Quick Easy Personal Loan or Debt Consolidation

Compare Personal Loan Rates

Best Debt Consolidation Loans

Best Overall Debt Consolidation Loan

Marcus

Minimum credit score

Marcus does not disclose this information

APR range

6.74% to 19.74%

with autopay

Loan amounts

Minimum credit score

Marcus does not disclose this information

APR range

6.74% to 19.74%

with autopay

Loan amounts

Why We Picked It

Marcus is a subsidiary of the investment bank Goldman Sachs, and offers personal loans between $3,500 and $40,000. In addition to offering flexible loans that are available for three- to six-year terms, Marcus also assists debt consolidation borrowers by offering direct payment to third-party creditors.

Borrowers also can benefit from the platform's on-time payment reward and flexible payment dates. Likewise, Marcus borrowers don't have to pay any fees, including origination fees and prepayment penalties. This makes Marcus a more affordable way to consolidate your debts without incurring additional costs.

Marcus also lets applicants prequalify with a soft credit pull, so it's easy to shop for debt consolidation rates without hurting your credit. As a prospective or current Marcus borrower, you'll also have access to robust customer support options with service available seven days a week from 9 a.m. to 7 p.m. Eastern time.

Pros & Cons

Offers direct consolidation payments to up to 10 third-party creditors
No origination, late payment, insufficient fund or prepayment fees
Borrowers can change their payment date up to three times over the life over the loan

Does not allow co-signers or co-applicants
Funding can take up to four days after loan approval
Minimum credit score requirement of 660

Extra Details

Eligibility: Marcus personal loan applicants must have a minimum credit score of 660 to qualify; however, those with higher scores are eligible for lower rates and more favorable terms. And, while Marcus doesn't disclose an income requirement, the platform does require applicants to have an income sufficient to cover loan repayment. Marcus doesn't permit co-signers or co-applicants, so if you have a low credit score you may qualify for a lower rate with a co-applicant elsewhere.

Loan uses: Marcus' personal loans can be used for debt consolidation, home improvement, moving and relocation, medical expenses, funeral costs, travel and many other personal expenses that come your way. That said, borrowers cannot use Marcus personal loans to refinance existing student loans, so keep this in mind if you're planning to refinance school costs.

Turnaround time: An applicant's loan may be approved in under 24 hours—quicker than some lenders, but not the fastest approval process we encountered. Once a loan is approved, funds take between one and four days after bank account verification to land in the borrower's account. However, funding time varies depending on the financial institution and when the loan was processed.

Best for Paying Off Credit Card Debt

FreedomPlus

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

FreedomPlus is an indirect lending platform that offers personal loans underwritten by Cross River Bank or MetaBank. Founded in 2014, the lender is one of our top picks for debt consolidation loans because of the flexible loan terms (two to five years) and loan amounts ($7,500 to $40,000). These characteristics make it easier to consolidate a large amount of debt while spreading payments out over a lengthy period of time and reducing monthly payments.

Like some of our other top picks, FreedomPlus also offers direct payment to creditors. In fact, borrowers who put 85% of the total loan amount toward debt consolidation via direct payment are more likely to qualify for a loan.

That said, depending on the interest rates on your current debts, the potentially high APR FreedomPlus charges may make it more difficult to save money by consolidating. Likewise, the origination fee of between 1.99% and 4.99% of the loan amount can make the loan more expensive. If you're considering FreedomPlus for debt consolidation, it's important to do the math before you sign on the dotted line.

Pros & Cons

Funds available within 48 hours
Flexible repayment terms
Allows co-borrowers

Application is not entirely online
Imposes a minimum income requirement
High minimum loan amount

Extra Details

Eligibility: Applicants must have a credit score of at least 620 to qualify for a FreedomPlus personal loan. Prospective borrowers also should have a minimum gross income of $21,500, keeping in mind that FreedomPlus will not lend more than 35% of the borrower's annual income. If you want to consolidate your other loans but don't have a great credit score, FreedomPlus allows both co-signers and co-applicants, with about 30% of borrowers having joint loans.

