Best Debt Consolidation Loans of February 2024 (2024)

Best Debt Consolidation Loans of February 2024

• Upgrade – Best for Bad Credit
• Universal Credit – Best for Comparing Multiple Offers
• Happy Money – Best for Flexible Repayment Terms
• Achieve – Best for Paying off Credit Card Debt
• Discover – Best for No Interest If Repaid Withing 30 Days
• Best Egg – Best for Debt Consolidation Perks
• LendingClub – Best for Peer-To-Peer Lending
• LightStream – Best for Low Interest Rates
• SoFi – Best for Large Loan Amounts

Personal loan interest rates depend on several factors, including the borrower’s creditworthiness, lender, loan amount and repayment term. Typically, however, personal loan interest rates range from around 5.99% to 36%, with the lowest rates reserved for borrowers with excellent credit.

Summary: Best Debt Consolidation Loans of February 2024

Company	Company - logo	Forbes Advisor Rating	Forbes Advisor Rating - Image	Minimum Credit Score	Current APR Range	Loan Amounts	Learn More CTA text	Learn more CTA below text	LEARN MORE
Upgrade		4.0		580	8.49% to 35.99%	$1,000 to $50,000	Compare Rates	Via Credible.com's Website
Universal Credit		4.0		580	11.69% to 35.99%	$1,000 to $50,000	Compare Rates	Compare rates from participating lenders via Forbes Advisor
Happy Money		4.0		640	11.72% to 17.99%	$5,000 to $40,000	Compare Rates	Via Credible.com's Website
Achieve		4.0		620	8.99% to 35.99%	$7,500 to $40,000
Discover		4.0		660	7.99% to 24.99%	$2,500 to $40,000	Compare Rates	Via Fiona.com's Website
Best Egg		3.5		640	8.99% to 35.99%	$2,000 to $50,000	Compare Rates	Via Credible.com's Website
LendingClub		3.5		600	9.57% to 35.99%	$1,000 to $40,000	Compare Rates	Via Credible.com's Website
LightStream		3.5		660	7.49% to 25.49%	$5,000 to $100,000	Compare Rates	Via Credible.com's Website
SoFi®		3.5		650	8.99% to 29.49%	$5,000 to $100,000	Compare Rates	Via Credible.com's Website

Which Debt Consolidation Loan Is Best for You

Best for Bad Credit: Upgrade

With a low minimum credit score of 580, Upgrade is a much more accessible option for borrowers who have a poor credit history.

Best for Comparing Multiple Offers: Universal Credit

As a lending platform that offers personal loans through its partners, Universal Credit is a good option for borrowers looking to compare offers from multiple lenders.

Best for Flexible Repayment Terms: Happy Money

With loans ranging from $5,000 to $40,000 and terms of two to five years, Happy Money gives borrowers a flexible option for consolidating debt.

Best for Paying Off Credit Card Debt: Achieve

Achieve offers borrowers rate discounts and the option to directly pay off creditors, making it a good option for borrowers looking to consolidate their credit card debt.

Best for No Interest If Repaid Within 30 Days: Discover

Discover is a great option for borrowers who can repay their loan within the first month, as this makes the loan interest-free.

Best for Debt Consolidation Perks: Best Egg

With Best Egg’s Direct Pay feature and no prepayment penalty, Best Egg stands out for the features it offers borrowers.

Best for Peer-To-Peer Lending: LendingClub

For borrowers looking for a peer-to-peer loan, LendingClub offers debt consolidation loans with high maximum loan limits and flexible qualification requirements.

Best for Low Interest Rates: LightStream

With competitive interest rates, LightSteam is a low-cost option for borrowers who can qualify for the lowest rates.

Best for Large Loan Amounts: SoFi

SoFi’s loan amounts range from $5,000 to $100,000, making SoFi a good option for borrowers who need to consolidate a large amount of debt.

How To Compare Best Debt Consolidation Loans

Personal loans often are available online through traditional banks, credit unions and alternative lending platforms so you can apply quickly and conveniently, without having to visit a bank branch. Many of these lenders also offer competitive interest rates and flexible repayment terms, meaning you may be able to save money by consolidating your other debts.

