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5 Best Debt Consolidation Loans
By Stephanie Colestock MONEY RESEARCH COLLECTIVE
From 5.93% with Autopay discount
No minimum credit score required
$5,000-$100,000
Depends on the lender
Depends on the lender
Depends on the lender
6.99%-24.99%
No minimum credit score required
$2,500-$35,000
4.99%-19.63% with Autopay discount
No information available on the website
$5,000-$100,000
From 5.99%
No information available on the website
Up to $50,000
Juggling debt can be stressful and expensive. Whether you’re carrying around a number of credit card balances, have loans to repay, or both, consolidating that debt into one new loan can not only streamline the repayment process but also save you money with lower interest rates and fees.
Debt consolidation loans are really just personal loans that are earmarked for debt repayment. However, they can be a great tool for combining existing balances into one easy-to-manage account. Here’s a look at our top five debt consolidation loan lenders and why we chose them. Although the interest rates mentioned below were accurate at the time of writing, you should always check the lenders’ websites to see what the current rates are.
Our Top Picks for Best Debt Consolidation Loans
- Best for Low Interest Rates: LightStream
- Best for Credit Card Consolidation: Discover
- Best for Large Balances: SoFi
- Best for Small Balances: PenFed
- Best for Low Credit Scores: Upstart
Best Debt Consolidation Loans Reviews
Best for Low Interest Rates: LightStream
- Loan funding possible on day of application
- High loan limits
- Will beat competitors' rates by 0.1%
- $100 loan satisfaction guarantee
- Good to excellent credit required
- No loan pre-approval offered
- Loan amount
- $5,000 to $100,000
- Repayment terms
- 2 to 7 years
- APR
- 3.49% to 19.99% fixed
Lightstream offers some of the lowest annual percentage rates (APRs) around when it comes to personal loans, earning it our top pick for the lowest rates. As of this writing (April 8, 2022), LightStream loans are available with interest rates ranging from 3.49% to 19.99% APR with a 0.50% autopay discount.
There is no loan pre-approval through LightStream, so borrowers will need to formally apply in order to see the exact personal loan rates and terms they’ll be offered. However, LightStream does guarantee to beat their competitors’ interest rates by 0.10%, and also has a $100 loan satisfaction guarantee.
Customers can borrow anywhere from $5,000 up to $100,000, with loan terms ranging from 24 to 84 months in length. In order to qualify for a LightStream loan, borrowers will need to have good or excellent credit. Once approved, these loans can be funded as quickly as the same business day.
Best for Credit Card Consolidation: Discover
- Balance transfer and personal loan options
- Next-business day funding available
- 30-day no-risk guarantee
- Check rate online without affecting credit score
- Top-rated lender
- Household income requirements
- Direct creditor disbursement requirements
- Loan amount
- $2,500 to $35,000
- Repayment terms
- 3 to 7 years
- APR
- 5.99% to 24.99%
For people whose debt is mostly with credit card companies, Discover is our top choice for a simplified debt consolidation process. This lender makes it easier to pay off revolving balances by offering both personal loans for debt consolidation purposes, as well as balance transfer options for consumers with an open line of credit.
The personal loan route can eliminate fees and give borrowers more flexibility, while the balance transfer route offers simplicity to borrowers when consolidating their existing credit card debt. In some cases, Discover may also offer promotional interest rates that make consolidating balances even more affordable.
Discover personal loans range from $2,500 to $35,000 with interest rates from 5.99% to 24.99% (as of this writing). Repayment terms on debt consolidation loans can run between 36 and 84 months in length. Borrowers who choose debt consolidation as their personal loan purpose (at the time of application) are required to have at least 70% of their loan disbursed directly to their creditors.
Potential borrowers can check their rate online in just minutes without affecting their credit score. If approved, loans can be funded as soon as the next business day. Borrowers can also return their full loan amount within 30 days without any interest charges or penalties if they’re not satisfied with the loan or simply change their minds.
Discover tied for first place in the 2021 J.D. Power U.S. Consumer Lending Satisfaction Study, earning the highest ratings in overall customer satisfaction.
