Debt Consolidation: Here are the 12 Best Loans & Companies

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Debt consolidation rolls all of your loans into a single, more manageable plan — but it’s not a silver bullet.

Here is everything you need to know to determine if consolidating your debts is your best option.

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Here are the 12 Top Debt Consolidation Lenders & Companies

There are a lot of debt consolidation loans available, and narrowing down which ones are best for you can be overwhelming. Here are the seven best loans and companies.

Best for Over $10,000 in Debt: DebtHammer

If you have more than $10,000 in credit card bills and other types of unsecured debt, DebtHammer may be your best option.

DebtHammer offers a free consultation, and there’s no obligation to sign up.

DebtHammer is not a lender. Instead, it’s a loan broker that will pass your application on to lenders in its network. DebtHammer will check more than 30 personal loan options to see whether debt consolidation is your best option. Only a soft credit pull is required to get these options, so your credit score won’t take a hit.

They also develop debt resolution plans that could lead to a debt consolidation loan. Debt resolution means an expert negotiator will work with your creditors to reduce the amount you owe. This can get you out of debt in a shorter amount of time.

DebtHammer’s team of experts will help you compare your options to determine which customized strategy works best for your financial situation.

There is no minimum credit score required to apply. DebtHammer will work with borrowers with no credit history.

The company doesn’t operate in every state, so make sure to clarify that they do.

DebtHammer’s blog and social media pages also offer an array of tips ranging from how to start a savings plan, the best personal finance blogs to check out and how to rebuild your credit score.

DebtHammer’s personalized service has won rave reviews online, including this review posted on the Better Business Bureau site:

DebtHammer has also earned a perfect rating on Trustpilot.

Here are a few reviews from DebtHammer’s Trustpilot page:

Best for Borrowers with Bad Credit: Upstart

Many people who need debt consolidation loans don’t have great credit. If you’re in that position, consider Upstart. You won’t get the interest rates that you would get with better credit, but you may still get a lower rate than you’re paying on credit card balances!

Upstart is a loan broker that will pass your application on to lenders in its network. This means you can get several loan offers from a single application. It would be best if you had a credit score of 600 or above, but Upstart will work with borrowers with no credit history.

Upstart handles loans from $1,000 to $50,000, with 3 or 5 years terms and rates from 5.55% to 35.99%. Your rate will depend on your credit score and other factors. Upstart also uses factors like your education and job history in assessing your creditworthiness.

The average three-year loan carries an interest of 25%, partly because they handle many loans for people with weak credit. There’s no prepayment penalty, but you may pay an origination fee, which will be deducted from the loan proceeds. Late fees may be assessed.

Upstart lends to borrowers with better credit, but if your credit is good, you may prefer a lender that doesn’t charge origination fees.

Best for Bigger Loans: SoFi

SoFi has one of the best overall debt consolidation loan packages on the market, but you’ll need good credit to qualify.

SoFi will lend from $5000 to $100,000, making it a top choice if you’re looking for a larger loan. APRs range from 4.99% to 19.63%. Approval can take up to 3 days, so it’s not the best choice if you need to make a move right away.

SoFi offers several features that make their loans a debt consolidation standout. They will pay your creditors directly, taking that burden off you (and removing the temptation of cash in your hand). There are no fees: no origination fee, no late payment fee, no prepayment fee.

There are other useful features: SoFi accepts cosigners and gives a 0.25% interest rate discount for automatic payments. There’s a mobile app for loan management and an unemployment protection program that provides relief in the event of job loss.

SoFi tops off the package with a financial education package, making them one of the top options if you have good credit and need to borrow over $5,000.

Best for Low-Interest Rates: Lightstream

If your credit is relatively good and you’re looking for the best possible interest rate, Lightstream is likely to be one of your top choices. They offer loans of up to $100,000 with funds available as early as the same day you’re approved.

Lightstream requires good credit, and you’ll need to have several years of credit history to qualify. Personal loan rates start at 4.99%, but the best rates are reserved for borrowers with very good or excellent credit scores.

Lightstream will offer you a 0.5% discount if you pay through an automatic deduction from your checking account. They will also beat any offer made by a competitor by 0.1% if the loans are equivalent.

Lightstream will not pay your creditors directly, and they don’t offer financial education. On the positive side, there are no fees and no prepayment penalties, and Lightstream’s customer service was rated highest among all personal loan lenders in a 2020 survey .

