Best Debt Consolidation Loans in 2017

One of the most common reasons individuals take out a personal loan is for debt consolidation, especially to consolidate credit card debt. To help you find the best loan for consolidating your debt, we looked at over 50 different personal loan companies. Below, we highlight our top picks for the best personal loans for debt consolidation.

Best Debt Consolidation Loans for Good Credit (680 to 850)

A good to excellent credit score is normally defined as any credit score from 680 to 850. If you have a credit score in this range, you’re luck when it comes to qualifying for a personal loan.

SoFi

We recommend SoFi for borrowers with good to excellent credit scores looking to consolidate debt or pay off credit cards. Most people know SoFi for student loan refinancing, but the company is also a great choice for a personal loan. APRs at SoFi are quite low at 5.49% to 14.24%, with the average APR around 8%. The company makes large unsecured loans up to $100,000, so it can be a good option if you have a lot of debt to refinance. To qualify, we recommend applicants have a credit score of at least 660, a verifiable source of income and a reasonable debt-to-income ratio.

Another area where SoFi stands out is the supplementary perks and benefits of being a SoFi member. SoFi offers free career development services to its members and regularly hosts member networking and social events in major cities throughout the United States. If you take out a loan with SoFi, the company also provides unemployment protection. If you lose your job through no fault of your own, SoFi can suspend your monthly payments and provide job placement assistance during your forbearance period. SoFi is available in all states, except Mississippi and Nevada.

Best for: Creditworthy borrowers, and large debt consolidation loans up to $100,000.

  • APR: 5.49% - 14.24% with AutoPay (variable rates also available)
  • Loan term: 3, 5 or 7 years
  • Origination fee: None
  • Read full SoFi review
  • Loan amount: $5,000 - $100,000
  • 3+ days to get funds
  • No cosigners allowed

Marcus

We think Marcus is another great choice for consolidating debt, especially if you’re looking to avoid fees. With Marcus, there are no origination, late, non-sufficient funds, returned payment or prepayment fees. If you make a late payment, for instance, you will only pay the extra interest that accrued during the period you were late. Another thing we like about the company is the payment deferral program. If you make consecutive on-time payments for one year or more, you can defer one payment. Interest accrued during the deferral is waived and your loan terms will be extended for one month. This feature is a nice safety net in case of emergency.

While you can only borrow up to $30,000 (which is lower than other companies on this list), Marcus has competitive APRs starting at 5.99% and a variety of repayment options from two to six years, and the company only makes unsecured loans. When you apply, Marcus considers your creditworthiness and income when evaluating your loan application. We recommend that borrowers have credit scores of at least 660 (preferably 680) and sufficient income to support repayment if you want to improve your chances of getting approved. Marcus is owned and operated by Goldman Sachs, so there’s a well-known bank behind the name. Marcus is available in all states, except Maryland.

Best for: Borrowers with good credit who want to avoid fees.

  • Loan amount: $3,500 - $30,000
  • 2+ days to get funds
  • No cosigners allowed

Payoff

One thing we like about Payoff is the company only makes credit card debt consolidation loans, and Payoff offers a number of tools and services to make it easier to stay on track paying off your credit card debt. For one, the company gives its users free FICO credit score updates as well as regular check-ins with its member support team to help you keep on track of your progress. The company also provides free cash flow assessments and job loss support to its members. According to the company, members who paid off at least $5,000 in credit card balances saw an average increase of 40 points to their FICO credit score within four months of getting a Payoff loan.

To qualify for a Payoff debt consolidation loan, you will need a FICO credit score of 660 and a debt-to-income ratio of 50% or less. You will also have to have at least three years of credit history, two open and satisfactory lines of credit and no more than one installment in the last 12 months. You cannot have any current delinquencies or delinquencies greater than 90 days in the past 12 months. You can borrow up to $35,000 through Payoff with APRs between 8% and 25%. Another advantage of using Payoff is the company only charges an origination fee, meaning there are no late fees, returned payment fees or check processing fees.

Best for: Borrowers with significant credit card debt that need help to stay on track.

  • Loan amount: $5,000 - $35,000
  • 2-5 days to get funds
  • No cosigners allowed

Best Debt Consolidation Loans for Fair to Average Credit (650 to 680)

If you have a fair to average credit score, you may find that you’re more likely to be approved through a credit union or online lender.

Upstart

We think Upstart is great for borrowers who are just shy of having an excellent credit score. Upstart has competitive rates on its unsecured personal loans with APRs ranging from 7.37% to 29.99%. You can borrow between $1,000 and $50,000 through this company with either three or five year maturities. To qualify for an Upstart personal loan, you need a credit score of 620 and a verifiable source of income (or a full-time job starting within six months). The average Upstart borrower has a credit score closer to 700 and annual income close to $100,000 so we only recommend this company for borrowers with credit scores of at least 650 and good annual income.

