Key Takeaways

Sifting through lenders in search of a debt consolidation loan with competitive interest rates can take a lot of time. To help you in your search, we’ve compared lending companies and selected the five best debt consolidation loans based on their APR, fees, and repayment terms.

Debt consolidation can be an easy and effective way to reduce interest costs and streamline payments. The average credit card interest rate is now up to 24.53%. Unlike credit card debt, consolidation loans come with lower interest rates, so they may also lower your monthly payments. Many lenders offer direct payments to your creditors, so you won’t even have to worry about making the payments yourself.

The best debt consolidation loans offer you lower interest rates, fewer or no fees, and flexible repayment terms, so you can pay off your debt sooner and save on interest charges.

What Is a Debt Consolidation Loan?

Debt consolidation involves rolling multiple high-interest debts into one. For example, you can use a debt consolidation loan to pay off your existing credit card debt or other high-interest debts. This can be favorable when you take out a loan at a lower interest rate than what you’re paying currently.

When you apply for a loan, your lender will make a hard inquiry on your credit, which can cause a temporary dip in your credit scores. Other than this, it won’t damage your credit. However, if you pay late or miss any loan payments, your credit score can be negatively affected. On-time payments can improve your credit score.

Debt consolidation is a type of debt relief strategy. If you have a good credit score, this can be an effective solution. However, if it isn’t the right option for you, there are other alternatives available such as a debt management plan, debt settlement, and bankruptcy as a last resort.

Factors to Consider When Choosing a Debt Consolidation Loan

Deciding which one will be the best debt consolidation loan for you will depend on how much monthly installment you can afford, your credit score, and your financial goals. That said, you should consider several important factors when comparing loan offers and choosing a debt consolidation loan, as listed here.

Interest Rates

The interest rate you’ll qualify for will depend on your credit score, debt-to-income ratio, income, and other factors. Aim to find a loan that offers APRs lower than what you’re currently paying. For example, if you are currently paying 15% on your credit card, look for lenders that offer APRs lower than 15%.

For debt consolidation loans, APRs typically range from 6% to 36%. This is a very large range, so it is important to compare lenders and get quotes from at least three different lenders before you pick one.

Fees

Many lenders may charge fees such as prepayment penalties, late fees, and origination fees. Late fees are usually $25-$50, while origination fees can range from 1% to 5% or even more. Prepayment penalties may be a percentage of the loan balance or a fixed charge. Not all lenders charge fees, so if you can find a no-fee loan, that would ideally be the best option for you.

Repayment Terms

Compare the repayment terms offered by different lenders. Most lenders offer options ranging from one year to seven years. A longer loan term can help you keep your monthly installment low and affordable, but it may cost more over the life of the loan. A shorter term can help you repay the loan faster and save money on interest charges. Look into the repayment options offered by different lenders to see if they match your needs.

5 Best Debt Consolidation Loans Reviewed

After reviewing over 20 lenders and loan options, we picked the five best debt consolidation loans for this year.

With zero fees and low rates, LightStream is one of the best lenders if you have excellent credit.

Pros:

  • No prepayment, late payments, or loan origination fees.
  • Interest rate discount for Autopay
  • Lower interest rate

Cons:

  • Autopay discount only available before loan funding
  • No pre-approvals

Highlights

  • APR: 7.99%-25.49%
  • Loan Amount: $5,000 to $100,000
  • Term: 24 months to 144 months
  • Minimum Credit Score: 660

Why We Chose It

LightStream is a top choice for debt consolidation loans because it offers larger loans and longer loan terms for up to 144 months or 12 years. The interest rate they offer is also lower when compared to most other lenders. It is a good option for borrowers with a stable income and excellent credit and for those who need a larger loan.

2. SoFi

SoFi offers borrowers some great perks, such as zero fees, free financial advice, unemployment protection, and a mobile app.

Pros:

  • Affordable interest rate
  • Interest rate discount for Autopay
  • Joint loans available
  • Financial hardship Program
  • Mobile App

Cons:

  • The minimum loan amount can be high for some borrowers
  • No pre-approvals
  • The longest term available is seven years

Highlights

  • APR: 8.99%-25.81%
  • Loan Amount: $5,000 to $100,000
  • Term: 36 months to 84 months
  • Minimum Credit Score: No minimum requirement, but rates will depend on creditworthiness.

Why We Chose It

SoFi is one of the best debt consolidation loans available today, thanks to no fees, multiple discounts on interest rates, unemployment protection, and other perks. You can choose to pre-qualify for personal loans if you're shopping around, however most personal loans are approved on the same day. If you choose Direct Pay for your installments, you can receive an APR discount of 0.25%.

Achieve offers competitive interest rates for borrowers with good credit scores. With quick disbursement and direct payment to creditors, it is an option worth considering.

Pros:

  • Interest Rate Discounts
  • Joint loans available  
  • Direct payment to lenders

Cons:

  • Not available in every state
  • May have to pay an origination fee

Highlights

  • APR: 7.99%-35.99%
  • Loan Amount: $5,000 to $50,000
  • Term: 24 months to 60 months
  • Minimum Credit Score: 620

Why We Chose It

If you want quick funding and direct payment to your lenders, Achieve is a good option to consider. Borrowers can receive loan funds in under 48 hours once approved. Although you may have to pay an origination fee, the lender offers rate discounts in many cases.