Loan uses: FreedomPlus loans can be used to cover home improvement costs, wedding and travel expenses, medical costs, moving expenses and, most importantly, debt consolidation.

Turnaround time: FreedomPlus says you could be approved for your loan on the same day you apply. You may be able to receive your funding in as little as 48 hours.

Best for No Interest If Repaid Within 30 Days

Discover

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

In addition to offering customers banking, credit cards and retirement solutions, Discover issues personal loans in all 50 states. The platform stands out for debt consolidation because loans are available from $2,500 to $35,000 and terms extend up to seven years—longer than is available for many other personal loans. This means that, in addition to possibly qualifying for a lower interest rate, you may be able to reduce your monthly debt service by extending your loan over a longer period.

And, while Discover does charge a late payment fee, it does not charge any origination fees or prepayment penalties, making it competitive with other top personal loan providers. Discover also will disperse funds directly to third-party creditors, which can save time when trying to consolidate your debt and take control of your finances. Finally, Discover stands out because of its online application and mobile banking tools, well-reviewed customer support team and quick funding.

Pros & Cons

Option to pay off creditors directly
No origination fees or prepayment penalties
Directly pays creditors

Charges late fees
Low maximum loan amount

Extra Details

Eligibility: To qualify for a Discover personal loan for debt consolidation, prospective borrowers must have a minimum credit score of 660; the average Discover borrower has a score of 750. Discover does not require applicants to have a minimum credit history length, but applicants must demonstrate a minimum household income of $25,000 per year. Applicants also are evaluated based on their credit history, recent credit activities and other credit inquiries. Co-signers and co-applicants are not permitted.

Loan uses: Discover personal loans can be used for a number of personal uses—including debt consolidation. And, unlike some other personal loan providers, Discover loans can be used to cover small-business expenses. Even so, Discover is similar to other lenders in that customers cannot use a Discover loan to pay for post-secondary education, to pay off a secured loan or for illegal activity.

Turnaround time: Applicants generally receive a same-day decision. If approved, funds may be sent as soon as the next business day if the loan was funded on a weekday—and if there aren't any typos or errors in the application. Otherwise, borrowers may not receive loan funds for up to seven days. Discover also can disperse funds directly to third-party creditors when a loan is being used for debt consolidation.

Best for Bad Credit

Upgrade

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

Upgrade provides accessible online and mobile credit and banking services in every state except Iowa, Vermont and West Virginia. Since its founding in 2017, the platform has made more than $3 billion in credit available to over 10 million applicants and continues to expand its online and mobile services. Loan funding can take up to four business days, but Upgrade makes loans available to those with poor credit history. And, perhaps most importantly, Upgrade will directly pay your other creditors if you're using a loan to consolidate your debts.

Maximum interest rates are higher than what other lenders on our list charge. However, loan amounts start at just $1,000 and go up to $35,000, so Upgrade is still a flexible option if you want to consolidate high-interest debts. Three- and five-year loan terms are available. There's also no prepayment penalty so you can save money if your goal is to pay off your consolidated debts quickly. Keep in mind, though, that these benefits are balanced out by Upgrade's origination fee of 2.9% to 8% of the loan amount.

Pros & Cons

Low minimum credit score requirement
Borrowers can use loans to cover business expenses
Offers direct lender payoff for debt consolidation loans

High APR range
Charges fees for origination, late payment and insufficient funds
Only offers two loan repayment periods

Extra Details

Eligibility: Upgrade applicants generally must have a minimum credit score of 580 to qualify for a personal loan. This makes it an accessible option for those with fair credit who want to consolidate their debt. What's more, Upgrade applicants aren't required to meet a minimum income requirement. Still, the average Upgrade borrower makes over $30,000 per year. Upgrade further increases loan accessibility by allowing both co-signers and co-borrowers.

Loan uses: Loans from Upgrade must be used to pay off credit cards, consolidate other debt, make home improvements or pay for other large purchases. Unlike some other lenders, Upgrade also offers direct payment to third-party creditors, though it can take longer for these funds to be processed.

