Best Loans to Consolidate Debt in 2021

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Repaying debt can be stressful, and managing multiple monthly payments might not be the best use of your time or money. Consolidating debts—combining multiple loans into one new loan—can simplify your finances and may save you money if it qualifies for a lower interest rate.

How Do Debt Consolidation Loans Work?

A debt consolidation loan is similar to other types of loans—you borrow money and repay it over time. However, instead of using the money to make a purchase, you use the funds to pay off existing loans or credit card debt.

Some lenders make this easier by sending the proceeds from a debt consolidation loan directly to your creditors. Others transfer the money into your bank account, and you'll need to follow through and use the funds to pay down your debts.

Many people consolidate debts with unsecured personal loans. Another option is to use a secured loan to consolidate debts, such as a home equity loan or cash-out mortgage refinancing. However, using a secured loan to pay off unsecured debt (such as a credit card) can be risky. If you can't afford your secured loan payment, you can lose your collateral—your home in the case of a home equity loan or refinance.

Missing payments on an unsecured loan can lead to fees, credit harm and other consequences, but you won't be putting your property directly at risk. As a result, it may be best to use unsecured personal loans, or a balance transfer credit card, to consolidate debt.

4 Top Debt Consolidation Loan Providers

You can find debt consolidation loans from banks, credit unions and online lenders. Here are a few of the top choices, and what you'll want to know about each lender. If you want to receive personalized recommendations based on your credit, try the Experian CreditMatchTM tool.

Best Consolidation Loan for Borrowers with Excellent Credit — SoFi

Apply

on SoFi's website

Good - Exceptional

Est. APR

4.99 - 17.09%

Term

24

Amount

Available loan amounts: $5,000 to $100,000

Est. monthly payment: $217 to $4,944

Grace period: 10 days

Application fee: $0

Loan Details
  • Personal Loans with low fixed rates
  • Borrow up to $100,000
  • No Origination Fees, No Prepayment Penalties, and No Late or Overdraft Fees
  • Simple online application with live support 7 days a week
  • Apply Now
Disclosure

SoFi is an online lender that tends to be a good fit for those with good to excellent credit. It offers fixed-rate loans with high potential loan amounts and few fees.

  • Loan amount: $5,000 to $100,000
  • Repayment terms: 24 to 84 months
  • Prequalification: Yes
  • Origination fee: No
  • Prepayment fee: No

Best Consolidation Loan for Credit Card Consolidation — Payoff

Apply

on Payoff's website

Fair - Exceptional

Est. APR

5.99 - 24.99%

Term

24

Amount

Available loan amounts: $5,000 to $40,000

Est. monthly payment: $219 to $2,075

Grace period: 10 days

Application fee: $0

Loan Details
  • 5.99% - 24.99% APR
  • Pay off high-interest credit card balances and save
  • Quickly check your rate without affecting your credit score
  • No prepayment, late, or check-processing fees
  • Members see an average FICO® Score boost of 40 points when paying down credit card balances
Disclosure

Payoff's fixed-rate loans are intended for consolidating credit card debt and have loan amounts and terms that will generally meet this need. It also lists some specific criteria for getting approved, such as a FICO® Score of at least 640, no delinquent accounts and at least three years of credit history.

  • Loan amount: $5,000 to $40,000
  • Repayment terms: 24 to 60 months
  • Prequalification: Yes
  • Origination fee: 0% to 5%
  • Prepayment fee: No

Best Consolidation Loan for Paying Off Credit Cards Directly — Upgrade

Apply

on Upgrade's website

Fair - Exceptional

Est. APR

5.94 - 35.97%

Term

36

Amount

Available loan amounts: $1,000 to $50,000

Est. monthly payment: $30 to $2,095

Grace period: 15 days

Application fee: $0

Loan Details
  • Affordable loans from $1,000 - $50,000 with low fixed rates that will never change, affordable monthly payments, and no prepayment penalties
  • Quick online application -- get pre-approved in just minutes
  • Checking your rate won't impact your credit score
  • Review multiple loan options so you can pick the amount and term that fits your budget and timeline
  • With automatic payments and a customizable due date, managing your account is easy and you'll be able to circle the date on your calendar when you'll be debt free
Disclosure

You can use a loan from Upgrade to consolidate a wide variety of loans. And if you want to pay off credit cards, Upgrade gives you the option of making payments directly to the card companies. Any excess loan amount will be sent to your bank account.

