Best Debt Consolidation Loans of July 2024

ElitePersonalFinance
Last Update: September 25, 2023 Debt Loan Reviews Loans

Debt consolidation loans allow borrowers to roll multiple debts into a single new one with fixed monthly payments and, ideally, a lower interest rate. With a debt consolidation loan, a lender issues a single personal loan that you use to pay off other debts, such as balances on high-interest credit cards. You’ll pay fixed, monthly installments to the lender for a set time period, typically two to five years. The rates may be a bit higher and still make sense if your multiple loan cost is very high and your credit score is poor.

Best personal loans for debt consolidation loans for good credit come with APRs of between 5.99% and 10%. For bad credit, you can expect an APR of up to 35.99%. If you are with bad credit, we invite you to read our guide on the best debt consolidation loans for bad credit:

https://www.elitepersonalfinance.com/best-debt-consolidation-loans-bad-credit/

Some of the things you should pay attention to when looking for this type of loan include:

  • APR.
  • Credit score requirement.
  • Fees and penalties.
  • Repayment period.
  • Debt to income ratio.
  • Lending limit.

Best Debt Consolidation Loans of July 2024

Loan Company:Min. Credit Score:APR:Amount:
SuperMoney04.99% – 35.99%$100,000
Upgrade5608.49% – 35.99%$50,000
PersonalLoans5805.99% – 35.99%$35,000
Wells FargoNot Disclosed5.74% – 24.49%$100,000
American ExpressNot Disclosed6.91% – 19.97%$25,000
BestEgg6405.99% – 29.99%$50,000
LaurelRoad6607.75% – 25%$45,000
FreedomPlus6207.99% – 29.99%$40,000
Sofi6805.99% – 18.53%$100,000
LendingClub6006.16% – 35.89%$40,000
Prosper6407.95% – 35.99%$40,000

LendingTree

Loan Amount:$1,000 – $50,000
APR:3.99% – 35.99%
Min. Credit Score:500
Approval:1 Day
Terms:1 – 5 years
Origination Fee:0 – 3%
DTI Ratio:N/A
Check rates

LendingTree is the best place to start shopping for personal loans for debt consolidation. This platform does not extend loans but connects borrowers with the best deals in the market.

Once you apply on their platform, you are matched with up to five different lenders that will compete to give you the best rates.

Pros:

  • Easy online application.
  • Multiple offers.
  • Low APR.
  • Quick funding.

Cons:

  • Requires a great deal of personal information to get meaningful results.

Best for: Borrowers with a steady source of income.

Upstart

Loan Amount:$1,000 – $50,000
APR:4.6% – 35.99%
Min. Credit Score:300
Approval:1 – 7 Days
Terms:3 – 5 Years
Fees:
  • Loan origination fee of 0% – 12%
  • Late payment fee of 5% of the amount due, or $15, whichever is greater, after a 15-day grace period
  • Insufficient funds fee of $15
  • Paper documents fee of $10
  • There are no prepayment fees
Qualification Criteria:
  • Minimum age: 18
  • Residing in the United States (don’t have to be a citizen or permanent resident) (exception for military)
  • Minimum credit score of 300 in most states
  • No bankruptcies or public records on your credit report
  • No accounts that are currently in collections or delinquent
  • Living in the 50 US states
Average Borrower Profile:
  • Borrows roughly $8,600.
  • Incurs an APR of 23.98% on a five-year term
  • Achieves approval nearly twice as often than traditional lenders with a FICO Score of 620 to 660
  • The CFPB found Upstart’s AI risk model approves 27% more borrowers and they incur APRs 16% lower than traditional lenders
Best For:Low credit scores, high DTI ratios
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Terms: Your loan amount will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will qualify for the full amount. Minimum loan amounts vary by state: GA ($3,100), HI ($2,100), MA ($7,000).

Although educational information is collected as part of Upstart’s rate check process, neither Upstart nor its bank partners have a minimum educational attainment requirement in order to be eligible for a loan.

The full range of available rates varies by state. A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $10,000 for a term of 60 months, with an interest rate of 18.44% and a 8.64% origination fee of $864, for an APR of 22.88%. In this example, the borrower will receive $9136 and will make 60 monthly payments of $257. APR is calculated based on 5-year rates offered in March 2023.  Your APR will be determined based on your credit, income, and certain other information provided in your loan application. Not all applicants will be approved.

If you accept your loan by 5pm EST (not including weekends or holidays), you will receive your funds the next business day. Loans used to fund education related expenses are subject to a 3 business day wait period between loan acceptance and funding in accordance with federal law.

While most loans through Upstart are unsecured, certain lenders may place a lien on other accounts you hold with the same institution. It is important to review your promissory note for these details before accepting your loan.