Upstart will also look at your educational and employment history when evaluating your application. If you don’t quite fit the average borrower profile (like being a low-income earner or a slightly lower credit score), having good educational history or a stable employment background will help your application.

Best for: Borrowers with credit scores between 650 and 680 and good educational or employment history.

  • Loan amount: $1,000 - $50,000
  • 1+ days to get funds
  • No cosigners allowed

Lending Club

Lending Club is another good option for a personal loan for borrowers with fair to average credit, and it’s particularly great for debt consolidation as the company can pay your creditors directly (though this is only available to select borrowers). To qualify, you’ll need a credit score of 640 or above and a debt-to-income ratio under 31%; however, the average Lending Club borrower has a credit score closer to 700 and a debt-to-income ratio around 18% (excluding mortgage debt). While there aren’t strict cut-offs or requirements for your income or credit history, the average Lending Club borrower has an annual income of $76,000 and 17 years of credit history.

Lending Club makes fairly large loans up to $40,000 with rates starting at 5.99%. The average APR is around 14%, which is what we found to be in line with what’s offered to borrowers with average to good credit. Since Lending Club is a marketplace lender, it will take longer to fund your debt consolidation loan -- seven days on average, which can be a major disadvantage when compared to other companies in this space. Lending Club is available in all states, except Iowa and West Virginia.

Best for: Borrowers who want their lender to directly pay their creditors.

  • Loan amount: $1,000 - $40,000
  • 7+ days to get funds
  • No cosigners allowed

Best Debt Consolidation Loans for Bad Credit (Under 650)

Even if you don’t have a stellar credit score, it’s still possible to get a personal loan to consolidate your debt. Below, we take a look at some of the lenders that cater to borrowers with limited credit history or lower credit scores.

Avant

Not only is Avant a good choice for borrowers who don’t have perfect credit, but the company also offers a lot of flexibility in repaying your debt consolidation loan. The average Avant borrower has a credit score between 600 and 700 with annual income between $50,000 and $100,000, so we recommend Avant for borrowers with credit scores of at least 600 and good annual income. The company does not set hard eligibility requirements for debt-to-income ratios. If you qualify for an Avant personal loan, you can borrow up to $35,000 with rates between 9.95% and 35.99%, and terms of two to five years.

The company provides great repayment flexibility, allowing you to change your upcoming payment up to one day before it’s due and not charging fees based on how you pay back your loan (there are no check processing fees as there are with many other online personal loan companies). The company also offers late fee forgiveness. Avant will refund the $25 late fee if you make three consecutive on-time payments after a late payment. Avant is available in all states except Iowa, Colorado and West Virginia.

Best for: Borrowers with credit scores of at least 600 and good annual income.

  • Loan amount: $1,000 - $35,000
  • 1+ days to get funds
  • No cosigners allowed

Backed (With a Cosigner)

If you have poor or thin credit, we think Backed is a great option for an unsecured debt consolidation loan, provided you apply with a cosigner. While you can get a loan without a cosigner, you’ll need a credit score of 660, annual income of $18,000, no bankruptcies in the last seven years and no current delinquencies to qualify. But with a cosigner, you don’t need to meet these criteria; instead, your cosigner will need to meet the minimum eligibility criteria. One thing we like about Backed is how the company treats cosigners. Unlike a traditional cosigner, Backed cosigners are notified immediately of a missed or late payment and given a 15-day grace period before any late fees or credit reporting begins. In most conventional co-signing arrangements, cosigners are not typically informed until a payment is a certain number of days late (e.g., 30 days).

Backed also has low APRs from 7.37% to 29.99%. These rates are a lot better than what you can find elsewhere if you apply for a debt consolidation loan alone and have a lower credit score. To improve your chances of qualifying for a low rate, your cosigner will need to have an excellent credit score (720+) and decent income ($50,000+). One downside to Backed is that it is currently only available in New York, New Jersey, Arkansas, Arizona, Florida and West Virginia.

Best for: Borrowers willing to use a cosigner to get a debt consolidation loan, and borrowers in NY, NJ, AR, FL, WV and AZ.

  • Loan amount: $3,000 - $25,000
  • 2+ days to get funds
  • Cosigners allowed

Summary of Our Top Picks

For easy comparison, we’ve summarized the best lenders for debt consolidation for borrowers with different credit scores.