  • Loan amount: $1,000 to $50,000
  • Repayment terms: 24 to 60 months
  • Prequalification: Yes
  • Origination fee: 2.9 to 8%
  • Prepayment fee: No

Best Consolidation Loan for Borrowers With Fair Credit — Avant

Apply

on Avant's website

Fair - Very Good

Est. APR

9.95 - 35.99%

Term

24

Amount

Available loan amounts: $2,000 to $35,000

Est. monthly payment: $91 to $2,048

Grace period: 10 days

Application fee: $0

Loan Details
  • Personal loans from $2,000 to $35,0001 entirely online
  • Checking your loan options will not affect your credit score
  • Funding as soon as next business day2
  • No collateral needed and customer support available 7 days a week
Disclosure

Avant offers loans for borrowers with fair credit. The unsecured loan may have a higher interest rate and origination fee, which Avant calls an administrative fee, but it could still be the best option if you don't want to risk losing your vehicle or don't have one to use as collateral.

  • Loan amount: $2,000 to $35,000
  • Repayment terms: 24 to 60 months
  • Prequalification: Yes
  • Origination fee: Up to 4.75%
  • Prepayment fee: No

Debt Consolidation Pros and Cons

While consolidating your debts can help you save money and manage your bills, there are pros and cons to consider:

Pros

  • If your new loan has a lower interest rate than your current loans, less interest will accrue each month.
  • Your debt consolidation loan may have a smaller monthly payment than your current combined monthly payments.
  • Consolidating credit card debt with an installment loan could help increase your credit scores.
  • Your new loan's repayment term gives you a clear timeline for paying off the debt.

Cons

  • Depending on your credit scores and other factors, you might not qualify for a consolidation loan that has a low interest rate.
  • Even if you get a loan with a low interest rate or monthly payment, you could wind up paying more interest overall if it has a long repayment term.
  • Some loans have origination and prepayment fees.
  • If you consolidate credit card debt and continue to use your credit cards without paying the bill in full, you'll wind up with more credit card debt in addition to your consolidation loan to repay.

What to Look for in a Debt Consolidation Loan

As you compare debt consolidation loan lenders and offers, consider how the following features will impact your decision:

  • Loan amount: Do the minimum and maximum loan amounts meet your needs?
  • Repayment terms: Will your monthly payments be manageable with the offered repayment terms? A longer term will mean lower monthly payments, while a shorter term could mean repaying less overall.
  • Prequalification: Can you get an estimate of your approval, loan amount and rates with a soft credit check—the kind that doesn't impact your credit scores?
  • Origination fee: Do you have to pay a fee when you take out the loan?
  • Prepayment fee: Is there a fee for paying off the loan early?

The interest rate on a debt consolidation loan is also important in determining whether taking out the loan and consolidating your debts make sense. Often, lenders advertise a range of potential annual percentage rates (APRs), but your rate will depend on your creditworthiness.

The rate range isn't particularly helpful, as you won't know your rate offer until you apply or get prequalified. However, if you have excellent credit, you may want to target lenders that offer the lowest potential rates.

Also, consider whether you want a loan with a fixed or variable rate. Many lenders offer fixed-rate loans, which give you the certainty of the same monthly payment amount for your loan's entire life. Variable rates often start lower than fixed rates, but may rise in the future.

Quickly Compare Multiple Loan Offers

You can apply for prequalification on many personal loan lenders' websites, or you can save time by comparing multiple loan offers with the free Experian CreditMatchTM tool. After signing in, you can submit a soft inquiry prequalification application with your desired loan amount and loan purpose—debt consolidation. Experian will then gather loan offers from its partners, and you'll have 30 days to compare each offer and determine which is for you.

Personal Loan Calculator

The information provided is for educational purposes only and should not be construed as financial advice. Experian cannot guarantee the accuracy of the results provided. Your lender may charge other fees which have not been factored in this calculation. These results, based on the information provided by you, represent an estimate and you should consult your own financial advisor regarding your particular needs.

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