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Having debt is tough, and it’s even tougher if your financial obligations come from multiple sources.
It can be enough to keep track of who you owe, and when you need to pay them, never mind worry about how much you owe them. If you’re really struggling, you might end up missing payments, increasing your total debt, and worsening your credit score—it can seem like a vicious cycle you can’t escape from.
That’s where debt consolidation loans come in.
Instead of juggling various loans with different conditions, you can take out a single loan to deal with them all; this means you’ll only have one payment schedule to think about, which is understandably an attractive option for money people.
What Are The Best Debt Consolidation Loans?
The best debt consolidation loan for you depends on a few factors; however, for many loan providers, your credit score is the major deciding factor. Loan providers that specialize in borrowers with bad credit may also take other indicators into account, such as educational background and earning potential.
Most people have a credit score between 350 and 850. However, be aware that most lenders prefer borrowers with a credit score of at least 670.
Don’t know your credit score? Find out now for FREE using Credit Karma; this will give you an idea of which lenders you can consider.
Best Consolidation Loans for Individuals with Poor Credit
|Best Companies For Poor Credit ( credit score: below 600 )|
BadCreditLoans.com specializes in just that, loans for people with bad credit. The site has been around since 1998 and is a leading name in the subprime sector. Instead of providing loans themselves, they are great at connecting borrowers with lenders.
You can receive a loan between $500 and $5,000 at an APR from 5.99% to 35.99% for a term of 3 to 60 months. Instead of asking for a specific credit history or collateral, a steady income and checking account is all you need to achieve approval.
OneMain Financial offers fair loans for people with bad credit—there are no minimum requirements stated to obtain a loan, although the average credit score of borrowers is 622. When deciding whether to approve customers, it also accounts for credit history, income, and debt load.
Most OneMain Financial loans are unsecured and have a fixed rate, but if you don’t qualify, you could opt for a secured personal loan instead—you could use your car, boat, RV, or motorcycle as collateral if they have enough value.
You can borrow from $1,500 to $20,000 at an APR of 18.00% to 35.99% at term lengths of 12, 36, 48 or 60 months. There’s a co-signing option, which gives you the chance to receive better terms. However, you’ll need to pay an origination fee and possibly a late fee depending on which state you live in.
OneMain has been around for over 100 years and has an A+ rating from the Better Business Bureau, which shows they’re a reliable lender. You’ll also be able to receive customer support in over 1,600 locations, which is a benefit for some. Unfortunately, there are only branches in 44 states.
Lending Club is a peer-to-peer lender (or lender marketplace), which means it connects investors looking for a return directly with borrowers looking for a loan. They offer quite flexible options—there’s a chance for you to receive a hardship plan, pay your lender back directly, and use a cosigner. The average customer saves $1,300 by using Lending Club.
You can borrow $1,000 to $40,000 at an APR from 6.95% to 35.89% for a term of 36 or 60 months. The rate will be fixed. Unfortunately, there are origination fees from 1% to 6% and a late fee, as is the case with most bad credit specialists.
The minimum credit score for applicants is just 600, and this lowers to 540 for those taking advantage of the opportunity to apply with a cosigner. The maximum debt-to-income ratio is 40%, but this drops to 35% for those with a cosigner.
Avant is fairly lenient with their loan requirements; you only need a minimum credit score of 580 to be approved.
You can receive a loan from $2,000 to $35,000 at an APR between 9.95% and 35.99% with a term of 24 or 60 months. There’s an origination fee of 0.95% to 4.75%, but no additional hidden fees.
Avant has an A+ rating from the Better Business Bureau and access to customer service by phone, email, or chat seven days a week; 95% of customers report satisfaction. You also can receive your funds within a day.
However, Avant loans aren’t available to residents from Colorado, Iowa, Vermont, or West Virginia.
The Pentagon Federal Credit Union (or PenFed for short) is a credit union, which is a financial cooperative owned by its members. This results in more favorable terms for those with poor credit compared to lenders operating for profit.
