Best Personal Loans for Debt Consolidation

Contributor, Benzinga

Between credit cards, retail card balances and even medical bills, it can be a challenge to keep up with multiple streams of debt. A personal loan for debt consolidation can make it easier to manage your monthly payments and stay on top of your finances. You might even qualify for a lower interest rate that proves easier on your wallet. 

Ready to get started? Follow this guide to find the best personal loans for debt consolidation. 

Best Personal Loans for Debt Consolidation 

Personal loans allow you to consolidate all your debt into a single monthly payment.  This can help you keep better track of your finances and give you an accurate picture of your future expenses. And there’s always the possibility of securing a personal loan at a lower interest rate than what you’re currently paying. In this case, you could save hundreds of dollars and pay off your debt faster. 

Many personal loans allow you to choose the timeframe on your loan. Most have a limit of 5 years. A longer loan term can help lower your monthly payments, although you will end up paying more in interest. 

Either way, many people are successful in lowering their monthly payments and getting out of debt with a personal loan. There’s also the added bonus of improving your credit score. If you make all your monthly payments on time, your score will get a boost. 

You’ll never know what kind of rates you’ll qualify for until you reach out to lenders. It’s a good idea to talk to several lenders and shop around for different rates before you agree to take out a personal loan. Take a look at our picks for the best personal loans for debt consolidation.

APR
Fixed 5.99% – 24.99%.
Loan Amounts
$5,000 – $40,000
APR

Fixed 5.99% – 24.99%.

Origination Fee

0%–5% of the loan amount

Term Lengths

2–5 years

Min Credit Score

550

1 Minute Review

Happy Money offers personal loans that allow you to more efficiently consolidate high interest payments. Happy Money was previously known as Payoff. The company was founded in 2009 and has since helped fund over $3.5 billion in loans. Happy Money is a financial company that works with approved lending partners to fund loans. Happy Money designed its Payoff Loans to provide borrowers with the financial freedom and power to be matched with a lending partner. Benzinga reviews Happy Money Loans as a way for people to consolidate debt with potentially lower APR rates. 

Best For
  • People with lower credit scores
  • Credit card debt consolidation
Pros
  • No prepayment fees
  • Potentially lower APR rates starting around 5.99%
  • Improve credit score
Cons
  • Personal loans only available for credit card debt
pre-apply securely through Figure Personal Loans’s website
APR
Between 5.99% and 15%; autopay discount of 0.25%
Loan Amounts
$5,000 – $50,000
APR

Between 5.99% and 15%; autopay discount of 0.25%

Origination Fee

Between 0% and 5% (dependent on state and local laws)

Term Lengths

Fixed-rate loan terms of 3 or 5 years

Min Credit Score

680

1 Minute Review

Figure’s online personal loan application process eliminates the painstaking process of following up your paperwork to scan or send to the lender. With an entirely online application, you can get your prequalification rate without impacting your credit score. You’ll get approval within a few minutes and await funding in as little as 2 business days — up to $50,000 you can direct toward what matters most.

Figure personal loans come with multiple fixed term options so you can map out your payment schedule so that it doesn’t strain your finances. Figure also offers some perks for spreading the word out to others. You’ll receive a $150 gift card for every friend you refer, and they too will get a $150 gift card when their loan funds.

Figure’s home equity line of credit lets you turn your home equity into up to $250,000 cash in as few as 5 days. Rates start as low as 2.88% APR1, and you can choose among 5-, 10-, 15- and 30-year fixed term options. You can also get up to $500,000 cash-out in mortgage refinance, all with custom rate and payment options.

While you can easily land better rates with a higher credit score, Figure also has options for applicants with less than perfect credit. You may secure a HELOC with a credit score as low as 620 (except in Oklahoma where the minimum is 720).

Best For
  • Online loan application
  • Unsecured loans
  • Affordable loan fees
Pros
  • 100% online application
  • Quick funding
  • Competitive rates
  • Stellar customer service
  • Multiple fixed term loan options
  • A gift card for every referral (personal loan only)
  • Personal loan offered in all 50 states
Cons
  • Products not available in some states
  • Personal loans capped to $50,000
get started securely through SoFi’s website
Disclosure: Fixed rates from 6.99% APR to 21.78% APR. APR reflect the 0.25% autopay discount and a 0.25% direct deposit discount. SoFi rate ranges are current as of 3/24/22 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
APR
9.95%-35.99%
Loan Amounts
$2,000-$35,000
APR

9.95%-35.99%

Origination Fee

Up to 4.75%

Term Lengths

24-60 months.

Min Credit Score

580

1 Minute Review

Established in 2012, Chicago-based Avant helps people obtain personal loans while offering transparent credit. Since its inception, Avant has helped over 1.5 million people receive funding. 

One thing that makes Avant so unique is its background as a financial technology company instead of a traditional bank. Banking needs are addressed by Evolve Bank & Trust, a member of the Federal Deposit Insurance Corp. (FDIC). The FDIC insures deposits and protects consumers in case of bank disasters. Benzinga’s review of Avant determined it is a strong option for personal loans because of its reputation for positive customer experiences and fast funding options. 

