Best debt consolidation loans of November 2023
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BLUEPRINT
Updated 2:20 p.m. UTC Nov. 9, 2023
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If you’re feeling overwhelmed by debt, taking out a personal loan to consolidate them could be a good option. To find the right loan for your needs, it’s important to shop around and compare your options with as many debt consolidation lenders as possible.
The best debt consolidation lenders offer competitive interest rates, reasonably high loan limits, a variety of repayment terms and lenient credit score requirements. Some of them also provide the option to pay off your creditors directly, further simplifying the debt consolidation process.
To determine the best debt consolidation lenders, we compared 15 lenders using these metrics as well as other factors like state availability, co-signer capability and customer experience to determine the best lenders for a wide array of borrowers.
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SoFi
: Best overall
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Upgrade
: Best for building credit
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Achieve
: Best for fast funding
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LendingClub
: Best for co-borrowers
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Discover
: Best for long repayment terms
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Happy Money
: Best for no late fees
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LightStream
: Best for competitive rates
Best debt consolidation loans
SoFi
Upgrade
Achieve
LendingClub
Discover
Happy Money
LightStream
Compare the best debt consolidation loans
Methodology
Our expert writers and editors have reviewed and researched 14 popular lenders to help you find the best debt consolidation loan. Out of all the lenders considered, the seven that made our list excelled in areas across the following categories (with weightings): loan cost (35%), loan details (25%), eligibility and accessibility (20%), customer service (10%) and direct creditor payment (10%).
Within each major category, we considered several characteristics, including APR ranges, prepayment penalties, maximum loan amounts and terms, minimum credit score requirements and co-signer acceptance. We also evaluated each provider’s customer support options and customer reviews. All interest rates are current as of Jan. 6, 2022.
Why some lenders didn’t make the cut
Of the 15 personal loan lenders that we reviewed, only a fraction made the cut. The lenders that didn’t have high enough scores to be included received lower ratings due to having higher interest rates, not offering direct creditor payment and not allowing co-signers.
Is debt consolidation a good idea?
Whether debt consolidation is a good idea will depend on your individual situation and financial goals. For example, if you have high-interest credit card debt and a good enough credit score to qualify for a lower interest rate on a debt consolidation loan, then consolidating your debt could be a wise move.
However, if your credit has gone down or you’re struggling with an unresolved spending problem, then debt consolidation might not be the best solution.
Here are some pros and cons of debt consolidation to help you decide if it’s the right fit for you:
Pros of debt consolidation
- Could lower your interest rate: You might qualify for a lower interest rate on a personal loan for debt consolidation compared to what you’ve been paying. Note that you’ll generally need good to excellent credit to qualify for the best available rates — a good credit score is usually considered to be 670 or higher.
- Might reduce your monthly payments: You can choose to extend your repayment term with a personal loan. This can reduce your monthly payments to fit more comfortably into your budget. Just keep in mind that picking a longer term means paying more in interest over time.
- Can simplify repayment: It can be hard to keep track of multiple loans with different terms and payments. Consolidating them with a personal loan will leave you with just one loan and payment to manage.
Cons of debt consolidation
- Could be hard to qualify without good credit: Most lenders require good to excellent credit to qualify for a debt consolidation loan. While there are also several lenders that accept lower credit scores, debt consolidation loans for bad credit generally come with higher interest rates compared to good credit loans.
- Might come with fees: Depending on which lender you choose, a personal loan can come with fees that can increase your overall costs. For example, a lender might charge an origination fee or fees for late payments.
- Doesn’t solve underlying financial issues: Ultimately, consolidating debt won’t fix the problems that can lead to overwhelming debt in the first place. If you don’t take the time to address these issues and create healthy financial habits, you might find yourself in the same position in the future.
How to get a debt consolidation loan
If you’re ready to get a debt consolidation loan, follow these steps:
- Check your credit. When you apply for a personal loan for debt consolidation, the lender will review your credit to see if you qualify — so it’s a good idea to check your credit beforehand to see where you stand. You can use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, report them to the appropriate credit bureaus to potentially boost your credit score.