Happy Money specifically serves borrowers with high-interest credit card debt. It is a good option for those who want a fixed monthly payment at a lower interest rate.

Pros:

  • Fast funding
  • Hardship program  
  • Direct payment to lenders
  • Pre-qualification available  

Cons:

  • Rate discounts not available
  • May have to pay an origination fee

Highlights

  • APR: 11.25%-24.50%
  • Loan Amount: $5,000 to $40,000
  • Term: 24 months to 60 months
  • Minimum Credit Score: 640

Why We Chose It

Happy Money is a relatively good option for those with a relatively low threshold of credit score requirement at 640. It is upfront about its requirements and allows you to borrow up to $40,000. The only thing to remember is that the funds can be used only for credit card consolidation.  

Debt consolidation loans from Best Egg are available to borrowers with a lower credit score. With a secured loan option, it is a good option for homeowners.

Pros:

  • Secured loans available
  • Loan proceeds are directly sent to lenders
  • A good range of loan amounts is available

Cons:

  • Rate discounts not available
  • May have to pay an origination fee

Highlights

  • APR: 8.99%-35.99%
  • Loan Amount: $2,000 to $50,000
  • Term: 36 months to 60 months
  • Minimum Credit Score: 580

Why We Chose It

Unlike most lenders, Best Egg has a minimum credit score requirement of just 580. If you can meet the lender's requirements, you may be able to borrow up to $50,000. Other than unsecured personal loans, the company also offers secured personal loans for homeowners.

Other Lenders We Considered

Lenders that offer a good range of terms, a competitive APR range, and other criteria were selected for our list of the best debt consolidation loans. While the companies listed below didn’t make it on the list, they may be a good option for you, regardless.

Lending Club is a marketplace for loans, providing you access to a wide range of options based on your needs. It offers loans from $1,000 to $40,000. APRs can be up to 36%.

Pros:

  • Direct payment to lenders
  • Ability to customize loan
  • Can apply with a co-borrower

Cons:

  • May need to pay an origination fee
  • Late payment fees are charged

Why It Wasn’t Selected

Lending Club was not selected for our list because of its higher interest rates, late payment fees, and origination fees.

OneMain Financial offers in-person and online services. It offers unsecured as well as secured debt consolidation loans with APRs ranging from 18% to 35.99%. You can borrow loans from $1,500 to $20,000 and pay them off in 26 to 60 months.

Pros:

  • Counseling with loan specialists is available
  • Debt consolidation calculator available
  • Branches in 44 states

Cons:

  • High APR
  • Origination fees can be high at up to 10% of the loan amount.

Why It Wasn’t Selected

The interest rate and fees charged by OneMain Financial are higher than many lenders, which is why it wasn’t selected in our list of top lenders.

Upstart

Upstart is an online lender offering loans from $1,000 to $50,000 for debt consolidation. There are no credit score requirements, so borrowers can qualify for consolidation loans with bad credit. The loan rates range from 18% to 35.99%, and loans can be repaid in two to five years.

Pros:

  • No credit score requirements
  • Next business day funding in the bank account
  • No prepayment penalties

Cons:

  • Repayment terms are not flexible
  • High origination fees

Why It Wasn’t Selected

Although it is a good choice for borrowers with poor credit, Upstart doesn’t offer a good range of repayment terms. For that reason and because of the high origination fee, it didn’t make our top picks.

How We Selected the Best Debt Consolidation Loans

To select our list of the five best debt consolidation loans, we reviewed over 20 debt consolidation loans from different lenders. We considered several criteria, such as the annual percentage rate ranges, fees, repayment terms, loan amounts, and more, to find the best options.

Interest Rates

For this list, we only selected lenders that offer interest rates lower than 36%. This is the maximum APR that most consumer advocates recommend for debt to be affordable. We prioritized lenders offering the lowest rates.

Fees

We also took into consideration the fees charged by lenders, such as late fees and origination fees. Lenders charging high fees did not make the cut. We prioritized lenders offering no-fee options or the ones that offered other perks that made up for the origination fees charged.

Loan Terms and Repayment Options

Lenders offering a good range of loan terms and repayment options were preferred for our list. For example, LightStream, our top pick for this list, offers a loan term of 24 months to 144 months.

Streamlined Application Process

We also took a look at the loan application process for each lender. Our top picks offer an easy, streamlined application process. Online applications and quick loan approvals that only take a few minutes to fill out, are straightforward and easy to understand, were prioritized.

Customer Service

Finally, we also evaluated the customer support options offered by each lender. Lenders with good reviews and those who offered multiple methods of getting in touch with the company were selected.

The Bottom Line: 5 Best Debt Consolidation Loans

If you have high-interest rate credit card debt, payday loans, or any other type of unsecured debt, replacing them with a low-interest debt consolidation loan can be a clever move. Compare our recommended five lenders to see which one will be the right option for you based on their minimum credit score requirements, loan amounts, and APR. Start an online application, and you’ll soon be able to tackle your debt.

If you’re unable to qualify for debt consolidation due to poor credit, you may want to consider other options like debt settlement to pay off existing debt. TurboDebt can help you jump-start your plan through debt relief services like debt settlement.

Our debt professionals can help you find the right debt relief option based on your financial situation. Connect with us today for a free consultation. Read our customer reviews to see how our debt relief services have helped thousands of clients.