You can borrow as little as $500 or as much as $25,000 at an APR from 6.49% to 17.99% with repayment terms up to 60 months. Loans are unsecured and fixed-rate. There are no origination or prepayment fees, but there is a late fee of $5.
To apply, you can either complete the process online or visit a branch—there are 51 in total across the United States. No minimum credit requirement is stated, but that doesn’t guarantee approval for those with bad credit. Unusually, all loans are disbursed by check.
Best Consolidation Loans for Individuals with Average Credit
|Best Companies For Average Credit ( credit score: 600 – 640 )|
LendingTree is a lending network that connects you with various loan providers, making it a great comparison shop. Lots of the lenders on LendingTree have lower than average requirements, so it’s a good choice for those with any credit score.
Because LendingTree indirectly connects you with loan providers rather than providing the loans itself, specific details such as the APR, term length, and loan value are at the discretion of the relevant lender.
After completing its online form, you’ll receive offers from up to five lenders. This helps you to get an idea of what kinds of terms you can expect, which makes LendingTree the ideal place to start your search for a loan. You can also use the shopping tool to compare providers.
Payoff only offers debt consolidation loans for paying off credit card bills, and all its loans are fixed-rate and unsecured.
The loans are between $5,000 and $35,000 at an APR of 5.99% to 24.99% for 24 to 60 months. You’ll have to pay an origination fee between 0% and 5%, but there are no other fees involved.
Payoff is geared towards helping its customers secure a better financial position. It helps clients to boost their FICO score by 40 points by providing educational resources and guidance from customer service. You can even request to have an alternative plan if the one you initially chose no longer suits you.
The minimum credit score requirement is 640, and you’ll also need a debt-to-income ratio below 50% and to have not made any payments late by more than 90 days. You can’t apply if you come from one of the following states: Massachusetts, Mississippi, Nebraska, Nevada, or West Virginia.
Upstart suits those with average, or even slightly below average, credit histories. They also accept borrowers who are new to credit and don’t have much of a history. Looking to reduce your high-interest debt? Upstart could be just for you.
You’ll receive from $1,000 to $50,000 at a fixed rate from APR 6.46% to 35.99% on three- or five-year terms. Your education, area of study, and job history will be taken into consideration as well as your credit history.
You need a credit score of at least 620 for approval, and an annual income of $12,000. There are origination fees from 1% up to 8% and late fees of 5% or 15%, whichever is greater. There’s also no co-signing option.
99% of applicants receive their money within just one business day.
Upgrade is another good provider for those with credit scores on the lower end of average; the minimum credit score needed is 620. You’ll also need a minimum monthly cash flow of $800.
You can receive a loan from $1,000 to $50,000 with an APR of 7.89% to 35.89% at a term of either three or five years. There’s a late fee of $10 if you miss a payment and an origination between 1.5% to 6%.
Signing up for a loan with Upgrade will give you access credit-building and credit health tools, which is a major perk, and you can receive funds within a day after getting approved.
Loans from Upgrade aren’t available to people from these states: Colorado, Iowa, Maryland, Vermont, and West Virginia.
Best Egg has an A+ rating from the Better Business Bureau and was named the #1 Personal Loan provider by Best Company. It’s a good all-round choice for people with a fair credit score.
You can get a loan from $2,000 to $35,000 an at APR from 5.99% to 29.99%. You can choose a term of three or five years. There’s an origination fee of 0.99% to 5.99% and a late fee of $15.
The minimum credit score requirement is 640, and you’ll also need to have at least three years’ credit history and no delinquencies. However, to secure the best rates, you’ll need a score of 700 and an annual salary of $100,000 or more.
You might be able to get your money within one business day after completing the online application.
The main advantage of FreedomPlus is that you can bring in a cosigner to lower your rate. However, you’ll still need a credit score of at least 640, a debt-to-income ratio of 40% or less, and at least $40,000 of annual income. This is stricter than most of the other poor credit lenders on this list. However, you can also choose to pay your creditors directly, and it’s possible to get a reduced loan if you have retirement assets of $40,000 or more.