- Compare lenders and pick a loan option. Before you apply, take the time to shop around and compare your options with as many lenders as possible. This way, you’ll be able to find the right debt consolidation loan for your needs. Look at interest rates as well as other factors like repayment terms, fees and eligibility requirements. Afterward, choose the loan option you like best.
- Submit an application. Once you’ve picked a lender, you’ll need to complete a full application. Many lenders offer fully online applications while others might require you to visit a local branch. Be prepared to submit requested documentation, too, such as tax returns or pay stubs.
- Get your funds. If you’re approved, the lender will have you sign for the loan so the funds can be disbursed to you. It generally takes about a week to receive funds from a personal loan — though with some lenders, you could get your money as soon as the same or next business day after approval. Several debt consolidation lenders also offer the option to pay your creditors directly to make the process even easier.
Alternatives to a debt consolidation loan
If a debt consolidation loan doesn’t seem right for you, here are some alternatives to consider:
Balance transfer card
With this option, you can transfer credit card debt to a balance transfer credit card. Several cards offer a 0% APR introductory period, which means you can avoid interest charges if you pay off the card before it ends.
Just keep in mind that if you can’t repay your balance in time, you could end up with some hefty interest charges. Balance transfers also usually come with fees — typically 3% to 5% of the total transfer amount.
Home equity loan
If you’re a homeowner, you could tap into your equity with a home equity loan to consolidate debt. Similar to a personal loan, you’ll receive a lump sum to use how you’d like — though home equity loans often come with lower interest rates in comparison.
However, because your home acts as collateral for the loan, you risk losing it if you can’t keep up with your payments.
Home equity line of credit
Another option for accessing home equity is with a home equity line of credit (HELOC). With a HELOC, you’ll have access to a revolving credit line that you can repeatedly draw on and pay off — similar to a credit card. HELOCs also tend to have lower interest rates than home equity loans and personal loans.
Note that HELOC rates are often variable, meaning your rate and payment could fluctuate according to market conditions. Additionally, the lender could foreclose on your home if you fail to make your payments.
A debt consolidation loan can be used to pay off a wide variety of debts. For example, you could use a debt consolidation loan to consolidate:
- Credit cards
- Store cards
- Gas cards
- Medical bills
- Student loans
- Personal loans
- Accounts in collection
When you apply for a debt consolidation loan, the lender will perform a hard credit check to determine your creditworthiness. This could affect your credit score by causing a slight but temporary drop—usually around five points, though this can vary. You can generally expect your score to bounce back after a few months.
Keep in mind that your payment history makes up 35% of your credit score, so you could see an improvement in your score over time if you consistently make on-time payments on your loan. Getting a debt consolidation loan might also boost your score if you’re able to reduce your credit utilization ratio, which is the amount you owe on revolving credit lines (like credit cards and lines of credit) compared to your total credit limits.
While consolidating your debt can help you pay off outstanding loans, save money on interest and simplify your repayment, it can also come with a few disadvantages. For example, you might end up with:
- Fees: Depending on the lender, a debt consolidation loan could come with fees that can drive up your overall costs, such as origination fees or late fees.
- Higher rates: In some situations, you might end up with a higher rate than what you’re currently paying. Some factors that can lead to a higher rate include having less-than-stellar credit, choosing a longer repayment term or borrowing a larger amount.
- No financial solution: Consolidation doesn’t address any underlying financial issues or problems that you might have. It also won’t help borrowers curb overspending or other poor financial habits.
Debt consolidation itself does not show up on your credit report unless you go through a separate process known as debt settlement. This is where instead of paying off your debts in full, you negotiate with your creditors to settle your debts with a single lump-sum payment—usually for less than what you owe. While this can provide financial relief, it can also damage your credit and come with expensive fees.
If you opt to take out a personal loan for debt consolidation, the hard credit inquiry performed by the lender during the application process will show up on your credit report and will stay there for two years. The inquiry itself will only impact your score for up to one year, though.
Your new loan will also be listed on your credit report, and your payments will be reported to the credit bureaus. Any missed or late payments can stay on your credit report for up to seven years, so be sure to keep up with your payments. You might consider signing up for automatic payments to avoid missing any in the future.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