Best for Small Loan Amounts: PenFed Credit Union

Debt consolidation doesn’t always involve tens of thousands of dollars. If your debt consolidation project involves a relatively small amount, PenFed Credit Union could be your ideal lender. PenFed makes personal loans from $500 to $50,000.

The lowest available APR is 5.99%. You’ll need a good credit score to qualify. As with most loans, better credit will get you a lower APR. Longer-term PenFed members may also get lower rates.

PenFed personal loan terms extend up to 60 months, and access to funds is immediate on approval. There are no origination fees or prepayment penalties. You can’t prequalify, but you can get an interest rate offer with a soft credit check.

PenFed offers a range of assistance programs, including forbearance, deferred payment, or loan modification to borrowers under stress from events beyond their control.

Loans are only available to members, but you can join the credit union by opening a savings account and depositing $5.

Fast Loans for People with Low Incomes: RocketLoans

RocketLoans lends from $2000 to $40,000 at APRs from 5.97% to 29.99%. You have a choice of a 36 or 60-month term. Funding is fast, with funds up to $25,000 usually available on the day of approval and a relatively quick approval process. RocketLoans will make loans to borrowers who earn as little as $24,000 a year, as long as they have at least fair credit.

There’s no application fee or prepayment penalty, but there is an origination fee and late payment fees will be applied. You will need a credit score above 620; if your score is near that level, your APR will be at the high end of the range. There is a rate discount for automatic payments.

RocketLoans does not offer direct payment to your creditors. Payment dates are fixed; you cannot change or choose the day you’ll pay. Cosigners and joint loans are not permitted.

If you need the money quickly and your income is too low to let you qualify with other lenders, RocketLoans might be your best option.

Best for No Origination Fee: Marcus by Goldman Sachs

If you’re looking for a true no-fee loan and you need less than $5,000, check out Marcus by Goldman Sachs. They lend from $3,500 to $40,000 with 3 to 6-year terms, with rates ranging from 6.99% to 19.99%.

This loan has absolutely no fees: no application fee, origination fee, late payment fee, or prepayment fee. Interest rates are competitive, making it a top low-cost option. You will need good credit to qualify.

Marcus offers an interest rate discount for direct payments, and they will pay your creditors directly.  Funds are typically available within one week. There’s a mobile loan management app and a financial education package.

Marcus offers an unusual range of payment term options, with nine choices between three and six years. Once you’ve made 12 consecutive payments, you can defer one payment without interest.

Other Debt Consolidation Loan Options

The loans above are some of our top picks. You may have your own special criteria. If you’re looking for more options, try these!

Upgrade: Customizable Loans with Long Terms

Upgrade offers loans from $1000 to $50,000 at APRs of 7.96% to 35.47%. Loan terms are from two to seven years, a wider than usual range. You’ll get a 0.5% interest rate discount for automatic payments, and you may also get a rate discount if you opt for direct payment to creditors. You will pay an origination fee, and late payment fees are assessed. You will need at least fair credit to qualify.

Upgrade allows joint loans, cosigners, and secured loans, providing an unusual range of options. There is a mobile loan management app and a comprehensive financial education package. You can customize your due date to match your pay schedule.

The option of terms up to seven years, the range of discounts available, acceptance of joint loans, cosigners (not available in all states) and secured loans make this one of the most flexible debt consolidation loan packages you can find.

Lending Club: An Option for Fair Credit

LendingClub offers personal loans of $1000 to $40,000 at APRs ranging from 7.04% to 35.89%. Loan terms are a choice of three or five years.

LendingClub serves borrowers with credit scores as low as 600. You will pay an origination fee, and there are fees for late payments.

This is a fairly ordinary loan package; if you have good credit, you might be better off with one of the no-fee loans discussed above. If your credit is less than stellar, it’s worth getting a quote from LendingClub.

BestEgg: An Option for Homeowners

BestEgg offers personal loans from $2,000 to $50,000. Terms are either three or five years, and APRs range from 5.99% to 29.99%. You’ll need a 640 credit score to qualify and 700 or above to get the best APR. BestEgg will pay your creditors directly.

The notable feature here is that BestEgg offers a secured loan. If you own a home, you can use it as collateral and get a better rate. If you don’t pay, you could lose your home, so be sure you can.

BestEgg loans have two loan term options: three and five years. There’s no rate discount for autopay, and you will pay an origination fee.

