loan companies’ [interest rates] can be in the hundreds of percentage points,” said Nick Clements, co-founder of MagnifyMoney. Clements warns that you could borrow just $1,000 from a title loan company and owe $1,500 within weeks due to triple-digit APRs.

To make matters worse, if you’re unable to pay back the title loan, you can find yourself without a car and in a never-ending cycle of debt. A debt consolidation loan is supposed to be a tool to get you out of debt. It’s not supposed to cause more financial strain. If using your title is your only way to qualify for a loan, make sure it’s an installment loan where you’re using it as collateral to help you qualify and it’s not a payday-structured loan from a title company because of the high fees.

Advantages of a debt consolidation loan

  • Quick online application. You may be able to qualify for a debt consolidation loan within minutes and have your loan funded within days. Many online lenders also offer a prequalification process where you can shop for rates with a soft pull that won’t harm your credit.
  • Condenses bills into one easy payment. If you have many payments for credit cards, auto loans, medical bills and more, one payment can be far easier to manage. You can also obtain large loan amounts if you have a substantial sum of debt to consolidate.
  • Can reduce your interest rate. It’s fairly easy to do a cost comparison with a debt consolidation loan. If your credit card interest rate is 20% and you qualify for a debt consolidation loan at 12%, you’ll know you’re in for some interest savings.
  • Can lower your monthly bill. Taking out a loan with an extended loan term of five to seven years can lower your monthly payment. A lower monthly payment can give you some wiggle room to put money elsewhere. For instance, building up an emergency savings account with the extra cash you gain each month can help you avoid falling back on credit cards or other forms of debt in the future.
  • Has a fixed interest rate and installment payments. Having a fixed interest rate and fixed payment schedule means you know how much the loan will cost you in total. There’s also a set payoff schedule that offers some structure if you’re having trouble managing debt. In comparison, credit cards have a variable interest rate, and you can fall into the debt trap of making just minimum payments, which can spiral out of control.

Disadvantages of a debt consolidation loan

  • The fees. Many debt consolidation loans have no origination or application fees, but some do. The loan origination fee (if there is one) is often around 1 to 8 percent and deducted from the proceeds of the loan before it appears in your account. Make sure you account for the fees when deciding how much to borrow.
  • The allure of an extended payment. The extended loan payoff schedule can be a blessing and a curse. Drawing out the loan term may offer a lower monthly payment, but it could also mean you’ll be paying off the lingering debt for several years. Consider a shorter-term loan to speed up repayment if your goal is to crush debt fast.
  • It’s not a lifeline. A debt consolidation loan is probably not going to be the answer to your prayers if you’re experiencing significant financial trouble. You won’t qualify if your credit has already taken a hit because you’re unable to keep up with your current payments. A debt consolidation loan restructures your debt to make it easier to manage. It won’t resolve delinquencies and defaults.
  • Good credit may not be required, but credit does matter. You may not be able to qualify for a debt consolidation loan with a competitive interest rate if your credit is less than stellar. Ultimately, you want to land an interest rate that’s better than what you currently have to make the most of a debt consolidation loan.

Things to do before applying for a debt consolidation loan

Consider alternatives

A balance transfer credit card. A balance transfer credit card is probably the cheapest way to consolidate your debt if you use it appropriately. A balance transfer card gives you a 0% APR introductory deal for a certain period of time, often 12 to 21 months. You transfer an existing balance onto the card and pay it off while there’s no interest charged.

There are a few drawbacks to the balance transfer card as well.

  • You generally need decent credit to qualify.
  • Balance transfer cards may charge a balance transfer fee of 2 to 5 percent.
  • Standard interest rates will apply to your balance once the introductory period is over.
  • There are also credit limits.

“If you have a lot of debt, you’re going to find it difficult to see more than $5,000 approved on the balance transfer card,” said Clements.

Lastly, getting a balance transfer card may not be the best idea if you’ve maxed out every other credit card in your wallet. You may get tempted to make the minimum payment instead of crushing debt during the interest-free period.

Home equity line of credit (HELOC) or home equity loan. A home equity line of credit (HELOC) and home equity loan are two other examples of secured debt you could use for a debt consolidation. These products are secured by your home and both involve borrowing from your home’s equity. A HELOC is a credit line that you can use and pay back as needed while a home equity loan works like a typical installment loan.

Benefits of both types are generally lower interest rates than personal loans or credit cards (after the 0% introductory period), but you may have to pay closing costs.

Qualification criteria for a HELOC and home equity loan can be stringent.

  • You need to pass a credit check.
  • Lenders will also review your debt-to-income ratio and loan-to-value (LTV) to determine if you qualify.
  • Watch out for the fine print when using a HELOC. Interest rates are variable and the minimum payment may be interest-only at the beginning. The low monthly payment could prolong your debt plan or tempt you to borrow more. Learn more about HELOCs and home equity loans here.

Cash-out refinance. A cash-out refinance is when you refinance your home loan for more than your existing loan amount so you can take cash from the deal.

Say your home is worth $200,000, your mortgage balance is $100,000, and you’re sitting on $20,000 of credit card debt. You refinance the mortgage for $120,000. You take the extra $20,000 in cash to pay off your credit cards. Your credit card debt is consolidated into your 30-year, fixed-rate mortgage. This is an option to consider if you’re looking for a low payment that can be spread out over a long period of time.

“[Cash-out refinances] are one of the most popular ways to use home equity right now,” said Clements. “The HELOC and home equity loan space is still very restrictive ... they’re not particularly easy to get or the cheapest relative to the cash-out refinance.” Learn more about cash-out refinances here.

Set a budget and make a repayment plan

As mentioned above, a debt consolidation loan isn’t a saving grace. Before getting one, you should create a monthly budget. Tracking your money will help you identify and curb overspending habits so you can avoid accumulating even more debt after the consolidation. You should also come up with a game plan. The game plan will help you choose the right product.

Do you want to pay off debt within one or two years? A balance transfer card or short-term loan may be the right choice. A balance transfer card is likely the cheapest short-term solution because it can give you 0% APR for a limited time.

Do you want to spread out your payments over many years? A long-term debt consolidation loan, home equity loan or cash-out refinance may be the best move. The cash-out refinance may offer you the longest repayment term for the lowest price.

Be careful to read fine print to avoid scams

Always look for fees and pay close attention to how much a debt consolidation loan will cost you over the entire loan term. Look at lender reviews before borrowing to make sure the company is reputable. Predatory lenders often take advantage of people who are desperate. Don’t make any rash decisions. If a product seems too good to be true, it’s probably too good to be true. Review terms carefully and ask questions about costs before borrowing.

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