Dealing with debt can be overwhelming. At times, it seems as if you’ll never recover. One way to make things easier on yourself is to find a personal loan to pay off your debt.
A debt consolidation loan can help you streamline your budget and lower your total repayment amount. But before applying, explore the best debt consolidation loans for your budget. You want to make sure the loan you choose ultimately makes things easier for you, not harder.
7 personal loans to pay off debt
APR: 5.99% to 18.72%
Repayment terms: 24 to 84 months
Borrowing limits: $5,000 to $100,000
Origination fee (a fee charged to begin the loan): No origination fee
Credit requirement: 680
SoFi might be a good consolidation loan because it has no origination fee and competitive interest rates.
SoFi also has an Unemployment Protection plan — if your loan is in good standing and you happen to lose your job, you can suspend your monthly payments for three months. Interest will continue to accumulate, but you won’t have the added stress of making that payment.
SoFi also offers a variety of other financial services, from budgeting to investing. SoFi is an online lender, so applying is relatively fast and easy.
APR: 5.99% to 5.99%
Repayment terms: 24 and 60 months
Borrowing limits: $5,000 to $35,000
Origination fee: up to 5.00%
Credit requirement: FICO score of 640 or higher. Debt-to-income ratio of 50% or less. At least three years of credit history.
Online lender Payoff offers debt consolidation loans without application fees, yearly fees or late payment fees. It does, however, charge an origination fee. Payoff also caps the maximum amount you can borrow at $35,000, on the lower end of the companies we’ve reviewed here.
On the plus side, Payoff’s specialty is debt consolidation loans, so you’ll be in good hands should you choose it.
APR: 7.99% to 29.99%
Repayment terms: 24 to 60 months
Borrowing limits: $7,500 to $40,000
Origination fee: 0.00% - 4.99%
Credit requirement: 0
FreedomPlus is an online lender, and its claim to fame is that you’ll get credit approval within 24 hours of applying, with the cash available within 48 hours.
The main downside of FreedomPlus, though, is the capped borrowing limit of $40,000. The company also doesn’t make it clear about any credit requirements, so your rate could surprise you if you don’t have a good credit score.
APR: 5.99% to 17.24%
Repayment terms: 36 to 60 months
Borrowing limits: $5,000 to $75,000
Origination fee: No origination fee
Credit requirement: Credit score of at least 680. No bankruptcy within the last 3 years. Good credit history with on-time payments.
Earnest offers one of the best consolidation loans… if you don’t mind being in for the long haul. The company starts its loan terms at 36 months. That’s something to consider when applying: do you need to be on the hook for that long?
Another plus for Earnest is its low APR — of course you’d have to have a good credit score and history to qualify.
Earnest, another online lender, claims that their application process takes about two minutes.
APR: 8.13% to 35.99%
Repayment terms: 36 or 60 months
Borrowing limits: $1,000 to $50,000
Origination fee: Up to 8.00%
Credit requirement: 600
Upstart is a debt consolidation lender that offers only two terms: 36 or 60 months. If the length of these loans don’t bother you, this might be a good choice.
One key downside of Upstart is its APR range begins on the higher side of the lenders on this list. If you’re considering a loan to pay off debt, you don’t want to apply for a loan with interest rates that make payments difficult.
Upstart has an online application process that takes about five minutes to receive a rate.
APR: 10.68% to 35.89%
Repayment terms: 36 or 60 months
Borrowing limits: $1,000 to $40,000
Origination fee: 2.00% - 6.00%
Credit requirement: 0
The main attraction of LendingClub is that it offers debt consolidation loans starting at just $1,000. The site also features a debt consolidation calculator that will help you figure out what your payments will look like.
The downsides of LendingClub are its high origination fee and its late payment charge. If you’re 15 days or later on a payment, you’ll be charged the greater of: a) 5.00% of your unpaid payment or b) $15.
LendingClub allows all loans to be processed online.
APR: 7.99% to 35.97%
Repayment terms: 36 or 60 months
Borrowing limits: $$1,000 to $35,000
Origination fee: 2.90% - 8.00%
Credit requirement: 620
Upgrade also offers low borrowing limits but comes with a slightly high origination fee. Its APR is also on the high end of this collection of best debt consolidation loans. Upgrade also charges a $10 late fee for every payment that’s 15 or more days late.
Upgrade is a lender with a free, online application.
Choosing the best debt consolidation loan for you
There are several factors to consider when evaluating the best debt consolidation and credit card refinancing options for you. Here are some things to consider when comparing consolidation loans:
- Loan amounts and lengths. Find a lender that offers a loan term that fits your needs. If you only need to borrow a small amount, like $2,000, a company like Upstart or Upgrade could be right for you. You could also consider credit card refinancing.
- APRs. Once you’ve narrowed down a list of lenders with options that suit your needs, request an APR quote from each one.
- Fees. When comparing loans, don’t forget to account for any fees attached. Some lenders have origination fees, application fees and more.
- Payments. With quotes in hand, use a debt consolidation calculator to compare the different quotes and see how much you’ll pay in total over time.
- Saving versus borrowing. If you’re considering a loan for a want and not a need, you might be better off saving instead of borrowing.
Getting a personal loan to pay off debt
There are several criteria that lenders use to see if you qualify for a loan to pay off debt, and the main factor is typically your credit score. In general, the higher your credit score, the lower your interest rate will be. You can see your credit score using financial tools like My LendingTree. Your score is based on information found in your credit reports, so you’ll want to review them to make sure there aren’t any inaccuracies that could affect your score. You can review your credit report from Equifax, Experian and TransUnion for free once every 12 months using AnnualCreditReport.com.
