By KBC Associate 
Credit card rates have been climbing in recent years, making it more expensive to service outstanding balances. Managing multiple debts — with varying interest rates, payment amounts and due dates — can be stressful and increases the risk of missing a payment. Consolidating debt, which involves replacing several debts with a single new loan, could be the answer for some borrowers juggling several accounts. Debt consolidation loans aren’t for everyone, but they offer an alternative for people who want to simplify their debt repayment process.
What to know about debt consolidation loans
- At its most basic, a debt consolidation loan is an unsecured personal loan.
- If you qualify for a favorable interest rate, make your loan payments on time and don’t accrue any more bad debt in the process, debt consolidation loans can be an effective way to pay off high-interest debt.
- The best debt consolidation loans offer prequalification, online approval, flexible terms, competitive interest rates — and don’t have fees or prepayment penalties.
- This type of loan is often used to consolidate expensive credit card debt for a lower rate. Debt consolidation loans have fixed rates, unlike variable credit card APRs, which makes budgeting easier.
- In addition to the interest you pay on the loan, some lenders charge origination fees, which are deducted from your loan proceeds.
How we chose our top picks
Our editors and writers evaluate debt consolidation loans independently, ensuring our content is precise and guided by editorial integrity. To make our list, we reviewed more than 30 lenders and considered dozens of data points, including interest rates and fees, terms, flexibility and customer satisfaction. Read the full methodology to learn more.
Our top picks for best debt consolidation loans of May 2025
The companies listed below are organized alphabetically.
- No origination fee
- Same-day approval
- Ranked #2 in J.D. Power 2024 U.S. Consumer Lending Satisfaction Survey
- You can apply online or by phone
- Minimum household annual income of $25,000 to qualify
- Late payment fee of $39
- Funds cannot be used to pay secured loans or Discover credit cards
HIGHLIGHTS
- APR
- 7.99%- 24.99%
- Term options:
- $2,500-$40,000
- Term options
- 36 to 84 months
- Minimum credit score
- Not specified
Why we chose it: Discover’s low interest rates, especially its highly competitive minimum APR of 7.99% for the most-qualified borrowers, make it our top choice for best debt consolidation loan for people looking for the lowest rate.Upon approval, Discover will pay your credit card issuers within one business day. Discover also doesn’t charge any origination or prepayment fees, although it does charge a $39 penalty for late payments.
Aside from its debt consolidation loans, Discover also offers balance transfer credit cards as another option for borrowers seeking to consolidate and pay off their debts. Discover also gets high marks for customer satisfaction, coming in second in the 2024 J.D. Power Consumer Lending Satisfaction Study.
- Lending network includes multiple credit unions
- Some partner lenders accept borrowers with fair credit
- Website is transparent, informative and user-friendly
- Minimum APR for larger loans is 11.70%
- Not available in Iowa, Massachusetts or Nevada
- Some partner lenders charge origination fees as high as 10%
HIGHLIGHTS
- APR:
- 8.95% – 29.99%
- Loan amount:
- $5,000-$40,000
- Term options:
- 24 to 60 months
- Minimum credit score:
- 640
Why we chose it: Among the marketplace platforms that let you browse offerings from multiple lenders, Happy Money had the most user-friendly and informative website. It also has a large number of credit union lenders in its network compared to competing platforms.
Happy Money has a decent minimum APR of 8.95%, but if you need to borrow more than $15,000, that jumps to 11.70%. Some of its lenders do accept borrowers with credit scores as low as 640, though, and its maximum APR of 29.99% is lower than the 35.99% charged by many lenders that cater to borrowers with fair credit. Happy Money doesn’t charge any fees, but its member lenders charge origination fees ranging from 0.25% up to 10%.