When you check your rate, we check your credit report. This initial (soft) inquiry will not affect your credit score. If you accept your rate and proceed with your application, we do another (hard) credit inquiry that will impact your credit score. If you take out a loan, repayment information may be reported to the credit bureaus.

The APR calculation compares the two models based on the average APR offered to borrowers up to the same approval rate. The hypothetical credit-score only model used in Upstart’s analysis was developed in connection with the CFPB No Action Letter access-to-credit testing program and was built from a traditional credit score only model trained on Upstart platform data. APR for the scorecard was averaged for each given traditional credit score grouping.

While automated recurring payments are easy to set up, payments by check or one time electronic payments can also be used to repay a loan. Borrowers have the flexibility to choose the repayment method that works best for them.

This information is based on actual borrowers as of 4/1/2023 who identified “credit card refinancing” as their primary use of funds and paid off at least 51% of their outstanding credit card debt within 3 months of taking out the loan. Out of these actual borrowers, some could have experienced an increase or decrease in their credit score. This information reflects the overall average change in credit score points experienced by this group of borrowers as identified above.

The majority of borrowers on the Upstart marketplace are able to receive an instant decision upon submitting a completed application, without providing additional supporting documents, however final approval is conditioned upon passing the hard credit inquiry. Loan processing may be subject to longer wait times if additional documentation is required for review.

Upstart is another great option for personal loans, with APRs ranging from 4.6% to 35.99%. The amount is between $1,000 and $50,000. One of the best things about Upstart is that they do not rely on the FICO score as the only determinant of loan qualification.

If you meet other education, career, and job history criteria, you may qualify for a personal loan with a poor credit score.

Pros:

  • Considerable APRs.
  • Unique loan approval process.
  • Starts with a soft pull.

Cons:

  • Two repayment terms.
  • Origination fees.

Best for: Low credit history

Why Personal Loan for Debt Consolidation?

Personal loans are considered the best option for debt consolidation because they mostly come at a lower APR than credit cards.

Again, most are unsecured, meaning that you do not have to risk your home or car to get financing.

However, a personal loan may be more expensive than your multiple debts when paid separately, especially when your credit score is not good. This does not mean that people with bad credit should stay away from this form of debt management.

There are lenders out there who specialize in debt consolidation personal loans for borrowers with low credit. You will need to shop around to identify such offers.

Another advantage of personal loans is that it is much simpler to apply for them. All you need to do with online lenders is fill out an online form and wait for the approval.

Most online lenders will respond within hours of application and disburse loans within two working days. You need not be worried about multiple online applications affecting your credit score since most of these lenders conduct soft inquiries when checking your credit report.

Applying for a personal loan for debt consolidation may improve your credit score, especially if you have credit card debts. This is because having a diverse debt portfolio is considered a good thing by credit rating agencies.

Again, by transferring debt from credit cards to a personal loan, you lower your credit utilization ratio, improving your credit score.

Are Debt Consolidation Loans Good for You?

First things first, it is important to note that debt consolidation, in general, is not the best debt management strategy for everyone.

This method only works if you are financially prepared to take up the challenge. Moving all your debt into a personal loan does not mean that you are now debt-free and can borrow more using the freed-up credit cards.

If you are not disciplined, you may find yourself accumulating more debt even before you settle the personal loan.

It would help if you also were careful with the loan terms and monthly amounts. Some loans will have lower monthly payments than your multiple loans but a more extended repayment period and higher overall costs. Others will have high monthly payments but a lower repayment period.

Determine the monthly amount you can afford to pay comfortably and look for offers that can accommodate that within a reasonable repayment period.

APRs and Fees – Determining The Right Choice

Personal loan APRs range from 5.99% to 35.99%. As previously mentioned, unsecured loans are usually cheaper than credit cards.

CreditCard.com estimates that as of January 2018, the national average APR on a credit card is 16.38%. The National Credit Union Association approximates the average APR for a 3-year unsecured personal loan as of March 2018 to be 9.22% for credit unions and 10.99% for banks.

Online lenders are likely to be even cheaper, with some offering rates as low as 5.99%. APRs are usually inclusive of fees but not penalties. If you are looking to pay off your debt aggressively, take loans with shorter terms and no prepayment penalties. This will enable you to direct all your budget surpluses to the loan repayment hence clearing the debt faster.

Loan rates are affected by your credit score and also the repayment period. A borrower with a good to excellent credit score is likely to secure a personal loan with lower APRs. Likewise, a short-term personal loan has lower APRs than long-term loans, but they will have high monthly payments.

We cannot stress enough the importance of picking personal loans whose monthly payments you can manage comfortably. Evaluate your finances and set a budget with an allowance to ensure that you can make payments even when unexpected expenses crop up.

The Dos and Don’ts of Personal Loans for Debt Consolidation

Taking a personal loan for debt consolidation saves on interest payments and pays off your debt aggressively. These tips will help you achieve these goals smoothly.

  • Shop around for a reasonable rate