Consider these tips when comparing personal loans:

• Where possible, prequalify.Many personal loan providers offer prospective borrowers the ability toprequalify for a loan. This means the applicant can submit details about their financing needs, income, housing situation and other relevant information to find out what kind of loan amounts, rates and repayment terms they are likely to qualify for. Even better, this process typically only requires a soft credit inquiry so you can shop around without hurting your credit score. If you think you may benefit from consolidating your debt—but aren’t sure what rates you’ll qualify for—the prequalification process can streamline your search by ruling out lenders with higher rates.
• Consider the purpose of your loan.While personal loans can be used for a broad range of purposes, they are limited to things like consumer debt consolidation,home improvements, vacations,weddings, funerals, large purchases and other personal expenses. For that reason, lenders often forbid you from using personal loans for postsecondary education expenses, business purposes and illegal activities, at a minimum. When considering a lender, always confirm that debt consolidation is an acceptable use of the loan funds. Even better—determine whether the lender will pay your other creditors directly.
• Keep an eye out for additional fees.Some lenders offer fee-free personal loans that don’t require borrowers to payorigination fees, late payment fees, prepayment penalties or other common loan costs. However, this is more the exception than the rule, so it’s important to ask about fees when shopping for the best loan terms. This is especially important if you’re trying to save money by consolidating debt because fees can cut into your savings over the life of the loan. Likewise, if a lender charges an origination fee, find out whether it’s built into the APR or taken out of the loan amount prior to funding, as this may impact the loan amount you need to request.
• Evaluate the lender’s customer support options.If you’ve found a lender that’s prepared to offer the money you need at acceptable terms, there’s one more thing to consider before signing the loan agreement. While customer support may not seem like a big deal in the honeymoon phase of your loan, it can make a huge difference if you encounter issues with payments or face a financial hardship during your repayment period. Review the lender’s customer service resources and read reviews from past and current borrowers to make sure it’s a good fit.

The Complete Guide to Debt Consolidation Loans

• What Is a Debt Consolidation Loan?
• How Does a Debt Consolidation Loan Work?
• Does Debt Consolidation Hurt Your Credit?
• Pros and Cons of Debt Consolidation Loans
• How To Qualify for a Debt Consolidation Loan
• How To Get a Debt Consolidation Loan
• Alternatives to Debt Consolidation Loans
• Is Debt Consolidation a Good Idea?
• Methodology
• FAQs

What Is a Debt Consolidation Loan?

Debt consolidation is when a borrower takes out a new loan, usually with more favorable terms (a lower interest rate, lower monthly payment or both) and then uses the loan proceeds to pay off their other individual debts. Debt consolidation loans are commonly used to help pay off credit card balances, auto loans and other personal loans.

How Does a Debt Consolidation Loan Work?

To start consolidating debt, apply for a personal loan through your bank or another lender. Once your lender approves you for a debt consolidation loan, it may offer to pay off your other debts automatically—or you will take the cash and pay them off yourself.

After your pre-existing debts are repaid with your new debt consolidation loan funds, you’ll make a single payment on your new loan every month. While debt consolidation often reduces your monthly payment, it accomplishes this by extending the loan period of the consolidated loans. Debt consolidation also streamlines payments and makes it easier to manage finances, like having a single monthly payment due date.

Does Debt Consolidation Hurt Your Credit?

Debt consolidation loans can hurt your credit, but the impacts can be temporary. Applying for a loan requires a hard credit check, which can result in a small dip in your credit score. However, the impact of the inquiry on your score will decrease over time and disappear typically after two years. Your credit score may also decrease if you take out a debt consolidation loan, pay off your credit cards and then rack up more debt on those cards.

That said, consolidating loans can be a great way to streamline your payments, reduce your monthly debt service and build healthy financial habits through regular, on-time payments. For that reason, consolidation loans can actually help you improve your credit score over time. What’s more, some lenders even offer credit tools beyond regular lending services to help you manage your credit profile.

Pros and Cons of Debt Consolidation Loans

Debt consolidation loans are a finance tool. Like any tool, it can either help or hurt you, depending on how you use it. Before you submit an application to borrow money, make sure you’ve fully considered the pros and cons of debt consolidation loans.

Pros of Debt Consolidation

• Simplifies your debt repayment
• Rates may be lower than the rates on credit card debt
• Helps you pay down debt faster if you opt for shorter-term loans
• Can improve your credit score, especially if you’re consolidating credit card debt
• Lowers your payment if you opt for long-term and/or lower-rate loans

Cons of Debt Consolidation

• Can damage your credit if you miss any loan payments
• Your options may be more limited if you have bad credit
• Can be somewhat confusing, especially as your old debts are being paid off
• Can tempt some people to run up their credit cards again once they’re paid off

How To Qualify for a Debt Consolidation Loan

Qualifying for a debt consolidation loan is similar to any other personal loan.