- No fees for loan origination, late payments or prepayment
- 0.50% rate discount for setting up Autopay
- Doesn’t provide loan pre-approvals
- Doesn’t accept loan applications via phone or fax
- Autopay discount only available before loan disbursement
HIGHLIGHTS
- APR
- 7.49% – 25.79% (7.99% – 26.99% without Autopay discount)
- Loan amount
- $5,000-$100,000
- Term options
- 36 to 240 months
- Minimum credit score
- Not specified
Why we chose it: LightStream (a brand of Truist Bank) is our top choice for large loans. Although it isn’t the only lender we evaluated that offers loan amounts as high as $100,000, it offers the most flexible repayment terms by far, with a maximum time limit of 20 years. Lightstream’s APR range is broadly competitive, and it offers borrowers a 0.50% discount if they set up Autopay. However, Lightstream requires good to excellent credit and doesn’t allow borrowers to use loan funds to pay off another LightStream loan.
Read our full review of LightStream personal loans.
- Loans of less than $1,000 available
- Accepts co-borrowers
- No origination fee or prepayment penalty
- You need to join the credit union to get a loan
HIGHLIGHTS
- APR
- 8.99% – 17.99%
- Loan amount
- $600 – $50,000
- Term options
- 12 to 60 months
- Minimum credit score
- Not disclosed
Why we chose it: With its $600 minimum loan amount, reputation for high customer satisfaction and low interest rates, PenFed is our top pick for the best small debt consolidation loan.
Among the direct lenders we evaluated, PenFed had the lowest minimum loan amount. It also has low interest rates and no origination fees. If your credit isn’t great, PenFed allows co-borrowers. However, since PenFed is a members-owned federal credit union, you’ll have to become a member. A credit union spokesperson says this process can be completed at the time you get your loan.
Read our full review of PenFed personal loans.
- Large loans available
- Ranked #4 in J.D. Power 2024 U.S. Consumer Lending Satisfaction Study
- Autopay discount of 0.25% available
- Term range isn’t as varied as competitors
- Origination fee of up to 7%
- Need to open a bank account to get additional 0.25% discount
HIGHLIGHTS
- APR
- 8.99% – 29.49% (rates reflect autopay discount and direct deposit rate discount)
- Loan amount
- $5,000-$100,000
- Term options
- 24 to 84 months
- Minimum credit score
- No minimum specified, but lower scores could affect eligibility, terms and loan rates
Why we chose it: We named SoFi’s personal loan as the best overall debt consolidation loan because it has a wide range of terms, doesn’t charge high mandatory fees and has a decent APR range. The company also offers multiple ways to get discounts on rates, although some are easier to get than others. You can get a 0.25% rate discount if you enroll in autopay. You can get a second 0.25% rate discount, although to do so, you have to open up a Sofi bank account and set up direct deposit of at least $1,000 a month, which might be too much of a hassle for some borrowers. Sofi doesn’t charge a mandatory origination fee, but a company spokesperson says borrowers have the option of paying origination fees of up to 7% to lower their APRs (think of how mortgage borrowers buy points to get a lower rate).
SoFi also was ranked fourth in the 2024 J.D. Power Consumer Lending Satisfaction Study.
Read our full review of SoFi personal loans.
- Informative, easy-to-navigate website
- $10 late fee is lower than what some competitors charge
- High origination fees
- Limited choice of terms available
HIGHLIGHTS
- APR
- 11.69% – 35.99%
- Loan amounts
- $1,000 to $5,000
- Term options
- 36 to 50 months
- Minimum credit score
- 560
Why we chose it: While people with excellent credit have their pick of lenders, there aren’t as many options out there for bad credit debt consolidation loans. Like others in this category, Universal Credit offers better rates to borrowers who set up autopay and agree to have a portion of their existing debt paid off directly.
Although — like the rest of our picks — there’s no prepayment penalty, you will have to pay origination fees ranging from 5.25% to 9.99%, which is on the steep side.
If you have a slightly better borrower profile, you might consider looking into Upgrade, Universal Credit’s corporate parent, which offers loans with a lower APR minimum and lower origination fees. A company spokesperson says Upgrade also accepts scores as low as 560, but the underwriting qualifications are stricter.
Other debt consolidation loan companies we considered
Axos Bank
Axos Bank’s minimum 11.79% APR isn’t great, but its maximum 20.84% APR is better than most of its competitors, and borrowers with credit scores as low as 730 might be eligible. While that’s higher than what many fintechs and speciality lenders require, it’s better than the excellent credit required by some traditional banks. Axos does charge an up to 2% origination fee.