Turnaround time: Once an Upgrade loan is approved, it generally takes up to four business days for a borrower to receive the funds. However, if Upgrade is directly paying off a borrower's loans to a third-party lender, it can take up to two weeks for the funds to clear.

Best for Comparing Multiple Offers

Universal Credit

Minimum credit score

APR range

Loan amounts

Universal Credit

Minimum credit score

APR range

Loan amounts

Why We Picked It

Universal Credit is an online lending platform that offers personal loans between $1,000 and $50,000 through its partners. Repayment terms range from 36 to 60 months—or three to five years.

While Universal Credit makes personal loans accessible even to those with damaged credit, it comes with a few tradeoffs. First, it charges high APRs, well above the most competitive rates seen on our list. Second, Universal Credit charges a 4.25% to 8% origination fee on all personal loans. Because this is deducted from your loan proceeds, you'll need to factor this in when determining your loan amount to ensure you receive the necessary amount after the fact.

Pros & Cons

Flexible qualification requirements
Next-day funding
No prepayment penalty

High APRs
All personal loans charge a 4.25% to 8% origination fee

Extra Details

Eligibility: Universal Credit requires a minimum credit score of 560, making it suitable for a wide range of borrowers.

Turnaround time: Once approved, Universal Credit will send your funds to your bank within one business day. However, the availability of your funds depends on how quickly your bank can process the transaction. If you're using funds to directly pay off another creditor, it may take up to two weeks.

Best for Flexible Repayment Terms

Happy Money

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

Founded in 2009, Happy Money (previously Payoff) is an online lending platform that connects prospective borrowers with fixed-rate credit card debt consolidation loans in every state except Massachusetts, Mississippi, Nebraska and Nevada. Happy Money specializes in helping borrowers eliminate their high-interest debt, and will pay off members' outstanding credit balances directly.

Loans are available from as little as $5,000 up to $40,000, making it a flexible option even for borrowers who need to consolidate high credit card balances. Lending terms are available from two to five years. And, while Happy Money charges a 0% to 5% origination fee, there are no late fees, annual fees or prepayment penalties.

Pros & Cons

Directly pays third-party creditors
Competitive APRs
Assists borrowers with financial wellness through its Peace program

May charge an origination fee
Limited repayment terms
Requires a minimum credit history of three years

Extra Details

Eligibility: To qualify for a Happy Money debt consolidation loan, applicants must have a minimum credit score of 640, though approved applicants have an average score of 705. To be eligible, applicants also must have a minimum credit history of three years, no current delinquencies and a debt-to-income ratio under 50%. There is no minimum income requirement, but Happy Money does not offer borrowers a co-signer or co-applicant option, so applicants must qualify based on their individual financial circumstances.

Loan uses: Happy Money specializes in credit card debt consolidation, making it an excellent option for readers who want to take control of their finances and streamline their debt repayment.

Turnaround time: After submitting an application and all the necessary documents, underwriting may take three to seven business days. After getting approved and signing the paperwork, you will receive the funds within three to six business days, according to a representative.

Best for Debt Consolidation Perks

Best Egg

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

Best Egg is a lending platform available to borrowers in every state except Iowa, Vermont, West Virginia and Washington, D.C. Personal loans are issued by Cross River Bank and range from $2,000 to $35,000, though offers up to $50,000 may be available. Loan proceeds can be used for debt consolidation, and payment terms are available from three to five years, so Best Egg can be a great way to consolidate your other debts and spread the payments out over time.

That said, Best Egg does not directly pay off creditors, so you'll have to manage the repayment process on your own. What's more, borrowers have to pay an origination fee between 0.99% and 5.99% of the loan amount. This fee is an important consideration when calculating how much you can save by consolidating your debts with a Best Egg personal loan. Borrowers can, however, pay off their loan early without incurring a prepayment penalty.

