Why we chose it: This lender disburses loan amounts quickly and offers direct payment to your original creditors when you take out a debt consolidation loan.
Overview: Achieve is another lender worth exploring if you’re looking to borrow more than $5,000. Its loans come with an origination fee between 1.99% - 6.99%, and you can choose a repayment term of 24 to 60 months. Achieve also offers a quick funding timeline with consumers receiving their personal loan funds in as little as 48 hours after they are approved.
| Pros | Cons |
|---|---|
|
May receive loans within 48 hours of approval Can choose your payment due date Allows for co-applicants |
Loans are not offered in all 50 states Charges an origination fee of 1.99% - 6.99% High minimum borrowing amount of ($5,000) |
Eligibility requirements: While Achieve isn’t exactly clear on the specifics, this lender takes the following factors into consideration when deciding whether to approve you for a loan:
Why we chose it: Avant is willing to work with borrowers with low credit scores and provides quick funding.
Overview: Avant offers personal loans for debt consolidation between $2,000 and $35,000, which you can pay off over the course of 12 to 60 months. Two potential downsides to consider: You might have to pay an origination fee of Up to 4.75%, and you likely can’t apply with a cosigner, which could make it difficult for some consumers with low credit scores to qualify.
| Pros | Cons |
|---|---|
|
Funding as soon as the next business day Low credit score requirements (most Avant borrowers have scores between 600 and 700) No prepayment penalty |
Must pay an origination fee (Up to 4.75%) Does not allow for co-applicants Unclear about specific eligibility requirements for personal loans |
Eligibility requirements: Avant isn’t entirely clear about its eligibility criteria, but it does offer consumers the opportunity to prequalify. However, applicants must have a personal checking or savings account to qualify for a loan with Avant.
Debt consolidation is a debt management strategy that involves rolling one or multiple debts into another form of financing. For instance, you may take out a debt consolidation loan or balance transfer credit card and use it to pay off existing debts with better terms.
Ideally, you’ll want to consolidate your debt to a lower APR than what you’re currently paying. This can help you save money on interest, lower your monthly payments and pay off debt faster.
| Consolidation loan amount: | $25,000 |
| New Monthly Payment: | $495 |
Debt consolidation is a good idea when…
You can qualify for a lower APR than what you’re currently paying on your debts
You’re struggling to manage credit card bills and loan payments
You want to pay off debt faster on a set schedule
Debt consolidation is a bad idea when…
You can’t qualify for a lower APR than what you’re currently paying on your debts
You only have small balances that you can pay off quickly
You owe too much to manage and repay
Although there are many ways to consolidate debt, it generally works the same way: You pay off one or more debts using a new debt. Some popular debt consolidation methods include personal loans and balance transfer credit cards.
Depending on your unique situation — how much debt you have to consolidate, your credit score, how soon you need the funds, what type of debt you have and other factors — one method may work better for you than another.
Personal loans:
Combine many types of debt into one fixed monthly payment with a debt consolidation loan.
Balance transfer credit cards:
Consolidate credit card debt onto a balance transfer credit card with a lower APR.
Home equity loans:
Tap your home’s equity to pay off debt by using your home as collateral.
Debt management plans:
Enroll in a DMP through a certified nonprofit credit counseling agency to repay your debt in three to five years.
| Pros | Cons | |
|---|---|---|
| APRs |
You can save money by comparison shopping for the lowest possible APR. Generally, the interest rates are fixed, making it easier to budget. |
Qualifying for lower APRs requires a strong credit profile, though you could always improve your score and reapply at a later date. |
| Repayment |
Personal loans have a definite payment schedule, which means borrowers know exactly how long it’ll take to pay off what they owe. Personal loans are generally unsecured, which means you don’t have to supply collateral. |
Missing one personal loan payment could result in a defaulted debt, causing harm to your credit file and future creditworthiness. While your personal property isn’t at risk with unsecured loans, you can still be sued for the debt if you fall behind on payments. |
| Amounts, fees |
Many lenders allow you to borrow a wide variety of amounts for a wide variety of purposes. There are plenty of no-fee lenders to choose from. |
Some lenders charge an origination fee that can be as high as 10% of the loan amount. Less scrupulous lenders hide fees or offer scant repayment protections. |
Check your credit score. Most consolidation options will require a credit check. Unsecured personal loans don’t require collateral, which means that lenders rely more heavily on your credit score, along with other factors, to determine eligibility. Check your credit score for free using My RateGuilde.