You can borrow from $7,500 to $40,000 at an APR of 5.99% to 29.99% for a term of two to five years. These are fixed rates. The origination fee can go up to 5%, and there are late fees of 5% or $15, but there are no hidden fees.
You can be approved on the same day as you apply, after which you’ll receive your money within 48 hours.
Best Consolidation Loans for Individuals with Good Credit
|Best Companies For Good Credit ( credit score: 650+ )|
Borrow between $5,000 and $50,000 at an APR between 5.99% and 35.99% for a term up to 72 months. As is the case with LendingTree, the exact conditions depend on the lender you choose. You can receive the funds within a day.
Marcus by Goldman Sachs
Marcus is the online lending offshoot of the major investment bank Goldman Sachs. It makes a good choice for those with a good credit history—you’ll need a minimum credit score of 660, although the average borrower has an even higher number. As is the case with many good credit lenders, there are no fees.
You can borrow from $3,500 to $40,000 at an APR from 6.99% to 28.99% for a term of between 36 and 72 months. You can be approved within 24 hours, but it may take up to five days to receive any money.
Earnest requires a minimum credit score of 680 to receive approval, which is one of the highest on this list. The lender also takes spending habits, education, and earning potential into account. However, there are no fees, and the terms are very fair.
You can borrow from $5,000 to $75,000 at an APR from 5.99% to $17.24% for a term of one, two, or three years. Earnest offers a fixed rate and involves no fees, as well as a flexible underwriting program. You’ll receive the funds within 1-2 days. If you can secure a loan with Earnest, you’ll be in safe hands.
Unfortunately, Earnest doesn’t operate in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.
Short for social finance, SoFi is a loans provider committed to helping graduates manage their student loan debt. You’ll need a credit score of 680 or higher for approval, but in return, you’ll receive a no-fees loan with low rates.
You can borrow from $5,000 to $100,000 at an APR of 5.99% to 17.88%. Interest rates may be fixed or variable. Terms are 3, 4, 5, 6, or 7 years. There’s also an AutoPay feature, which guarantees a discount of 0.25%; if you know you’ll be able to meet your obligations, you should take advantage of this.
Because of its commitment to social causes, SoFi will pause payment obligations for those who unexpectedly become unemployed during their loan term and need some help with searching for a new job. There’s also late-fee forgiveness after three consecutive on-time payments.
You can access support seven days a week.
Discover is an FDIC-insured online bank that offers loans well-suited to people with good credit scores. You need to have a minimum credit score of 660 and a minimum annual salary of $25,000, although these numbers are higher for the average borrower.
Loan amounts are between $2,500 and $35,000 for an APR between 6.99% and 24.99%. You can have a loan term of 36, 58, 60, 72, or 84 months. There are no origination fees, but you will have to pay a late fee of $39. There’s also no cosigning option.
However, a big advantage of Discover is its flexibility. You can pay back creditors directly if you want, and you can return a loan within the first 30 days of taking it out without paying interest. You can even change the date your payment is due to suit you better, as long as you don’t try to do so twice within a year.
You’ll have access to customer service seven days a week from professional advisors, and you can manage your finances from the app. As well as advisors, Discover provides lots of resources to help with financial management, such as a free FICO credit scorecard.
However, it can take up to a week to receive your funding, which is slower than average.
Laurel Road offers loans at a low rate with a few extra benefits, including the option to apply with a co-signer for a lower rate and to receive a discount of up to 0.25% by using the Autopay feature.
You can get a loan from $1,000 to $45,000 at an APR between 8.01% and 16.30%. You need a minimum credit score of 660. There’s an origination fee of 5% and a fixed fee of $28 for late payments, which is unusual for a lender asking for a relatively high credit score.
You can receive funds within two days.
How Do Debt Consolidation Loans Work?
Debt consolidation loans provide a way of streamlining your obligations: you’ll receive a loan amount equal to the sum of your debts, so you can work on paying them all back at once.
