Best debt consolidation loans of 2022

A debt consolidation loan can help you combine multiple high-interest accounts into one lower payment. These are the best loans to help save you money. (iStock)

If you have a wallet full of credit cards and you’re struggling to keep up with your monthly payments, you might consider a debt consolidation loan to help get your finances back on track. A debt consolidation loan allows you to replace multiple debts with a single loan you can pay off at a fixed interest rate with predictable payments. 

Keep reading to learn about some of the best debt consolidation loans on the market and for answers to some common questions you may have about consolidating your debt.

If you’re looking for a debt consolidation loan, Credible lets you compare personal loan rates from various lenders, all in one place.

• What is a debt consolidation loan?
• Best debt consolidation loans
• Why use a debt consolidation loan?
• How do you apply for a debt consolidation loan?
• Debt consolidation loan FAQs

What is a debt consolidation loan?

A debt consolidation loan is a type of personal loan that you can use to pay off existing debt. These loans are typically unsecured, meaning you don’t have to put up any of your property as collateral. Debt consolidation loans also generally have fixed rates, payments that don’t change for the life of the loan, and a set term — meaning you’ll know exactly when your loan will be paid off. 

Best debt consolidation loans 

The best debt consolidation loans offer low interest rates, low or no fees, and loan amounts that will allow you to pay off all your existing debt. The following six lenders are Credible partners that may be a good option for you.

Best overall: Marcus by Goldman Sachs

Marcus will pay off your creditors directly, and after making 12 months of on-time, in-full payments, you can defer one month’s payment without interest accruing. But if you have a lot of credit card debt, you may need a higher maximum loan amount.

• Minimum credit score: 660
• Loan amounts: $3,500 to $40,000
• Loan terms (years): 3 to 6
• Fees: None

Best for bad credit: Avant

Avant can deposit your loan funds as soon as the next business day after approval. But you may be able to find a lender that offers longer loan terms.

• Minimum credit score: 550
• Loan amounts: $2,000 to $35,000
• Loan terms (years): 2 to 5
• Fees: Origination fee of up to 4.75%

Best for personal coaching: Happy Money, formerly known as Payoff

Happy Money, formerly known as Payoff's personal loans are specifically designed for consolidating credit card debt. Representatives from Happy Money, formerly known as Payoff, schedule quarterly calls with you to help you meet your financial goals, and they’ll also help you assess your cash flow and monitor your credit score. But the lender doesn’t pay your creditors directly.

• Minimum credit score: 600
• Loan amounts: $5,000 to $40,000
• Loan terms (years): 2 to 5
• Fees: Origination fee of up to 5%

Best for paying off credit card debt: Upgrade

Upgrade will pay your creditors directly, and it can fund personal loans as soon as the next business day. 

• Minimum credit score: 560
• Loan amounts: $1,000 to $50,000
• Loan terms (years): 2 to 6
• Fees: Origination fee of up to 8%

Best for low fees: SoFi

If you lose your job, SoFi may offer to change your loan payments to keep you from default. The company will also help you look for a new job. But a SoFi loan may be difficult to qualify for — while it doesn’t disclose its credit score requirements, the lender says on its website that low credit scores may make you ineligible for a personal loan.

• Minimum credit score: Does not disclose
• Loan amounts: $5,000 to $100,000
• Loan terms (years): 2 to 7
• Fees: None

Best for low rates: LightStream

LightStream’s advertised rates are among the lowest on the market, and you may be able to get your loan funds as soon as the same business day you apply. But the lender doesn’t offer the ability to prequalify.

• Minimum credit score: 660
• Loan amounts: $5,000 to $100,000
• Loan terms (years): 2 to 7
• Fees: None

Credible lets you see your prequalified personal loan rates, and it won’t affect your credit score.

Other lenders to consider

The following three lenders aren’t Credible partners, so you won’t be able to easily compare your rates with them on the Credible platform. But they may also be worth considering if you’re looking for a debt consolidation loan.

Earnest

Earnest partners with a lending platform called Fiona to bring in personal loan offers from a range of financial institutions and lenders. But even if you’re matched with a loan through Earnest and Fiona, you aren’t guaranteed to be approved for a loan.

• Minimum credit score: Varies
• Loan amounts: $1,000 to $250,000
• Loan terms: 6 months to 12 years
• Fees: Varies by lender

Laurel Road

If your credit isn’t quite good enough to qualify for a debt consolidation loan on your own, Laurel Road allows you to add a cosigner with better credit. But even applicants with good credit may pay a higher APR than what some other lenders charge.

• Minimum credit score: 660
• Loan amounts: $5,000 to $45,000
• Loan terms (years): 3 to 5
• Fees: None

PNC Bank

Beyond traditional installment loans, PNC also offers personal lines of credit. But PNC doesn’t offer large loan amounts if you have a lot of debt you want to consolidate.