Avant: Debt Consolidation Loans for Credit Scores Down to 550

Avant makes loans of $2000 to $35,000 at APRs from 9.95% to 35.95%. Terms are two to five years. There is an origination fee, and direct payment to creditors is unavailable. There’s no joint signing or cosigning option, and there’s no discount for automatic payments. You will have the option to change your monthly payment date if it’s inconvenient.

The only real attraction here is that Avant is willing to work with credit scores as low as 550. You won’t get the best rates, but you will have a chance at approval. If you have better credit, you can probably find a better deal.

Happy Money: Specialized Loans for Consolidating Credit Card Debt (Formerly Payoff)

Happy Money’s debt consolidation exists for one reason: consolidating credit card debt. That’s limiting, but if that’s what you need to do, the loans are worth a look.

Happy Money lends from $5,000 to $40,000 with terms from two to five years and APRs from 5.99% to 24.99%. You will generally need good credit. There’s no discount for autopay. There’s no late fee or prepayment penalty, but you may be charged an origination fee. They will pay your credit card issuers directly.

You can prequalify for a Payoff loan with a soft credit pull that will not affect your credit. If you are d credit card debt and prequalify with no origination fee and a competitive rate, this might be your loan.

What is Debt Consolidation?

It’s possible to consolidate many different forms of debt, but it’s important first to figure out a strategy. Whether you’re struggling with credit card debt, payday loans, student loans or any number of other personal debts, you have options. You need to do some research to find the best loan for your circumstances.

Debt consolidation rolls all outstanding debts into a single monthly payment, usually with a lower interest rate. Because this involves combining multiple debts into a single loan, this is called “consolidating” your debt.

Basically, borrowers take on a new, larger loan and use that money to pay off other existing loans with higher interest rates. Debt consolidation could be a good option if borrowers have a lot of high-interest debts they need to pay off and are given favorable terms with a lower interest rate than their current debts.

The main goal of debt consolidation is to pay off high-interest debts first, like credit cards and payday loans. However, a lower interest rate isn’t always guaranteed and will depend on the borrower’s credit score , income and other factors.

Debt consolidation may not always be the best choice for everybody. Interest rates will vary, and borrowers with poor credit scores may be rejected or receive worse terms than their existing debts.

All sorts of debts can be consolidated, including credit card debt , medical debt, student loan debt , payday loans, auto loans, title loans and other personal debts.

It’s important to remember that debt consolidation will never wipe out your balance — you’re stuck with that unless you can negotiate forgiveness with your lenders. However, if you can get a lower interest rate on your new loan, you will usually save a boatload of money.

The Pros and Cons of Consolidating Your Debts

Before jumping in and applying for loans, it’s important to consider debt consolidation’s potential benefits and drawbacks.


  1. Better budgeting, simpler to keep track of: Debt consolidation can help simplify your payments. Instead of juggling several different debts, each with different repayment structures and interest rates, borrowers will now only have one payment each month to remember. If you’ve missed a couple of payment deadlines a month, this will save you quite a bit in late fees and help prevent your credit score from taking a hit .
  1. Lower interest rates allow you to pay off the principal faster: Debt consolidation loans usually have lower interest rates and better terms than other existing debts that borrowers might have. That means less money goes toward paying interest, and more money is used to pay off the principal.
  1. You can improve your credit score: When borrowers apply, there will be a small hit to their credit scores because lenders will need to do a hard credit check. However, paying off existing debts and making consistent payments towards your new debt consolidation loan can improve your credit score in the long run.


  1. A high credit score is required: Borrowers will usually get rejected if their FICO score isn’t high enough. This is one of the most challenging aspects of this type of loan because borrowers with high-interest debt are usually only in that situation because their poor credit scores have given them no other option.
  1. Borrowers could pay more interest over time: Debt consolidation loans have repayment plans of around three to five years. While borrowers may be given lower interest rates, they may end up paying off their debt consolidation loan for far longer than they would have needed to pay off their other debts. This can result in them paying more interest over time than they would have paid with their high-interest debts. If you can afford it, put some extra money toward your loan principal each month. Even paying an extra $10 to $20 a month can lead to significant savings over five years.
  1. The loans can pull borrowers further into debt: This is the biggest risk with debt consolidation loans and the reason they can be so dangerous. Debt consolidation is not an excuse to spend more money. If borrowers don’t fix the underlying spending problems that brought them to this position in the first place, debt consolidation can encourage more spending.
  1. Assets could be at risk: Some — not all — personal loans could require borrowers to put up collateral (like their house) to guarantee their debt consolidation loan offers. If the debt isn’t paid back, even if it’s due to an unexpected event, borrowers could end up losing their property.