A good rule of thumb: If your score is 680 or higher, you’ll usually qualify for a wide range of loans with low APRs. If your score is on the lower end, don’t fret. There are several consolidation loans available for consumers with fair credit scores.
Here are some other factors lenders might consider:
- Income. Some lenders will only approve consumers who earn a high income.
- Credit history. Some lenders require you to have a long credit history that shows little to no late payments.
- Employment. Some lenders will want to see a steady history of employment before approving you for a debt consolidation loan.
- Debt-to-income ratio. Some lenders will consider your debt-to-income ratio — your monthly debt payments divided by your gross monthly income — when reviewing your application. According to the CFPB, you want a ratio of 43% or less.
Balance transfer credit cards: Another way to refinance or consolidate debt
If you’re mainly interested in consolidating credit card debt, one option to consider is a balance transfer credit card. These types of credit cards often come with promotional APRs, so you can transfer your existing credit card debt onto them (for a possible fee) and repay the debt at a lower APR. If you don’t pay off the balance before the promotional period ends, you’ll be charged deferred interest, so this is an option best for those who know they can pay off their debt on time.
Another way to handle a balance transfer is to use a balance transfer check from a credit card company. These are blank checks sent by lenders to new or existing cardholders. Typically, the check has a low APR offer, and you would use that check to pay off the balance on your high APR card. Once the check gets cleared, the amount you owed is transferred to the new credit card. Just remember, you must pay off the debt during that low introductory offer period to make this a worthwhile transaction.
Credit card refinancing vs. debt consolidation
Credit card debt is a common source of debt. The average U.S. household has about $6,354 in credit card debt, according to a March 2020 study from CompareCards. If you are struggling with credit card debt, you can refinance it via a balance transfer card or consolidate the debt with a personal loan.
Credit card refinancing is simply moving credit card debt from one card with unfavorable terms to a card with favorable terms. Debt consolidation is moving several debts under one single loan, with one monthly payment. Here’s a handy guide on how to choose between the two strategies.
|Comparing credit card refinancing vs. debt consolidation|
|Choose credit card refinancing if…||Choose a debt consolidation loan if…|
|● You can qualify for a balance transfer credit card with a low or zero-percent APR offer and you can pay off high-interest debt during the promotional period.||● You won’t be able to repay your high-interest debt in full during the credit card offer period and will benefit from a longer loan length.|
|● Your credit limit is large enough to consolidate all of your debts on one credit card.||● You want to reduce the number of bills you have to pay but you can’t fit all of your debts on one credit card.|
|● You’re not worried about racking up new debt and feel you can handle the responsibility of having another credit card in your wallet.||● You suspect you may overspend with a new credit card or are satisfied with the number of credit cards you currently have.|
When it may be best to wait before consolidating or refinancing
You’ve probably noticed that your credit score is an important factor lenders consider when evaluating your application. Higher scores usually mean more favorable loan terms, including lower interest rates — and that means lower payments and better affordability for you.
If you check your credit score and you’re not above a 680, the most important thing you can do to help or maintain your score is pay your bills on time, every time. You can also try asking your current credit card lenders for a credit limit increase to improve your usage ratio. Avoid closing down unused credit cards for the same reason. And if you want to compare consolidation loan offers, make sure lenders do a “soft pull” instead of a “hard pull” — that’s because a hard inquiry will knock your score down a few points temporarily.
The best debt consolidation strategy is the one that works best for you. Before diving head first into a loan to pay off debt or a balance transfer credit card, know that you can afford it. You should also make sure you know the grand total of your monthly payments, then figure out if you have enough cash flow to cover it. Sit down and calculate how the new loan will impact your budget. Debt consolidation only works if your finances are such that they will allow you to responsibly repay your debt.
Interested in a personal loan?Here are the top personal loan lenders of 2020!
|Lender||APR Range||Loan Amount|
|5.99% – 18.82%1||$5,000 - $100,000|
|8.13% – 35.99%||$1,000 - $50,000|
|7.99% – 35.97%*||$1,000 - $35,000|
|99.00% – 199.00%2||$500 - $4,000|
|5.99% – 24.99%3||$5,000 - $35,000|
|7.99% – 29.99%4||$7,500 - $40,000|
|7.99% – 20.88%5||$5,000 - $50,000|
|9.99% – 35.99%6||$2,000 - $25,000|
|10.68% – 35.89%7||$1,000 - $40,000|
|9.95% – 35.99%8||$2,000 - $35,000|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Opploans.
Direct Deposit required for payroll.
Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.
3 Includes AutoPay discount. Important Disclosures for Payoff.
4 Important Disclosures for FreedomPlus.
5 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
6 Important Disclosures for LendingPoint.
7 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage and history. The APR ranges from 10.68% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 9.56% and a 5.00% origination fee of $300 for an APR of 13.11%. In this example, you will receive $5,700 and will make 36 monthly payments of $192.37. The total amount repayable will be $6,925.32. Your APR will be determined based on your credit at time of application. The origination fee ranges from 2% to 6% (average is 4.86% as of 7/1/2019 – 9/30/2019). In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,001 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
8 Important Disclosures for Avant.
*If approved, the actual loan terms that a customer qualifies for may vary based on credit determination, state law, and other factors. Minimum loan amounts vary by state.
**Example: A $5,900 loan with an administration fee of 4.75% and an amount financed of $5,619.75, repayable in 36 monthly installments, with an APR of 29.95% would have monthly payments of $250.30.
Based on the responses from 11,574 customers in a survey of 210,584 newly funded customers, conducted from 1 Feb 2018 – 1 Aug 2019 95.05% of customers stated that they were either extremely satisfied or satisfied with Avant. 4/5 Customers would recommend us. Avant branded credit products are issued by WebBank, member FDIC.
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
Personal loans made through Upgrade feature APRs of 7.99%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.