Generally, you’ll pay back at a fixed interest rate in monthly installments. This makes your debt easier to organize since you know exactly what and when you’ll need to pay for everything. Most debt consolidations loans are unsecured, but some companies also offer secured loans, which require collateral—this may be the case if you have a poor credit score.
Personal Loans vs. Debt Consolidation Loans
Some loan providers offer debt consolidation loans as a specific type of personal loan, while others have a dedicated loan for debt consolidation. Either way, the mechanisms of the loans are the same.
When choosing between loans, pay attention to the Annual Percentage Rate (APR) offered by providers and not just the interest rate; the APR incorporates extra charges and allows you to compare the conditions of lenders directly. Extra charges may include origination fees, prepayment fees, and late payment fees.
You should also consider any special features the lender offers. They could offer the ability to directly pay your creditor (which means your lender will pay off your old debts when your loan closes). Or the opportunity to have a co-signer, which is a way of improving your rates if the cosigner has a better credit score. You may also get access to free credit score monitoring or hardship programs.
You could get a debt consolidation loan from a brick-and-mortar bank, credit unions, online lender, or lender marketplace.
Do Consolidation Loans Hurt Your Credit Score?
Your credit score is only harmed when a ‘hard pull’ is performed; this happens every time you make an official application to a loan or credit card.
However, almost all loan providers let you carry out a ‘soft pull’ first using a rate quote request; these don’t affect your credit score, so you should take advantage of them before applying for any financial product. Unfortunately, they’re not always completely accurate; it’s possible to be approved by the soft pull inquiry but not the real loan.
Are Debt Consolidation Loans A Good Idea?
Although taking out a loan when you’re already in debt sounds counterintuitive and risky, a debt consolidation loan actually has lots of benefits. Debt consolidation loans often have a lower interest rate than other types of debt, they help you to pay off your debt faster, they can make the debt less expensive, and they help you to track your debt more easily since you only have to think about one thing. Debt consolidation loans also give you a chance to increase your credit score.
If your unsecured debts are 40% or more of your income, it’s a good idea to consider a debt consolidation loan, as this suggests you’re juggling an overwhelming amount of debt and need extra help.
However, there are certainly risks involved. You might end up getting into deeper debt, especially if you still struggle with keeping to a budget. It’s important that you don’t spend the loan money you receive on anything other than your debt, and that once you pay off your credit card debts, you stop accumulating further balances.
A further consideration is that debt consolidation loans involve steeper monthly payments than credit cards, even though you’ll end up paying less overall. Ensure you can afford to make these payments.
Is It Smart To Get A Personal Loan to Consolidate Debt?
To decide whether a debt consolidation loan is right for you, evaluate your circumstances and the exact purpose for the loan.
You should think about how much you want to borrow, how quickly you want to pay it off, and what your credit score is. Once you have an idea of these variables, you’ll be able to estimate what your potential rates and payments would be if you took out a loan. Compare this with what you’re currently paying and work out if it would be manageable and beneficial.
Do Banks Offer Debt Consolidation Loans?
Some debt consolidation providers are banks, such as Marcus, which is an offshoot from Goldman Sachs. Others are credit unions, peer-to-peer lenders, or online lenders. Generally, banks have stricter credit score requirements than other types of lenders.
However, if you go to visit a local bank in person, you may be able to secure a debt consolidation loan at a fair rate with a poor credit score. This is because many institutions have an interest in giving back to their community and providing social value.
Is A Consolidation Loan The Right Choice for You?
Depending on your circumstances, debt consolidation loans could be a great way to pay off your loans or a bad idea. If you’ve accumulated various sources of debt across credit cards, medical bills, and other repayments and have a relatively good credit score, then taking out a loan of this type is probably a sensible choice.
However, if you have a bad credit score and you’re not confident you’d be able to sensibly manage the money you borrow, taking out a debt consolidation loan could be dangerous and result in you accumulating more debt. Make sure you compare the loan terms offered to you and survey your finances carefully before making a final decision.