How Does a Debt Consolidation Loan Work?

Debt consolidation works like this :

  1. Search for the lowest-interest loan you can find with favorable repayment terms.
  2. Complete the application process.
  3. Once approved, use the new low-interest loan to pay off all of your high-interest loans.
  4. Pay back the low-interest loan.

When borrowers apply for a debt consolidation loan, lenders will look at your credit score, credit history, income, debt-to-income ratio and other financial details to determine interest rates, payment terms and lending amounts. Your credit score will matter. You’ll pay the highest interest rates if you have poor credit . You’ll get a better deal if you have fair credit and generally qualify for the best rates only if you have good credit.

These are the average FICO score ranges:

  • Good credit: 670 to 739
  • Fair credit: 580 to 669
  • Poor credit: 300 to 579

Once approved, the lender will use the money to pay off the agreed-upon debts. You might be charged some origination fees. In some cases, lenders will deposit money directly into the borrower’s bank account, and they will be responsible for paying off the debts themselves with the funds received.

If paying off the other loans is your responsibility, do it as soon as the money hits your bank account. It will not help your financial situation if the money goes to something else instead, leaving you in a worse position.

When is the Best Time to Consolidate Your Debts?

Debt consolidation is a good option when borrowers have several high-interest loans to pay off — but only if these loans haven’t already severely impacted their credit scores. Loans aren’t typically approved for people with poor credit scores; if they are, they usually come with very unfavorable terms and high-interest rates. But borrowers with average credit will have a few solid options.

Debt consolidation loans might not be a good idea if you don’t have a long-term strategy. It won’t work if you pay off high-interest debts but also continue to overspend and pile on even more debt. Paying off a credit card with a debt consolidation loan and then maxing it out again will only pull you further into debt.

Debt Consolidation Methods

There are several different ways to consolidate debt. They include:

Personal Loans

The most common type of debt consolidation loan is a personal loan issued by a financial institution, credit union, or online lender. These personal loans will come with a fixed repayment timeline (typically anywhere from six months to five years), set interest rate (determined at the time of application), and usually are unsecured, meaning borrowers don’t have to put up any collateral. They usually don’t have a prepayment penalty, so you can pay them off earlier than scheduled. Personal loans also have higher borrowing limits than other methods, with some lenders providing loans of $50,000 or more.

401(k) Loans

Many 401(k) plans allow their users to borrow money against their savings balance. Users can borrow up to half of their retirement account balance, and the payment period lasts for a maximum of five years. They’re cheaper than balance-transfer credit cards and offer a higher borrowing limit of $50,000. However, it comes with the risk of significantly slashing your retirement account savings, tax consequences and penalties.

But the biggest risk of a 401(k) loan is that it hinges on your employment. Many employers require you to pay the loans back in full if you’re fired, laid off or leave the company for another job. Be sure to research your company’s rules and repayment terms so you don’t get hit with a surprise lump repayment you can’t afford.

The true cost of using a 401(k) loan is that borrowers not only risk their savings but they also miss out on market gains and compound interest they would have accrued from leaving their 401(k) plan alone. But this is a good way to get rid of high-interest debt.

Debt Consolidation Loan

A debt consolidation loan is the most obvious choice. It’s a loan designed specifically for the predicament that you are in. Typically, you will need a credit score in the 600s to qualify, and loan amounts can be as high as $50,000 . Interest rates for consolidation loans usually start around 6%. Only use a debt consolidation loan if the interest rate you qualify for is lower than the interest rates of your current loans. Use an online calculator to see if how much money you’d save.

Credit Card Balance Transfer Offer

A balance transfer credit card often comes with an introductory offer of an interest rate as low as 0% for a limited promotional period. Borrowers can take advantage of this by transferring all of their other credit card debts onto the new card. There may be some fees to pay to transfer your debts — usually around 3% to 5% — but like any other debt consolidation, there will now be one single card to pay off, with a much lower rate.

These introductory periods can last anywhere from 6 to 18 months.