Best Egg
Best Egg is a fintech company that offers personal loans ranging from $2,000 to $50,000 with terms from three to six years. Its online application platform is relatively transparent and simple to navigate. Best Egg didn’t make our cut because you need a minimum individual (not household) annual income of at least $100,000 to qualify for its lowest APR of 6.99%. In addition, its top APR of 35.99% is very high, and there’s a minimum origination fee of 4.99% for loan terms of four or more years.
What you need to know about debt consolidation loans
Debt consolidation is a debt management strategy that calls for combining multiple types of debt into a single loan or line of credit. Consolidating debt can potentially reduce your overall interest charges and help you pay off debts more efficiently, as it means borrowers only have a single monthly payment.
How do debt consolidation loans work?
Debt consolidation loans combine other forms of debt into a lower-interest installment loan with more favorable terms. Your credit score and debt-to-income (DTI) ratio will determine the rate you’re offered. A debt consolidation loan might be a good option if the rate is lower than your current debt, so long as you factor in any fees the loan provider may charge as well.
They’re most commonly used to consolidate credit card debt, as this typically has high interest rates and variable rates.
Is a debt consolidation loan right for you?
Debt consolidation loans are a great option if you can get rates and terms that are more favorable than your current debt structure. This will usually require a better than average credit score and a solid history of on-time payments, meaning people carrying a large, high-interest debt load may not meet the minimum credit score requirements. If that’s the case with you, you can try to build your credit before pursuing consolidation or consider other options to pay off debt.
Alternatives to debt consolidation loans
Although debt consolidation loans are effective and can have a positive impact on your financial health, they aren’t the only way to get out of debt. If you’re a homeowner, you can see if using your house as collateral helps you snag a better rate with a home equity loan or home equity line of credit. For borrowers with excellent credit and smaller debt loads they can pay off relatively quickly, a balance transfer credit card — where you can get a 0% interest rate during a temporary promotional period — can be the most cost-effective way to consolidate debt.
Borrowers who can’t get approved for new credit have options, too. Working with a non-profit credit counseling agency to enroll in a debt management plan is a smart one. With these plans, the agency negotiates a lower interest rate with your creditors and you make one monthly payment to your debt counselor, who then splits the money between your creditors. Finally, if you’re already behind on your payments, you may want to explore more serious interventions, like debt settlement or bankruptcy.
How to get a debt consolidation loan
1. Check your credit by requesting your reports from one of the three credit bureaus. This can help you get a better idea of the interest rate you might get before risking a hard pull on your credit. If your score is right on the edge of a lender’s eligibility, getting a second score from a different bureau might be helpful.
2. Add up your debt and figure out the weighted interest rate you’re currently paying on your credit cards and other outstanding debt. This will help you determine the interest rate you’d need from a debt consolidation lender in order for the loan to be worthwhile. Keep in mind that consolidation doesn’t have to be all or nothing: You can consolidate all your credit cards, for example, but leave an existing personal loan on its own if it has a competitive interest rate.
3. Take some time to research and compare lenders, interest rates, loan terms and fees.
4. Use a debt-to-income ratio calculator to get an idea of how much you can put toward your debt every month. Lending institutions have different debt-to-income ratio requirements, but as a rule of thumb, you never want your monthly debt payments to equal more than 50% of your income (and many lenders set the threshold lower than that, with 43% another common threshold). Figuring out how much money you can spend servicing your debts every month is a good starting point to figure out what kind of repayment terms you should seek for a debt consolidation loan.
5. Choose a lender offering a lower interest rate than what you currently have. Remember: If you choose a lower monthly payment, that means it will take longer to pay off your loan, which means paying more in interest over the life of the loan.
6. If the pre-approved offers involve a higher interest rate than what you’re currently paying, consider whether you have a friend or family member with a higher credit score who’s willing to act as cosigner.
7. Apply for the loan, and make sure to read the offer’s fine print before accepting it.
8. Obtain the loan funds and pay your debts or, if the lender has a direct payment option, have the lender pay your creditors on your behalf.