Best for Large Balances: SoFi
- Check your rate online without affecting your credit
- Same-day funding possible
- Co-applicants allowed
- Minimum credit score can vary
- No variable rate option
- Loan amount
- $5,000 to $100,000
- Repayment terms
- 2 to 7 years
- APR
- 5.74% to 21.78% fixed
With loans available for up to $100,000 and a 60-second online application process, SoFi is our choice for the best debt consolidation loan if you’re looking to consolidate quite a bit of debt. While a few other lenders also offer loans of up to $100,000, SoFi does it with a no-credit-impact prequalification and enables you to shop for the best possible loan terms through a number of their partner lenders.
SoFi offers its own loans and also connects borrowers with its partner lenders, which gives consumers the opportunity to compare their options.The credit score requirement for each potential lender could vary, though, meaning that you might qualify for one lender and not another. To help improve your approval odds, SoFi does allow for co-applicants now, as long as they live at the same address.
Once approved, SoFi loans can be funded as early as the same day. Repayment terms on personal loans earmarked for credit card debt consolidation start at 3 years, but if you classify your debt as a personal loan and use it to consolidate non-credit card debt, your term will range from 24 to 84 months.
Best for Small Balances: PenFed
- Low minimum loan amount
- Competitive interest rates
- Check rate online without affecting credit score
- Must become a member to borrow
- Funding can take 1-2 days
- Loan amount
- $600 to $50,000
- Repayment terms
- 1 to 5 years
- APR
- 4.99% to 17.99%
For borrowers looking to consolidate a smaller amount of debt, PenFed is our top pick. They offer loans starting as low as $600, which is significantly less than many other lenders on this list (some of which might require you to borrow a minimum of $5,000+). PenFed also offers competitive interest on your smaller debt balance, with rates starting at just 4.99% and loan terms of 12 to 60 months.
Borrowers can check their rate online in just seconds without any impact to their credit score. Once approved, PenFed debt consolidation loans are usually funded in a matter of one to two business days.
You don’t have to be a PenFed member in order to apply for a loan and check your rate. However, if you decide to proceed with the loan, you will. The process is relatively quick, though, and no military service is required.
Best for Low Credit Scores: Upstart
- Next-business-day funding
- Low credit score requirements
- Check rates online in just five minutes (without affecting credit)
- Top-rated lender
- High interest rates
- Limited repayment terms
- Partner lenders are used
- Loan amount
- $1,000 to $50,000
- Repayment terms
- 3 to 5 years
- APR
- 5.22% to 35.99%
Many personal loan lenders require their borrowers to have good or even excellent credit in order to be approved. This leaves borrowers with fair credit, poor credit or even bad credit in the dust, unable to take out a debt consolidation or other loan when they need it most. Upstart, however, takes a different approach, using AI to factor in more than just the borrower’s FICO score when determining eligibility, allowing for borrowers with limited credit or lower scores to get approved by Upstart’s partner lenders.
Loans through Upstart are available from $1,000 to $50,000, with repayment terms ranging from 36 to 60 months. While interest rates start at 5.22% (as of this writing), they potentially go as high as 35.99%, borrowers can check rates online in just minutes without affecting their credit. Approved loans are funded the next business day.
Upstart was ranked sixth in the most recent J.D. Power U.S. Consumer Lending Satisfaction Study (2021), which considers factors such as overall customer satisfaction, loan management, and the application process.
Other companies we considered
Here’s a look at some of the other debt consolidation loan lenders we considered, but ultimately excluded from this top picks list.
- Avant — This lender offers personal loans between $2,000 and $35,000 with a low borrower credit score requirement and fast funding. However, they didn’t make our list because interest rates are higher than their competitors (as of this writing, they range from 9.95% to 35.99% APR) and personal loans are often subject to administrative fees as high as 4.75%.
- Best Egg — Borrowers can request up to $50,000 from this lender, checking their rates online in just minutes without affecting their credit. However, loans aren’t available to borrowers in all states – and this lender does charge origination fees.
- One Main Financial — Though this lender offers competitive interest rates and fast loan approval, their origination fees (as much as $500 or up to 10% of the total loan amount) got them bumped from our list. They also scored below average in the 2021 J.D. Power U.S. Consumer Lending Customer Satisfaction Study.
Debt Consolidation Loans Guide
Curious about what debt consolidation loans are and how they work? Here’s a brief overview.
What is a debt consolidation loan?