Best For
  • People with below-average credit scores who need unsecured personal loans
  • People who need fast funding
Pros
  • Quick funding
  • Fixed payments
  • Mobile accessibility
Cons
  • Additional costs such as origination fees
  • No third-party guarantor such as a co-signer on a secured personal loan
Disclosure: *AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Excellent credit required for lowest rate. Rates vary by loan purpose.
APR
3.49%- 19.99%
Loan Amounts
$5,000 – $100,000
APR

3.49%- 19.99%

Origination Fee

$0

Term Lengths

Up to 240 months

Min Credit Score

660

1 Minute Review

LightStream was founded by its parent company Truist Financial. The company offers a wide range of traditional and innovative personal loan benefits and opportunities such as home improvement loans and fertility financing to address a wide range of needs. The company charges APRs between 3.49% and 19.99%. Benzinga offers a review of LightStream’s personal loan options that provide a variety of personal loans while minimizing additional fees and promoting financial flexibility. The company offers diverse loans with varying term lengths, APRs, and uses. For example, Lightstream offers a variety of home improvement loans that are designed to assist with specific needs such as funding for landscaping or solar panels.

Best For
  • Potential borrowers interested in quickly funded unsecured personal loans
  • Same day funds
  • People with stronger credit scores
Pros
  • Doesn’t require collateral
  • No late fees
  • Potential same day funding
  • Self-selected funding dates
  • Offers a mobile application to ease access to loan information
Cons
  • Not recommended for bad credit scores

Types of Personal Loans for Debt Consolidation

Most personal loans are unsecured, fixed-rate loans. Although different lenders may offer you different kinds of loans depending on your financial situation and credit report. It’s a good idea to understand the different kinds of loans available. Take a look at some features of the most common types of loans.

Secured Loans

A secured loan is a personal loan that is guaranteed by collateral. Collateral is any asset you own that has significant value, including your home, car, jewelry, antiques, an investment portfolio or even art. It’s important that you are the owner of the asset and that its value is large enough to cover the amount you’re borrowing. 

Secured loans are common options for people that have no credit history or low credit scores. However, they can become dangerous if you are unable to fulfill the terms of the loan. For example, many people use their homes as collateral for a secured loan. If they are unable to pay back the money, the lender has the right to seize ownership of the home. 

Unsecured Loans

Unsecured loans don’t require any collateral in exchange for the loan amount. Lenders will determine whether you are eligible based on your financial criteria such as your credit score and income level. 

If your credit score is less than good or if you have a large amount of debt, you may have a difficult time getting approved. On the other hand, the higher your credit score and the healthier your finances are, the more likely you are to be approved on favorable terms. 

Fixed-Rate Loans

Interest rates on fixed-rate loans are the same throughout the entire duration of the loan. Unlike variable-rate loans or adjustable-rate loans, you won’t have to worry about your rate going up. 

Most auto loans, student loans and mortgages are fixed-rate loans. Fixed-rate loans give you a good understanding of how much your future payments will be. Unlike variable-rate loans, whose interest rates can change over time. 

Fixed-rate loans are great if you lock in your loan for a low-interest rate. If interest rates go down over time, you may decide to refinance your loan at a lower rate. Most personal loans have timeframes that range from a few months to a few years. You are less likely to have to refinance your personal loan than you if you were taking out student loans or a mortgage. 

Personal Loan Requirements and Criteria

Personal loans for debt consolidation work best if you are struggling with credit card debt, medical bills, retail credit cards, payday loans or other personal loans. The interest rate, time frame and other terms you receive will depend on your personal financial information. Your credit report is a major influence on the type of loan you will be offered.

If you have fair or poor credit, you’ll have to accept higher interest-rates than someone who has good or excellent credit. If your credit is poor or if you have no credit history, it’s possible to be denied altogether. If this happens, don’t be discouraged and keep trying out different lenders. It might also be a good idea to look into credit builder loans. 

While your credit score is important, it’s not the only factor that influences your ability to qualify for a personal loan. There are other components lenders look into to understand your overall financial health. Your chances of getting approved and receiving more favorable terms are better if you’re doing well in 1 of the following areas:

  • Steady income
  • Debt-to-income ratio
  • Payment history
  • U.S. citizen or legal resident
  • Minimum age (usually 18 but varies in different states)

Personal Loan Considerations

Although personal loans can be a great way to consolidate your debt, they are not for everyone. Most personal loans cap out a couple of tens of thousands of dollars at the most. If you have a high amount of debt or owe more money than you can reasonably pay back, you might not qualify for a personal loan and should look into other options like bankruptcy. 

It’s important to verify that your creditors will allow you to consolidate your debt with a personal loan. Some creditors may not allow you to use a personal loan to pay off your debt. Some might even charge you penalties for paying off your debt early. There’s also no guarantee that your monthly payments will be lower. It’s best to consult with your creditors and shop around for different lenders to understand what your options are. 

Whatever you do, don’t resort to predatory loans. Predatory loans may seem like an easy way to get cash fast, especially if you don’t have the best credit. 

These loans exploit borrowers with unfair or abusive terms. In some cases, lenders may try to coerce, force or hide important information from you. You could face high-interest rates, excessive fees and potentially damage your credit score.

Personal Loans vs. Credit Cards

Some people might opt for a balance transfer credit card instead of a personal loan. These credit cards can have intro 0% APY offers for up to several months to a couple of years. These cards can be a viable option for debt consolidation but only if you can pay off the balance in full and by the time the promotional period ends. 

Once the 0% APY period is over, you’ll be paying higher interest on a credit card than you would on a personal loan. You’ll also need to make sure you don’t rack up additional charges on your credit card balance. 

Doing this would make it more difficult to pay off the money you owe. Unlike credit cards, personal loans have the added benefit of fixed-payments, so you’ll always know what your future payments are going to be. 

Borrow Money for Debt Consolidation

Taking out a personal loan can be a great way to consolidate debt. However, personal loans are not necessarily an easy fix. You’ll still need to work hard to make your payments on-time and curtail unnecessary spending. 

Remember that a personal loan for debt consolidation is only the 1st step. It’s up to you to make long-lasting financial changes.