• Minimum credit score: Does not disclose
• Loan amounts: $1,000 to $35,000
• Loan terms: 6 months to 5 years
• Fees: No application, origination, or prepayment penalties

Methodology

To identify the best debt consolidation personal loan lenders, Credible evaluated data points including the minimum APR, fees, loan terms, how quickly the loan is funded, and other factors. While Credible does receive compensation from partner lenders, all opinions expressed are our own and articles are reported objectively.

Why use a debt consolidation loan?

People typically use debt consolidation loans to replace multiple high-interest accounts, like credit card balances, with a single loan at a lower, fixed interest rate. This can often lower the overall amount spent on debt payments and also provides you with a specific end date when your debt will be paid off. You may be able to save thousands of dollars in interest and pay off your debt years faster than if you don’t consolidate.

For example, say you have $10,000 in credit card debt at an APR of 29%. Credit card companies typically require you to make a minimum payment between 2% and 4% of your balances. With $10,000 of debt, your minimum payment may be between $200 and $400 per month. 

Making minimum payments of $250, it would take about 12 years to pay off your total debt, and you’d pay more than $25,000 in interest. And the amount you pay could rise if your APR increases or you incur new charges.

A debt consolidation loan can make paying off this debt cheaper and easier. With a five-year, $10,000 personal loan at a 13% interest rate — the average rate for the week of March 21, 2022 — you’ll pay about $228 per month. But you’ll pay just $3,652 in interest and pay off your loan in the five-year time period.

After consolidating your debt, you also have just one loan to keep track of, rather than multiple loans or credit cards each with its own minimum payment and due date.

How do you apply for a debt consolidation loan?

Many debt consolidation loans are available completely online, allowing you to apply for the loan quickly and at your convenience. Here are the steps you should take.

Step 1: Evaluate your debt

Before hunting for a debt consolidation loan, make a list of all the accounts you want to consolidate, including the company name and your current balance. You may also want to write down the due dates for each one to help you avoid missing payments while you’re applying for your consolidation loan. When your list is complete, you can add up all your current balances to determine how large a loan you’ll need to consolidate them all.

Step 2: Check your credit

Your credit score will be a key factor in whether you qualify for a debt consolidation loan and the interest rate and fees you’ll need to pay. You can visit AnnualCreditReport.com to request copies of your credit report for free from the three national credit bureaus: Equifax, Experian, and TransUnion. Look over the reports carefully for any errors that may be holding down your score. If you see incorrect information, like an account listed as past due that’s actually current, you can dispute it with the credit bureau and have it corrected.

Step 3: Comparison shop

Knowing your credit score and the loan amount you’ll need, compare offers from three to five personal loan lenders. Look for lenders that offer the lowest interest rates, low or no fees, and loan terms that fit your budget.

You can use Credible to compare personal loan rates from various lenders in minutes.

Step 4: Prequalify

Identify the top two or three lenders that may work for your situation and go to their websites to prequalify for a loan. This typically only requires you to provide a Social Security number so the lender can run a credit check. This is usually only a soft pull, meaning it won’t affect your credit score. Your lender may be able to quickly prequalify you for a certain loan amount and interest rate.

Step 5: Complete a full application

Select the best offer from the companies you prequalified with, and follow that lender’s instruction on how to complete a full loan application. You may need to provide more information about your finances for the company’s underwriters. At this point, the lender will typically conduct a hard inquiry on your credit. Your credit score may suffer temporarily as a result, since the credit bureaus take into account how frequently you apply for new credit. 

Step 6: Receive your loan funds and pay off your debt

Your personal loan funds will typically be deposited directly into your bank account, minus any origination fees you’re required to pay. Your lender may require you to provide bank account information to do so. You can use the money to pay off your credit card and other debt balances. Some debt consolidation lenders offer to make these payments for you. Make sure you continue to pay your credit cards and other bills until you receive confirmation that the account has been satisfied.

Debt consolidation loan FAQs

What is a good APR for a debt consolidation loan?

Personal loan interest rates fluctuate over time, but have recently been near historic lows. The average APR on a three-year personal loan was 10.43% during the week of March 21, 2022. The rate on a five-year personal loan was 13%.

If you have excellent credit, you may qualify for a much lower interest rate. The APR you’re offered on a debt consolidation loan will depend on your credit score and other financial information. The higher your credit score, the lower the interest rate you’ll typically pay.

How long does it take to get approved for a debt consolidation loan?

Many personal loan lenders offer you the ability to prequalify in just a few minutes after completing their online forms. Full loan approval takes a bit longer, often between one and seven business days. But you may be able to find a lender who can make a credit decision and fund the loan within the same day.

Can you get a debt consolidation loan with a low credit score?

Yes, but your options may be limited. Most personal loan lenders have a set minimum credit score you’ll need to qualify for a debt consolidation loan. 

Fewer lenders offer loans to people with fair or poor credit, so you may have fewer choices when shopping for a loan. People with lower credit scores also tend to pay higher interest rates and face higher fees. 

It may be worthwhile to focus on improving your credit score before applying for a debt consolidation loan. The best way to improve your score is to make all your bill payments on time, every time.