Shop around for lenders where you meet the minimum qualifications. If you don’t meet the credit score requirements, take steps toimprove your credit score. This can include correcting mistakes on your credit report, paying credit card debt or paying down any past-due accounts.

Getting preapproval for a debt consolidation loan can verify that you’ll qualify for the loan when you submit an official loan application.

How To Get a Debt Consolidation Loan

While the process varies by lender, follow these general steps to get adebt consolidation loan:

• Check your credit score.Check your credit score for free through yourcredit cardissuer or another website that offers free scores. This will help you understand your creditworthiness and qualification chances. Aim for a score of at least 610; however, a score of at least 720 will yield the most favorable terms.
• If necessary, take steps to improve your credit score.If your score falls below 610 or you want to boost your score to receive the best terms possible, take time to improve your score before applying, such as lowering your credit usage or paying off unpaid debts.
• Determine how much debt you need to consolidate.Once you check your credit score, calculate how much money you need to borrow to consolidate all of your debts. Remember, though, you’ll receive your money as a lump sum, and you’ll have to pay interest on the entire amount—so only borrow what you need.
• Shop around for the best terms and interest rates.Many lenders will let you prequalify prior to submitting your application, which lets you see the terms you would receive with just asoft credit inquiryand without hurting your credit score.
• Submit a formal application and await a lending decision.After you find a lender that offers you the best terms for your situation, submit your application online or in person. Depending on the lender, this process can take a few hours to a few days.

How To Get a Debt Consolidation Loan With Bad Credit

If you have bad credit, you can strengthen your application by improving your debt-to-income (DTI) ratio. You can do this by increasing your income—with a side hustle or otherwise—or by paying off some of your smaller, more manageable debts. If you choose to pay down some of your debts, this could also help improve your credit score, accomplishing two things at once.

There are debt consolidation loans for bad credit if you can’t improve your credit score enough to qualify for other loans. You may also have better luck applying for secured loans, which are more accessible to applicants with bad credit because they reduce the lender’s risk and often come with lower interest rates.

Alternatives to Debt Consolidation Loans

If you don’t qualify for a traditional debt consolidation loan or want to compare other available options, consider alternatives, including:

1. Balance transfer credit cards.Some credit card providers offer cards that let you move—or transfer—existing credit card debt to a new card with a 0% introductory APR, often for a small fee. As long as you repay your debt within the introductory period, typically up to 21 months, you can avoid paying interest. Any unpaid balances after the introductory period ends will begin to accrue interest.

2. Home equity loan.If you have sufficient equity in your home, typically at least 15% to 20%, you may be eligible to borrow up to 85% of your equity. Funds are disbursed as a lump-sum payment, which you can use to repay high-interest debts, and interest is owed on the full loan amount. Home equity loans are secured by your home, which means the lender can repossess the property if you default on the debt.

3. Home equity line of credit (HELOC).Similar to a home equity loan, a HELOC also gives you access to funds through your home equity. However, instead of receiving funds as a lump-sum payment, you’ll have access to a credit line you can use as needed, and reuse as you repay your balance during the draw period. You’ll also only pay interest on the amount you borrow, not the entire approved amount.

Is Debt Consolidation a Good Idea?

Determining whether debt consolidation is a good idea for you depends on your credit score and whether you’re taking other steps to improve your financial habits. Debt consolidation may benefit you if:

• You’re committed to paying off the full amount of your debt consolidation loan
• You have enough cash flow to cover all of your debt payments
• You’re okay with repaying your loans over a longer period of time
• You’ve improved your credit score since you took out your original loans
• You have a financial plan to avoid running up your debts again

Methodology

We reviewed 15 popular lenders based on 11 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:

• Loan cost.35%
• Loan details.20%
• Eligibility and accessibility.20%
• Direct payment to creditors.15%
• Customer experience.10%

Within each category, we also considered several characteristics, including available loan amounts, repayment terms, APR ranges and applicable fees. We also looked at minimum credit score requirements, whether each lender accepts co-signers or joint applications and the geographic availability of the lender. Finally, we evaluated the availability of each provider’s customer support team.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our.

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