A debt consolidation loan is a personal loan that’s used to consolidate multiple debts into one single account. These unsecured personal loans require no collateral and operate as installment loans. This means that borrowers will receive their loan proceeds in one lump sum and repay their debt on a monthly basis for an agreed term.
Debt consolidation loans offer a few helpful benefits for borrowers. They can:
- Simplify many types of debt into one single payment each month, relieving the debtor of the hassle of juggling multiple payments
- Result in a lower monthly payment by reducing interest rates (especially on high-interest debt, such as credit card balances)
- Reduce one’s credit utilization if there are maxed out revolving accounts (this can improve your credit score)
How do debt consolidation loans work?
Rather than continuing to make monthly payments on multiple debt balances each month, borrowers can use a single debt consolidation loan to repay them all. This loan streamlines the debt repayment process, combining multiple accounts into one single loan with one interest rate and one monthly payment.
Debt consolidation loans are usually offered in the form of a personal loan. Borrowers can then use these funds to repay the creditors that they currently owe. Some debt consolidation lenders also offer direct debt consolidation products; with these, the lender will obtain payoff balances and clear out the borrower’s existing debt balances directly. All the borrower has to do is provide them with the lender and account number information, then make payments on their new loan as scheduled.
If opting for a direct consolidation loan, borrowers should still check in with their previous creditors after their new loan has closed, to ensure that the balances have been satisfied in full.
This new unsecured debt then takes the place of the balances that were repaid with the loan. There’s a set loan payment and loan term, often with a fixed interest rate on the balance owed.
How to choose the best debt consolidation loan
Choosing the best debt consolidation loan really comes down to what you as the borrower need most from the loan. This means looking at specific factors such as:
- How much you need to borrow
- How much time you want to repay the loan
- What you can afford monthly
- Your specific credit history
- What’s on your credit reports with each of the three credit bureaus
- Whether you want (or need) to add a co-signer
- Your household income and monthly expenses
- How quickly you need funds
The best consolidation loan for you is the one that has the most competitive rates and offers you the money you need, when you need it. You should also ensure that your new loan has a monthly payment that you can afford for the duration of the loan term.
How to get a debt consolidation loan
Since debt consolidation loans are a type of personal loan, they can be taken out through a number of types of financial institutions, including banks, credit unions, finance companies and online lenders.
In order to get a debt consolidation loan, borrowers will need to apply for their desired loan amount. The lender will request certain information to help determine eligibility and confirm the borrower’s identity, and may run either a soft or hard credit pull in order to approve (or pre-approve) the loan. The information requested could include your:
- Name
- Address
- Phone number
- Date of birth
- Social Security number
- Household income (to determine your debt-to-income ratio)
- Email address
- Employment details
- Monthly expenses
- and more
Once approved, borrowers will need to sign a loan agreement, guaranteeing to repay the debt as scheduled. The lender will then disburse the funds accordingly — sometimes even the same or next business day — which can then be used to repay other existing creditors. In some cases, the debt consolidation lender will require that a bulk of the disbursement go directly to the other creditors, rather than to the borrower.
How We Found the Best Debt Consolidation Loans
In order to select the best debt consolidation loan providers, we considered a range of factors and borrower needs.
Our methodology included looking at each lender’s loan options, such as repayment terms and minimum and maximum loan amounts. We also considered how much that loan would cost borrowers, both in terms of interest rate and any applicable fees such as origination fees or loan prepayment fees.
We considered how easy the application and funding process is, and how quickly borrowers could get cash-in-hand. This included looking at whether the lender allowed for a soft credit inquiry in the preapproval process, or if borrowers were forced to apply in order to see the rates and terms they’d be offered.
Lastly, we looked at the lender’s availability and reputation. The 2021 J.D. Power U.S. Consumer Lending Satisfaction Survey was our primary source point for this analysis.
Summary of the Best Debt Consolidation Loans of 2022
- LightStream — Best for Low Interest Rates
- Discover — Best for Credit Card Consolidation
- SoFi — Best for Large Balances
- PenFed — Best for Small Balances
- Upstart — Best for Low Credit Scores
Stephanie Colestock is a DC-based personal finance writer with nearly 11 years of freelance writing experience. She covers a wide range of finance-related topics and is currently working toward her CFP®️ certification. Her work appears on sites such as Business Insider, MSN, Fox Business, CNET, Investopedia, and more.