Life can feel overwhelming when you’re saddled with loads of debt from different creditors. For example, maybe you carry multiple credit card balances on top of having a high-interest personal loan.
Or maybe you have a loan with an adjustable rate, and your payments are starting to rise each month, making your budget more and more uncomfortable.
In these situations, it may be wise to look at a debt consolidation loan. For some people, it’s a smart choice that gets your debts organized while potentially lowering your monthly payments. Ready to learn more? Let’s get started.
Best Debt Consolidation Loans of 2022
We’ve compiled a list of the best debt consolidation loans online, along with their basic eligibility requirements. Research each one carefully to see which one can help you with your debt consolidation.
Different lenders are ideal for different borrowers. Review these options and take a look at which ones best suit your needs as well as your credit profile. Once you have your own shortlist, you can get prequalified to compare loan options and find the best offer.
Since 2012, DebtConsolidation.com has worked with borrowers to find the best debt consolidation service for their unique situation. If you are not sure where to start your debt repayment process, this may be it.
The company offers many resources, tools, and relief programs on how to get out of debt quickly. Wherever you are on your debt repayment journey, they may be able to help.
After you provide some information about your debts, the website will present the best way forward. Depending on your situation, they may match you with a debt consolidation lender, a debt settlement company, or a credit counselor.
You can easily compare several different options through this service which is a great way to start your debt repayment journey off right!
It is completely free to use their services. However, when you are matched to a partner, the partner may charge fees for their services. Therefore, always make sure you understand your debt consolidation loan terms before moving forward with any company.
If you’re looking for an online-only lender, then Marcus by Goldman Sachs may be the right choice for you. Marcus offers personal loans that can be used for debt consolidation.
If you have a credit score of 660 or higher, you may qualify for a personal loan between $3,500 and $40,000. The APR range is between 6.99% and 28.99%.
One of the best things about taking out a loan through Marcus is how transparent the bank is. There are no hidden fees, including late fees, which is pretty rare among other lenders.
Plus, the bank gives you the option to choose your own payment due date. In addition, after making 12 months of consecutive payments, you can defer one monthly payment if you want.
The only real downside is that you’ll need good to excellent credit history to qualify. And Marcus won’t let you apply with a cosigner.
Avant is designed for borrowers with average credit scores or better and offers several benefits for debt consolidation loans.
You can get help with your debt management by getting free access to resources, plus you receive regular updates on your VantageScore to track your credit scores.
In fact, the average borrower using the funds for debt consolidation sees a 12-point increase within the first six months. So who can get a loan through Avant?
The minimum credit score is 580, but most borrowers have a credit score between 600 and 700. While you don’t need to meet a minimum income threshold, most customers earn between $40,000 and $100,000 each year.
One of the great things about borrowing with them is that you can get loan funding in as little as a day once you are approved and agree to your loan terms. This is a great benefit if you have several due dates coming up and want to start paying off your current creditors as soon as possible.
Their loan terms range anywhere between two and five years, so you can choose to either pay off your debt aggressively or take the slow and steady route.
If you have fair to good credit, you may be eligible for a debt consolidation loan from Payoff. The company offers debt consolidation loans with competitive rates and flexible repayment terms. Payoff focuses on helping borrowers pay down their high-interest credit card debt.
Payoff does this by providing personal loans between $5,000 and $35,000. The APR range is between 5.99% and 24.99%, depending on your credit score. The repayment terms will be between two and five years.
One of the advantages of taking out a debt consolidation loan through Payoff is the additional support they provide. Payoff doesn’t just want to help you consolidate debt; they want to help you build a solid financial future.
The lender will provide financial recommendations, tools, and resources to help you stay on track. This will help you meet your short-term goals and build positive long-term financial habits.
Upstart’s target borrower is a younger person with less established credit. So maybe you don’t have a problem with bad credit, but you have a problem with no credit. When you apply for an Upstart loan, more emphasis is placed on your academic history than your credit history.