Be sure to check your mail for these kinds of offers. Credit card companies are required by law to approve the majority of offers they make through the mail. So if you get an offer with an enticing balance transfer offer, you’re likely to get approved.

Before you complete the application, check your credit score with the three major credit bureaus : Experian, TransUnion and Equifax. See if there are any errors on your credit report that you can remove to bump your score up a bit. There will be a credit inquiry, so you’ll need to have fair credit, solid payment history and a reasonable debt-to-income ratio to be approved for a new credit card.

These low annual percentage rate balance transfer offers are ideal for those who can pay off their debt within the introductory period. Because once that intro period is up, you’ll be paying the full APR of the credit card. So be sure that you can pay off the debt within the 0% APR balance transfer period. If you can’t, be sure to check what the APR will be when the introductory period expires, and make sure it’s lower than what you currently pay.

One other warning: Many credit card companies will rescind the introductory rate if you aren’t making on-time payments, so make sure to set up an autopay — even if just for the monthly minimum — to ensure that you’re paid up by the due date.

Tap Into Your Home’s Equity

Also known as taking out a second mortgage, a home equity loan allows homeowners to use their property as collateral to secure a low-interest loan. The loans have fixed interest rates that are usually lower than unsecured personal loans. Be careful with this strategy: If you use your home to pay your debts and can’t make the payments, you risk losing your home.

Home Equity Line of Credit (HELOC)

A Home Equity Line of Credit, or HELOC, is a loan that is secured by your home. You can draw your loan whenever you need it, and the amount you can draw is based on the equity you have in your home. Currently, HELOC annual percentage interest rates are in the 3.5% range, making them one of the cheapest ways to consolidate your loans. Additionally, the loan terms are extremely long — 10 to 20 years — giving you plenty of time to repay your debt.

Of course, this is only an option if you own a home and have equity in it. Additionally, you are putting your home up as collateral, so you could potentially lose your home if you fail to repay the loan.

READ MORE: 10 ways to use your home’s equity

Reverse Mortgage

If you’re 62 or older, you have another option — a reverse mortgage . It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. The Federal Trade Commission (FTC) has a handy guide explaining the pros and cons of taking out a reverse mortgage.

Consider Refinancing your Mortgage

If you’ve owned your home long enough to have built up a significant amount of equity, this might be a good time to consider a mortgage refinance and use some of that equity to pay your debts. Interest rates are low, so you’ll also likely have a lower monthly payment for your mortgage. You will have to pay significant fees to refinance, but they’ll be rolled into your new mortgage payment.

READ MORE: Is a home equity loan a good idea?

Do Your Research Before Committing to a Debt Consolidation Company

If you’ve been researching debt consolidation, you’ve likely come across companies that offer debt consolidation as a service. And they might sound enticing.

Do your homework before you commit.

These companies essentially take over the payments to your lenders, then require you to make payments to a separate bank account in your name. These companies typically rely on the ability to negotiate with your lenders to have your debts reduced, then take fees and a percentage of the money saved.

If you choose to go this route, be sure the firm is licensed with the state and in good standing with the Better Business Bureau .

Consider a Debt Management Plan

Debt Management Plans are similar to debt consolidation companies, except they’re usually run by a nonprofit credit counseling agency. The credit counselor will help you better understand your financial situation and help you establish a payment plan. The cost usually ranges from $25 to $55 a month.

When is Debt Consolidation a Good Idea?

For some, consolidating debts can be life-changing, while it isn’t practical for others. Here are some general guidelines to help determine if it’s a good idea for you.

Debt consolidation is a good idea if:

  • You are overwhelmed by multiple monthly bills and can’t reliably pay them off.
  • You have taken inventory of all your existing debt.
  • Your total debt isn’t more than 40% of your gross income.
  • Your credit score is high enough to secure a low to 0% interest debt consolidation loan.
  • You have done all your research and understand what you’re getting into.

Debt consolidation is not a good idea if:

  • Your credit rating is too low for you to secure a low-interest loan.
  • You are consolidating unsecured debt with a secured loan.
  • You are spending more than you earn or if you still haven’t solved your spending problems. Before taking action, you need to reassess your financial situation to ensure you can handle the new loan.
  • Your debt load is too small; in that case, applying for debt consolidation often doesn’t make sense.

Still not sure about debt consolidation? This video may give you a better idea.

Debt Consolidation by State

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