Best for…LenderAPR
Good credit (680 - 850)SoFi5.49% - 14.24% with AutoPay (variable rates also available)
Marcus5.99% - 22.99%
Payoff8% - 25%
Fair to average credit (650 - 680)Upstart7.37% - 29.99%
Lending Club5.99% - 35.89%
Bad credit (under 650)Avant9.95% - 35.99%
Backed (with a cosigner)2.90% - 15.99%

Our Methodology

We evaluated over 50 different personal loan companies to find the best debt consolidation loans. In our review, we considered the following criteria:

  • Competitive APRs: In most states, the maximum APR for a personal loan is 36%. However, we looked at lenders that offered competitive rates for borrowers, regardless of whether the borrowers had good or bad credit.
  • Range of loan amount and terms: All of the lenders on this list let individuals borrow at least $25,000 with multiple options for repayment. Typical terms were between two to seven years.
  • Fair fees: Many lenders in this list do not charge any fees (e.g., LightStream, Marcus). Of the lenders who do, the fees were reasonable, with origination fees of no more than 6% and late fees no more than $25 or 5% of the monthly past due.
  • Transparent rate and fee disclosure: Trustworthy lenders will present rates, fees and loan amounts upfront, instead of requiring you to apply to figure out what the cost of the loan will be. Lenders we included in this list all had easy-to-find and transparent rate and fee schedules on their websites.
  • Lender credibility: We evaluated the credibility of the lenders on this list based on user reviews, Better Business Bureau (BBB) ratings and the company itself. Some of the lenders on this list are backed by well-known financial institutions (e.g., LightStream by SunTrust, Marcus by Goldman Sachs). All lenders on this list had positive user reviews and/or BBB ratings.
  • Geographic reach: Most of the lenders on this list are available in at least 40 states across the U.S., making them a better fit for a wider variety of borrowers.

Lenders included in this list scored well in each of the criteria above by having competitive, clear and transparent terms.

How to Find the Best Debt Consolidation Loan

If you're looking to consolidate debt, it's best to shop around and consider a variety of options from personal loans to balance transfer credit cards to credit card hardship programs. If you have a good credit score, you can save significantly on interest by using a balance transfer credit card with a 0% introductory APR. However, if you decide to go the personal loan route, make sure to compare at least three to four lenders.

The best places to start are banks and local credit unions, especially if you already have a banking relationship there. Many banks and credit unions now make unsecured and secured personal loans to individuals who have a checking or savings account with them. Wells Fargo, Citibank, U.S. Bank and Navy Federal Credit Union all make personal loans, with some making large loans up to $100,000 or more. In most cases, you’ll need to have a qualifying account with the bank to apply.

Consider Online Lenders

You should also look at online lenders, as many online lenders can offer rates that are the same or better than what you may find at a bank. In general, APRs on personal loans are capped at 36% in most states, so if you see a loan offer with a higher APR, it is likely to be a no credit check loan, payday loan or something similar. You should avoid these types of loans, as they can easily exacerbate your debt situation with their high interest rates (sometimes up to 900%), hidden fees and short payback times. When looking for lenders, consider where you will most likely qualify. If you have a below average credit score or are a low-income earner, you should look at lenders that cater to borrowers like you or consider putting up collateral to secure a lower interest rate.

The key things to consider in getting the best personal loan for yourself are the total cost of the loan, the monthly payment, the length of the loan, fees and rates and payment methods (i.e., autopay, check, etc.). Before you sign a loan contract, you should understand what your annual percentage rate is and how that translates to how much you will pay each month and how much you will pay back in total. It's also important to know if there are any fees associated with the loan, such as prepayment penalties, origination fees, check processing fees or late fees. Understanding this will help you find the lender best suited to your needs.

Will Debt Consolidation Hurt My Credit Score?

Most individuals use a debt consolidation loan to consolidate credit card debt. Because you’re transferring your debt from a line of credit to an installment loan, you will actually lower your credit utilization, which can help your credit score (provided you don’t add more charges to your credit cards). An installment loan is factored into your credit score differently than a credit card, so it does not affect your credit utilization. If you make on-time payments on your debt consolidation loan, this can also be a boon for your credit score. Payment history is the biggest factor in determining your credit score.

Make a Plan to Get Rid of Debt

More generally, you also need a plan for getting yourself out of debt. A personal loan is merely consolidating your debt, not getting rid of it. It's too easy to fall into the mindset that your personal loan has taken care of your debt when it hasn't -- don’t start racking up charges on your credit card as this will just increase your debt burden. Since you'll only have one monthly payment with a debt consolidation loan, it will be much easier for you to budget each month. Make sure you are setting enough money aside to pay your loan in full each month as well as enough money to save or invest.

Consider Alternative Options

Getting a debt consolidation loan is not the right move for everyone. If you’ve had a long-term issue with managing your debt, you might want to look into credit counseling and debt settlement or management programs.

Credit counselors can help you set up a plan to tackle your debt by helping you set up a monthly budget. You should look for a non-profit organization that specializes in credit counseling.

Debt settlement and management companies will negotiate with lenders on your behalf to lower the amount you owe (in the case of debt settlement companies), or lower your rates or payments (in the case of debt management companies). However, we recommend individuals negotiate with their creditors directly to avoid fees or hits to your credit score that using a company can bring. What’s more, it’s hard to find a legitimate debt management or settlement company as scams abound.

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