Pros & Cons

Loan terms available up to five years
Low minimum APR
No prepayment penalty

Does not offer direct payment to third-party creditors
Charges an origination fee
Maximum repayment term of five years

Extra Details

Eligibility: Best Egg applicants should have a minimum credit score of 640 to qualify for a personal loan, but the platform does not disclose a minimum income requirement. Overall, a borrower's loan term, amount and APR will all depend on their credit score, income, debt payment obligations, loan amount, credit history and other factors.

Loan uses: As with other top lenders on our list, borrowers can use Best Egg personal loan funds to simplify their finances through debt consolidation and credit card refinancing. Still, Best Egg loans are just as flexible as those offered by other lenders, and can be used for a variety of purposes, including everything from home improvement to moving and relocation or taxes and medical expenses. As with many other lenders, however, loan proceeds cannot be used for post-secondary educational expenses, purchasing or carrying any securities or illegal activity.

Turnaround time: The application process for a Best Egg personal loan can take less than five minutes. Expect loan approval and funding to take one to three business days, although some customers may receive same-day funding.

Best for Peer-to-peer Lending

LendingClub

Minimum credit score

APR range

Loan amounts

Minimum credit score

APR range

Loan amounts

Why We Picked It

LendingClub is a peer-to-peer lender and the largest online lending platform for personal loans. The platform issues loans in every state except Iowa and has worked with over 3 million customers and funded more than $55 billion in loans since its founding in 2007. And, while LendingClub does not offer the fastest funding time, it will directly pay your creditors so you don't have to worry about the logistics of debt consolidation.

What's more, applicants can borrow from $1,000 to $40,000, which makes it easier to pay off outstanding debts, even if you have high balances. That said, LendingClub has higher APRs than other lenders (topping out at 35.89%) and loan terms are limited to three or five years. This means that LendingClub may be a less flexible debt consolidation option—especially if you can qualify for better rates elsewhere. Borrowers also are charged an origination fee between 2% and 6% of the total loan amount, so you'll need to take this into consideration when evaluating how much you stand to save by consolidating loans.

Pros & Cons

Will directly pay off third-party creditors as part of balance transfer loan
Co-applicants permitted
Available to borrowers with fair to excellent credit

Origination and late fees
Limited loan term availability
High APR range

Extra Details

Eligibility: To qualify for a LendingClub personal loan, applicants must have a minimum credit score of 600 and a minimum credit history of three years. We also confirmed that applicants should have a debt-to-income ratio of less than 40% for single applicants and 35% for joint applicants. These factors, including proof of income, help LendingClub's platform of investors decide who they want to lend to. Co-applicants (you live in the same home) are permitted but co-signers are not.

Loan uses: LendingClub personal loans can be used for a number of personal uses—including debt consolidation. In fact, LendingClub makes it even easier for borrowers to consolidate debt by offering direct payment to third party lenders. As with many other lenders, LendingClub borrowers are restricted from using funds for postsecondary education, the purchase of investments, gambling and illegal activities.

Turnaround time: LendingClub borrowers typically receive their loan funds as soon as four days after loan approval. However, this timeline may vary if an application is complete or if the lender requires additional documentation or verification.

Best for Low Interest Rates

Lightstream

Minimum credit score

APR range

3.99% to 19.99%

with autopay

Loan amounts

Lightstream

Minimum credit score

APR range

3.99% to 19.99%

with autopay

Loan amounts

Why We Picked It

LightStream is a consumer lending division of Truist—which formed following the merger of SunTrust Bank and BB&T. The platform offers unsecured personal loans from as little as $5,000 up to $100,000. Loan amounts vary based on the loan purpose. Although a number of lenders offer smaller loans than the LightStream minimum, few lenders offer a higher maximum loan. Repayment terms are available from two to seven years, making it an excellent option for those who want to spread out the payment of large expenses over time.

In addition to offering appealing and flexible terms, LightStream charges no origination, late payment or prepayment fees. The lender also offers a 0.50% rate discount for borrowers who enroll in autopay—higher than most lenders with the same perk—as well as a 30-day loan experience guarantee to ensure borrower satisfaction, Covid-19/hardship assistance and a rate-beat program. LightStream will beat a competitor's interest rate by 0.1% for applicants who meet certain criteria.