Upstart will review your college, major, job, and even grades to help make you a loan offer. The minimum credit score is 620. Most borrowers are between 22 and 35 years old, but there are no technical age restrictions.
However, one requirement is that you must be a college graduate, which obviously limits the applicant pool. And while loan amounts range up to $25,000, you only have one term option: three years.
Upstart doesn’t offer the most flexibility with its debt consolidation loans. However, they have competitive rates and a unique approval model that may help borrowers who want a loan.
PersonalLoans.com directly helps individuals with low credit scores, so this is a great place to come if you’re still in the credit repair process.
However, there are a few restrictions: you cannot have had a late payment of more than 60 days on your credit report, a recent bankruptcy, or a recent charge-off. But if you meet these basic guidelines, PersonalLoans.com may be a good option for you.
PersonalLoans.com is unique in that it’s a loan broker, not an actual lender. Through the application, you’ll get offers from traditional installment lenders, bank lenders, and even peer-to-peer lenders.
The loan agreement that you choose is signed between you and the lender, not PersonalLoans.com. This provides a convenient way to compare rates and terms through just a single application process. If approved, you can receive the funds in your bank account as soon as the next business day.
LendingClub is a peer-to-peer lender. That means rather than having your debt consolidation loan funded directly by the lender, your loan application is posted for individual investors to fund.
Additionally, your interest rate and terms are determined by your credit profile. The minimum credit score is just 600, but the average borrower’s score is higher.
LendingClub boasts competitive rates. In fact, the average debt consolidation borrower lowers their interest rate by 30%. In addition, you can use the website’s personal loan calculator to determine how much you could actually save by consolidating your debt.
There’s also a large cap on personal loans, all the way up to $40,000. That’s on the higher end for many online lenders, especially those open to individuals with lower credit.
Upgrade appeals to all different types of borrowers. When assessing a new borrower, the lender considers various factors, including credit score, free cash flow, and debt-to-income ratio.
The company offers personal loans that can be used for many different purposes, including debt consolidation. Upgrade will even make payments directly to your lender for added convenience.
If you have a minimum credit score of 600, you may qualify for a personal loan between $1,000 and $50,000. When you apply, the lender will do a soft pull on your credit so it won’t affect your credit score.
Upgrade is one of the best options for borrowers with poor to fair credit and a high debt-to-income ratio. And the lender offers a hardship program, so if you fall on difficult times financially, you may receive a temporary deduction on your monthly payments.
Discover offers personal loans for borrowers with good to excellent credit. You can use a personal loan from Discover to consolidate your existing high-interest credit card debt.
If you qualify, you’ll receive a personal loan between $2,500 and $35,000. The APR range is 6.99% to 24.99%. And the bank never charges any origination fees.
To qualify, you must have a minimum credit score of 660, so Discover isn’t a good option for borrowers with bad credit. And unfortunately, Discover doesn’t give borrowers the option to apply with a cosigner.
With an A+ rating from the Better Business Bureau, OneMain is a lender committed to customer satisfaction. While they offer debt consolidation loans up to $25,000, you can also get a loan for as little as $1,500.
This is one of the lowest loan minimums we’ve seen, which is perfect if you have just a small amount of debt you’d like to consolidate because of exorbitant or adjustable interest rates.
In addition to applying online, you can also elect to meet with a financial adviser at a OneMain branch location.
In fact, part of the application process entails meeting with someone either at a branch or remote location to ensure you understand all of your loan options. This is a great step that most online lenders lack, allowing you to really take the time to weigh your options and decide which is best for you.
Best Debt Settlement Companies of 2022
Taking out a debt consolidation loan is just one option when you want to lower your monthly payments. Another way to go is enrolling in a debt settlement program. Rather than paying off your lender in full, a debt settlement company can help negotiate an amount to repay so that the debt is considered settled.
In the meantime, you agree to freeze your credit cards and deposit cash each month into an account that they will eventually use to pay off the settlement.
However, the downside is that to make this strategy work, you must stop making payments on your owed amounts, which will cause them to go into default. That means your credit score will take a nosedive. But, the goal is to pay less than what you owe.