How to get a debt consolidation loan with bad credit
Some lenders work with customers with poor credit; however, most lenders will require at least a 620 FICO score (i.e. a “fair” score). Bear in mind that lenders will invariably charge borrowers with little to no credit history their highest annual percentage rates. If you have bad or fair credit, here are three tips to help you get a debt consolidation loan:
- Get a secured debt consolidation loan. You can use collateral, such as your car or your home, to guarantee the payment of a secured debt consolidation loan. This type of loan may be easier to get approved for if you have bad credit.
- Add a cosigner. If you have a friend or family member with good credit, they may be willing to cosign on your debt consolidation loan. Adding a cosigner may also get you a lower interest rate.
What to look for when choosing a debt consolidation loan
Picking the right debt consolidation loan will depend on your financial goals and how much of a monthly payment you can afford. When choosing a debt consolidation loan, consider the following:
Interest rates
- APRs typically range from 7.99% to 35.99%.
- Your interest rate will depend on your credit score (FICO or VantageScore), current income and debt-to-income ratio, among other factors.
- Aim to find an APR lower than your current interest rates. For example, if you have a 15% average APR on your credit card debt, only consider lenders that offer APRs below that to consolidate your debt.
Fees
- Lender fees may include origination, late payment and prepayment penalties.
- Origination fees usually range from 0% to 10% of the loan amount.
- Late payment fees can range from $25 to $45.
- Prepayment penalties are not very common with personal loans, but you should still check for them. They can be a fixed fee, a percentage of the loan balance, or the interest amount the lender loses by the early payment.
- Compare lender fees. Not all lenders charge all fees — and some don’t charge any fees at all.
Loan terms and repayment options
- Most repayment options range from one to seven years.
- Many lenders offer the option of paying creditors on your behalf.
- Different repayment options include via mobile app, website, over the phone and setting up direct deposit. Some lenders will give you an APR discount for setting up autopay.
Debt Consolidation Loans FAQs
Is debt consolidation a good idea?
Debt consolidation can be a good option for people struggling to manage multiple monthly payments. Exchanging your high interest debt for a more reasonable rate helps you pay down your debt more quickly by reducing your overall interest costs.
However, consolidating debt is only recommended if you have good enough credit that allows you to qualify for that lower interest rate. Be sure to compare rates, loan terms and fees before choosing a loan.
Do debt consolidation loans hurt your credit?
When you apply for a new loan or credit card to consolidate your debts, the initial credit inquiry may temporarily have a small negative impact on your credit score. However, if you consistently make on-time payments on the new consolidated loan or credit card, it can positively impact your credit score over time.
What is the best debt consolidation company?
The best debt consolidation company for you depends on your priorities and your credit profile. We found that LightStream is a good choice for consolidating a large debt. For smaller loans, PenFed is a good option. If you’re looking for more of a one-stop shop, Happy Money offers debt consolidation loans for all types of credit and allows you to compare top lenders in one place.
Latest debt consolidation loan news
Credit cards remain the primary source of funding for consumer spending and Americans are piling on the debt, according to a new report from the Federal Reserve Bank of New York, which says that roughly 60% of people revolve a balance from month to month.
Amidst evidence that economic growth is faltering, borrowers are seeking relief from high credit card interest rates. The market for unsecured consumer loans, the category that includes debt consolidation loans, is growing. According to credit bureau TransUnion, total balances on unsecured personal loans hit a record high of $251 billion in the final three months of 2024. The average borrower in this growing market had just over $11,600 in debt — a jump of nearly $2,000 from three years earlier.
How we chose the best debt consolidation loans
To select the best debt consolidation loans, we reviewed the products of more than 30 lenders, prioritizing overall costs, special offers and customer satisfaction. Specifically, we took into consideration the following:
- Interest rates. We chose lenders that offered some of the lowest APRs on the market.
- Variety of loan terms. We favored lenders that offered a wide array of repayment terms, from six months to more than five years.
- Streamlined application process and fast funding. While some lenders do require customers to call or visit a bank branch, we favored those that made the application and funding process as quick and painless as possible.
- Customer satisfaction: We also took into account customer reviews from third party consumer review platforms and rankings with the Better Business Bureau.
- Few or no fees. Most lenders charge fees; we looked for those that charged the least.
Summary of our top picks for debt consolidation loans of May 2025
The companies listed below are organized alphabetically.