LightStream offers loans in all 50 states plus Washington, D.C. and Puerto Rico, and applicants can contact the lender's customer support team seven days a week; current borrowers have access to customer support from Monday through Saturday. And, while LightStream doesn't offer a mobile app for loan management, customers can access their account through LightStream.com.

Pros & Cons

No origination, prepayment or late fees
Low, competitive rates
Fast approval and funding

No prequalification process
No due date flexibility
Limitations on use of loan proceeds

Extra Details

Eligibility:LightStream recommends applicants have good to excellent credit before applying for a personal loan. To increase their chances of approval, applicants also should have several years of credit history, including multiple account types, as well as an income that is stable enough to service current debts and a new LightStream loan.

LightStream doesn't give prospective borrowers the ability to prequalify for a loan. This fact—combined with the minimum credit score requirement—makes the platform a better fit for those with a strong credit profile. Applicants with excellent credit also are more likely to get favorable terms. LightStream does not allow co-signers, but prospective borrowers can submit a joint application.

Loan uses: LightStream's personal loans can be used for a wide range of purposes, from purchasing a new car, RV or jewelry to paying for home improvements. However, LightStream really stands out, because loans can be used to finance land, timeshares and so-called tiny homes. As with other top lenders, LightStream prohibits use of its personal loans for post-secondary education costs, business purposes and illegal activities. Borrowers also are prohibited from using LightStream loan funds to refinance an existing LightStream loan.

Turnaround time: LightStream borrowers can receive funds as soon as the same day if the loan is approved before 2:30 p.m. Eastern time on a banking business day. To receive same-day funding, the applicant also must review and electronically sign the loan agreement; provide LightStream with funding preferences and relevant banking information; and complete the final verification process—all before 2:30 p.m. on the day the loan is approved.

Best for Large Loan Amounts

SoFi

Minimum credit score

APR Range

6.99% to 22.73%

with autopay

Loan amounts

Minimum credit score

APR Range

6.99% to 22.73%

with autopay

Loan amounts

Why We Picked It

SoFi is an online lending platform that offers unsecured fixed-rate personal loans in every state except Mississippi. Founded in 2011, SoFi has extended over $50 billion in loans and stands out for allowing high loan amounts and its availability of extended loan terms.

Loans are available between $5,000 and $100,000, making SoFi a great option for those with excellent credit who need to borrow a large amount of money. Loan amounts available may vary by the state you live in. Repayment terms range from two to seven years, making SoFi an incredibly flexible option for those with sufficient credit (minimum 650) and annual income (at least $45,000). SoFi also lets prospective borrowers submit joint applications—although co-signers are not permitted.

Approved borrowers are rewarded with comparatively low APRs. What's more, SoFi doesn't charge origination fees, late fees or prepayment penalties—a stand-out feature because personal loan lenders often charge origination or late payment fees at a minimum.

However, if you're considering a debt consolidating loan from SoFi, keep in mind that the lender does not offer direct payment to a borrower's other creditors. This means the loan proceeds will be deposited to your bank account and you'll have to pay off your other lenders individually. The platform does offer customers a number of other perks and discounts, including unemployment protection and the ability to change their payment due date once a year.

Pros & Cons

Prequalification with soft credit check
Funding in as little as one to two days
High loan amounts and lengthy terms

Does not offer direct payment to third-party creditors for debt consolidation
Some applicants report difficult qualification standards
Co-signers are not permitted

Extra Details

Eligibility: Personal loan applicants should have a minimum credit score of 650. However, many successful applicants have a score of 700 or higher. Applicants also must have an annual income of at least $45,000, though the average income of a SoFi borrower is over $100,000.

Loan uses: In general, SoFi personal loans are limited to use for personal, family and household purposes. This means a borrower can use loan funds to cover things like medical costs, credit card consolidation, home improvements and relocation costs. However, SoFi loans cannot be used to fund a new business venture, the purchase of real estate, investments and securities, post-secondary education or short-term bridge financing.

