Debt consolidation is a process where multiple debts, often from things like credit cards, are rolled into a single payment. This can make it easier to pay off debt faster and keep track of how much debt you have. Best Debt Consolidation Loans May is a type of personal loan that can help you combine several high-interest debts into one new loan, ideally one with a lower interest rate.
You pay off multiple debts with a single loan that has a fixed monthly payment. When managed responsibly, a debt consolidation loan can help you save money on interest and get out of debt faster.
About The Best Debt Consolidation Loans
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A debt consolidation loan can help you manage your debts more effectively, but only if you find a loan that works for your situation. When shopping for the best debt consolidation loan, look for the lowest interest rate, a loan amount that meets your needs, an affordable and workable repayment term and low to no fees. Loan details presented here are current as Nov. 12, 2021. Check the lenders’ websites for the latest information. The top lenders listed below are selected based on factors such as APR, loan amounts, fees, credit requirements and broad availability.
What is Debt Consolidation Loan
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.
Debt Consolidation Loan Cost
Debt consolidation loans are designed to help you manage your existing debt, so the loan will need to cover your existing debts’ value. How much a debt consolidation loan will cost will depend on several factors:
- Loan amount: This will depend on the value of the debts you plan to consolidate
- Term: How long you intend to borrow (the average term is 4 years*)
- APR: This is the loan interest rate plus any other charges like annual fees or arrangement fees
- Any extra fees: Providers may charge a settlement fee if you pay the loan off
Debt Consolidation Loans Work
Online lenders, banks and credit unions offer debt consolidation loans. If you qualify, the lender deposits the loan into your bank account, and you use that money to pay off your debts. Some lenders send loan proceeds directly to your creditors, saving you that step.
Once you pay off your other debts, you make monthly payments toward the debt consolidation loan. Payments are fixed for the life of the loan, typically two to seven years.
Debt Consolidation Loans Good Idea
If you can qualify for a low enough interest rate, and you can afford the monthly payments, debt consolidation loans can be a smart strategy for getting out of debt.
You pay less in interest. A debt consolidation loan should have a lower interest rate than the combined rate on your existing debts. This means you’ll owe less interest on the amount you’re borrowing.
You can get out of debt faster. Depending on the amount you owe and the repayment term you choose, you may get out of debt faster with a consolidation loan.
You can budget for fixed payments. Unlike other debts such as credit cards, debt consolidation loans have fixed rates and monthly payments that won’t change over the course of the loan, making budgeting easier.
You’ll have a clear finish line. By consolidating multiple debts under one loan, you’ll have an exact date when you’ll be debt-free, which can be motivating and help you stick to the payments.
Loan companies APR range Loan amount Credit required Origination fee Repayment terms LightStream 3.99% – 19.99% $5,000 – $100,000 Not specified No origination fee 24 to 144 months Marcus by Goldman Sachs 6.99% – 19.99% $3,500 – $40,000 Not specified No origination fee 36 to 72 months Payoff 5.99% – 24.99% $5,000 – $40,000 640 0.00% – 5.00% 24 and 60 months Prosper 7.95% – 35.99% $2,000 – $40,000 640 2.41% – 5.00% 36 or 60 months SoFi 6.99% – 21.78% $5,000 – $100,000 680 No origination fee 24 to 84 months Upgrade 5.94% – 35.97% $1,000 – $50,000 620 2.90% – 8.00% 36 or 60 months Upstart 4.37% – 35.99% $1,000 – $50,000 600 0.00% – 8.00% 36 or 60 months Wells Fargo 5.74% – 24.24% $3,000 – $100,000 620 None 12 to 84 months