If you have enough debt that it seems impossible for you to ever repay, debt settlement might be a better option than filing for bankruptcy. Below are Crediful’s top two picks for debt settlement companies. You can find the full list here.
Accredited regularly works with major banks and lenders to help clients negotiate settlements. These include Bank of America, Wells Fargo, Chase, Capital One, Discover, and other financial institutions of all sizes, both large and small.
They’ll even work with retailers if you have store cards with major balances. While results vary from person to person, they offer examples of clients saving between 50% and 80% on their amounts owed.
National Debt Relief has an A+ rating with the Better Business Bureau and prides itself on trying to help those who truly have financial hardships in their lives.
One benefit of working with this company is that your funds are held in an FDIC-insured account opened in your name.
That means you have full control over the account and don’t run the risk of being scammed out of your money — you can rest assured that National is a reputable company.
Plus, the team is fully versed in consumer and financial law, so you can trust that your interests are being served to the fullest legal extent possible.
What is debt consolidation?
Debt consolidation allows you to pull all of your smaller existing debts into one new debt that you pay each month. When you take out a debt consolidation loan, you receive funds to pay off all of your existing debt, like your credit card balances and high-interest loans.
You then make a single monthly payment to your lender, rather than making multiple payments each month. Keep in mind that this is different from debt settlement in that you’re not negotiating a new amount owed. Instead, you keep the same amount of debt but pay it off in a different way.
Depending on your personal situation, debt consolidation loans come with both pros and cons. Therefore, it’s important to weigh both sides carefully before deciding if a debt consolidation loan is right for you.
Let’s delve into the details so that you can get closer to making a decision.
Advantages of Debt Consolidation Loans
There are several advantages and disadvantages associated with debt consolidation loans. We’ll go over all of them so you can weigh your options.
Lower Your Monthly Payments
The biggest benefit of a debt consolidation loan is the ability to lower your combined monthly payments. Because interest rates on credit cards are so high, it’s possible that you can find a lower interest rate on a debt consolidation loan instead, which means lower payments.
However, your actual interest rate depends on several factors, especially your credit score. It’s important to compare interest rates and the total cost of the debt consolidation loan to your current payments to make sure you don’t end up paying more over time. The goal is to save you money.
Improve Your Credit Score
Another advantage of taking out a debt consolidation loan is that it can actually help increase your credit score. While your amount of debt stays the same, installment loans are viewed more favorably than credit card debt.
So if the majority of your debt comes from maxed-out credit cards, you could potentially see a rise in your credit score because your credit utilization on each card has gone down.
A debt consolidation loan streamlines your monthly payments. Rather than being inundated with multiple due dates each month, you simply have one to remember. This also contributes to building a healthy credit score because it lowers your chance of having a late payment.
Disadvantages of Debt Consolidation Loans
In some cases, personal loans for debt consolidation might not be a great idea. We talked about the total cost of the loan, which needs to be reviewed holistically, not just as a monthly payment. This is true for several reasons.
First, most personal loan lenders charge some sort of fee when you take out a new loan. The most common is an origination fee, typically charged as a percentage of the total loan amount.
So if you have a loan amount of $10,000 and there is a 4% origination fee, you’ll only actually receive $9,600. Next, compare interest rates and loan terms.
Even if the monthly payments look good on paper, you may be paying a lot more over an extended payment period. You can use the APR to compare interest rates and fees, but you also need to consider how much you’ll spend on interest over the entire loan term.
Changing Your Spending Habits
Finally, it doesn’t necessarily fix the root problem of your debt.
This isn’t something you need to worry about if your debt results from a one-time incident, such as an expensive medical procedure or temporary job loss. But if you habitually spend more than you earn and are still incurring new debt, then debt consolidation loans will not help you in the long run.
If this sounds like you, try to figure out how to curb your spending to stop accruing more debt. You can even talk to a debt counselor to help create a sound management plan for your finances.
See also: Debt Consolidation Loans for Bad Credit