Turnaround time: Borrowers typically receive funds within a few days—or as soon as the next business day after approval and acceptance of terms. However, funding times may be longer than a few days—especially for loans over $20,000.

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.

Tips for Comparing Personal Loans for Debt Consolidation

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 to prequalify 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 pay origination 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.

How Do Debt Consolidation Loans Work?

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 Debt Consolidation Loans 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.

Compare Debt Consolidation Loan Rates

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% to 36%, with the lowest rates reserved for borrowers with excellent credit.

How to Apply for Debt Consolidation Loans

While the process varies by lender, follow these general steps to apply for a personal loan:

Check your credit score. Check your credit score for free through your credit card issuer 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 a soft credit inquiry and 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.

Related: 5 Personal Loan Requirements To Know Before Applying

How to Get Debt Consolidation Loans For 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.

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.

Related: Can I Get A Debt Consolidation Loan With Bad Credit?

Does Debt Consolidation Hurt Your Credit?

Consolidation loans have the potential to affect your credit score in several ways. 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.

Related: Does Debt Consolidation Hurt Your Credit?

Best Ways to Consolidate Debt

The best way to consolidate debt typically varies for each individual and their unique financial situation. Here are some of the best options to consider:

Debt consolidation loans. Personal loans are among the most common ways to consolidate multiple debts. This method will help you streamline all your debt payments under one loan.
Balance transfer credit cards. Highly qualified borrowers can access no-interest financing through balance transfer credit cards typically for one year to more than 18 months. This debt consolidation method is a great way to streamline your payments while avoiding interest through the promotional period. However, unpaid balances at the end of the promotional period will begin to accrue interest.
Home equity. If you have enough equity in your home, you can utilize a home equity loan or home equity line of credit (HELOC) to help consolidate your debt. Be careful with this option, though. Because your house secures the loan, the lender can repossess your home if you fail to repay the loan.
401(k) loans. A 401(k) loan is a loan you take out from your own 401(k) account. You typically borrow the greater of $10,000 or 50% of your vested account balance up to $50,000, and you generally have up to five years to repay it.

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

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:

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.
Home equity loan. If you have sufficient equity in your home, typically at least 15-20%, 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.
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.

Debt Consolidation Loan FAQs

Should I get a personal loan to pay off debt?

Falling behind on debt payments can have a damaging effect on your credit score and may ultimately result in repossession of collateral or accounts being sent to collections. If you're struggling to make payments on all of your individual debts, consider taking out a personal loan to streamline your payments and increase the repayment term—thereby reducing your monthly payment.

A debt consolidation loan also may be a good option if your credit score has improved since you applied for your loans. By qualifying for a lower interest rate on a debt consolidation loan, you'll be able to reduce how much you pay over the life of your loans.

What are the pros and cons of debt consolidation?

Debt consolidation comes with various advantages and disadvantages. For instance, it may help you streamline finances, expedite your payoff, lower your interest rates and reduce your monthly payments. However, it may come with added costs, an increase in total interest paid over time and the urge to increase your spending.

Is there debt consolidation for veterans?

Veterans who have Veterans Affairs (VA) loans may qualify for a Military Debt Consolidation Loan (MDCL), also known as a VA Consolidation Loan. This acts as a cash-out refinance. Veterans who don't have VA loans can rely on traditional personal loans to consolidate their debts.

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

Approval turnaround times typically vary per institution. For example, some online lenders may approve your loan within a matter of minutes, while banks may take a few days or up to a week to process. Once your loan is approved, funding can arrive within 24 to 48 hours or up to one week, depending on your lender.

Also, keep in mind that once you are approved for a debt consolidation loan, it might take several weeks to pay off your existing debts, depending on the lender. They will likely still hold you responsible for any payment due dates within that waiting period.

How long does debt consolidation stay on your credit report?

Debt consolidation isn't something creditors or credit bureaus specifically highlight on your credit report. Instead, you may receive a hard inquiry when you apply for a new personal loan, which can stay on your credit report for two years. However, it only impacts your credit score for one year.

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Source: https://www.forbes.com/advisor/personal-loans/best-debt-consolidation-loans/