Calculate how much you need to borrow. Add up all your monthly debt payments that you wish to consolidate. You can use a personal loan to pay off credit cards, payday loans and other high-interest debts.
Determine the APR you need in order to save money. Your APR would need to be lower than what you’re currently paying on your debts for a personal loan to be worthwhile.
Compare APRs by prequalifying with lenders. Many lenders let you prequalify for a personal loan to get an idea of your potential APR without impacting your credit score. This lets you compare estimated loan offers before you formally apply.
Formally apply with a lender. If you’re approved, the lender can deposit the funds directly into your bank account. You can use that money to pay off all types of debt.
Once you consolidate your debts, regardless of which method you use, you’ll have one bill to pay. This can help you stay on top of your finances and set an attainable goal for your debt repayment plan.
Ideally, you’ll use a financial product with a lower interest rate and fewer fees than what’s charged on your current debts. This reduction in interest will help you save money you’d have been required to pay had you not consolidated.
Paying off credit card debt with a loan can have an immediate effect on your credit score by lowering your credit utilization ratio. This is the total amount of credit available to you versus the amount of credit card debt you have.
Credit counseling is a nonprofit service to help you manage expenses and debt payments more effectively. A credit counselor may set you up on a debt management plan and even negotiate debts and monthly payments on your behalf.
Debt settlement involves negotiating with your creditors to lower the amount of debt you owe and reduce fees charged to your account. Some companies offer this service, but these programs may come with high fees and can severely damage your credit.
Bankruptcy is a legal process offering debt relief for an individual or business. When you file for bankruptcy, your assets may be sold to repay your creditors, or you may be enrolled in a court-ordered debt repayment plan.
When it comes to obtaining most types of credit, including personal loans, the higher your credit score, the better the interest rates you are likely to be offered by lenders.
In the eyes of lenders, your credit score indicates how likely you are to repay a loan on time and in its entirety. Every time a lender offers someone a loan, they are taking a risk; the higher the credit score, the lower the perceived risk.
However, even borrowers with bad credit are able to find lenders that are willing to work with them. Keep in mind that you may not receive that lender’s lowest interest rates.
| Credit score range | Average APR | Average borrowing amount |
|---|---|---|
| 720+ | 14.37% | $18,812.69 |
| 680-719 | 20.86% | $15,214.76 |
| 660-679 | 32.14% | $11,727.69 |
| 640-659 | 44.09% | $9,470.86 |
| 620-639 | 61.13% | $7,350.97 |
| 580-619 | 87.74% | $5,746.62 |
| 560-579 | 122.22% | $4,250.88 |
| Less than 560 | 160.81% | $2,817.03 |
Debt consolidation loans may be the right choice for some borrowers, but there are other options out there that might be better suited to others. Here are a few alternative strategies to consider:
If you have high-interest debt, you may be able to cut back on how much interest you pay by getting a 0% intro balance transfer credit card.
These types of credit cards come with no interest for a set period of time. Once the introductory period ends, you’ll have to pay interest on whatever balance is left on the card.
Home equity loans and home equity lines of credit (HELOCs) allow borrowers to take advantage of the equity they’ve built into their homes.
Home equity loans work as a second mortgage and often come with fixed interest rates. You’ll be provided a lump sum and may be able to borrow up to 80% of your home’s value.
HELOCs, on the other hand, function as a credit line that is used to borrow against your home’s equity. These types of loans are similar to credit cards in that you only pay interest on the amount you borrow. HELOCs typically come with variable interest rates.
A debt consolidation loan won’t ultimately solve your financial issues if you’re struggling with sticking to a budget. If you find yourself in this scenario, you can work one-on-one with a debt counselor.
A debt counselor can help you create a realistic debt management plan and teach you how to manage your finances. They can also help you navigate whether bankruptcy is a good option for you.
In some cases, it may be beneficial to aggressively pay off your current debt instead of taking on a new loan. The debt avalanche and debt snowball methods are among the most popular forms of debt repayment strategies.
This debt repayment strategy focuses on paying off debts with the highest interest rates first. As a result, the debt avalanche method can help borrowers save money on interest in the long run.
When it comes to paying off debt, small wins can feel like big accomplishments. This is why some borrowers prefer the debt snowball method. This strategy focuses on paying off debts with the smallest balances first.
We looked at 16 lenders that offer debt consolidation loans to determine the 11 best lenders for this service. By offering a detailed and objective account of each lender’s rates and terms, LendingTree’s goal is to provide you with all the information you need to make a financially sound decision specific to your situation.
Here are the criteria we assessed to choose the best debt consolidation lenders: