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Credit card debt is common, and sometimes we end up in over our heads before we even realize it.
The average credit card balance is $5,315, according to Experian’s latest data. And while that number has dropped since 2019, even debt in the low four-figures can cost you a lot in interest when you only make the minimum payment.
If you’re stuck in a no-win situation with credit card debt you can’t afford to pay off (but also can’t afford not to), a personal loan for debt consolidation might be your ticket out.
Debt consolidation also helps people with multiple student loans lump them together into one loan, ideally with a lower interest rate.
One obvious draw of using a personal loan for debt consolidation is that it helps you avoid getting overwhelmed by too many bills and too many different due dates. Imagine taking all those payments you’re juggling and streamlining them into one monthly bill. That’s one of the big benefits of a debt consolidation loan.
However, there are a few considerations to make when looking for the right debt consolidation loan. You’ll want to make sure you are getting the best interest rate and that the repayment plan works within your budget.
CNBC Select rounded up the top personal loans for debt consolidation, looking at fees, interest rates and flexible repayment options for different credit scores. (Read more about our methodology below.)
We tried to prioritize loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores. Some of the options ahead have origination fees and/or APRs — make sure you understand the terms of the loan before you sign up. For loans with no origination fees, check out our best personal loan list.
CNBC Select’s picks for best debt consolidation loans
Debt consolidation loans FAQs
Best for student loan consolidation
SoFi Personal Loans
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Annual Percentage Rate (APR)
5.99% to 22.56% when you sign up for autopay
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Loan purpose
Debt consolidation/refinancing, home improvement, relocation assistance or medical expenses
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Loan amounts
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Terms
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Credit needed
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Origination fee
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Early payoff penalty
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Late fee
Pros
- No origination fees, no early payoff fees, no late fees
- Unemployment protection if you lose your job
- DACA recipients can apply with a creditworthy co-borrower who is a U.S. citizen/permanent resident by calling 877-936-2269
- Can have more than one SoFi loan at a time (state-permitting)
- May accept offer of employment (to start within the next 90 days) as proof of income
- Co-applicants may apply
Cons
- Applicants who are U.S. visa holders must have more than two years remaining on visa to be eligible
- No co-signers allowed (co-applicants only)
Best for fair/average credit
Upstart Personal Loans
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Annual Percentage Rate (APR)
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Loan purpose
Debt consolidation, credit card refinancing, home improvement, wedding, moving or medical
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Loan amounts
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Terms
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Credit needed
FICO or Vantage score of 580 (but will accept applicants who’s credit history is so insufficient they don’t have a credit score)
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Origination fee
0% to 8% of the target amount
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Early payoff penalty
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Late fee
The greater of 5% of monthly past due amount or $15
Pros
- Open to borrowers with fair credit (minimum 580 score)
- Will accept applicants who have insufficient credit history and don’t have a credit score
- No early payoff fees
- 99% of personal loan funds are sent the next business day after completing required paperwork before 5 p.m. Monday through Friday
Cons
- High late fees
- Origination fee of 0% to 8% of the target amount (automatically withheld from the loan before it’s delivered to you)
- $10 fee to request paper copies of loan agreement (no fee for eSigned virtual copies)
- Must have a social security number
Best for consolidating debt while improving financial literacy
Upgrade Personal Loans
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Annual Percentage Rate (APR)
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Loan purpose
Debt consolidation/refinancing, home improvement, major purchase
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Loan amounts
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Terms
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Credit needed
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Origination fee
2.9% to 8%, deducted from loan proceeds
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Early payoff penalty
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Late fee
Up to $10 (with 15-day grace period)
Pros
- No early payoff fees
- Loans up to $50,000
- Fixed interest rates (no surprises)
- Can pay creditors directly (may take up to two weeks)
- Fast funding in as little as four days
Cons
- No joint applications or co-signers
- Origination fee of up to 8% (deducted from your loan)
- Not available in Colorado, Connecticut, Iowa, Maryland, Vermont and West Virginia
Why Upgrade is the best for financial literacy:
- Free credit score simulator to help you visualize how different scenarios and actions may impact your credit
- Charts that track your trends and credit health over time, helping you understand how certain financial choices affect your credit score
- Ability to sign up for free credit monitoring and weekly VantageScore updates
Best for paying creditors directly
Marcus by Goldman Sachs Personal Loans
On the Marcus by Goldman Sachs secure site
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Annual Percentage Rate (APR)
6.99% to 19.99% APR when you sign up for autopay
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Loan purpose
Debt consolidation, home improvement, wedding, moving and relocation or vacation
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Loan amounts
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Terms
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Credit needed
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Origination fee
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Early payoff penalty
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Late fee
Pros
- No origination fees, no early payoff fees, no late fees
- Will send direct payment to up to 10 creditors (for debt consolidation)
- Monthly VantageScore updates
- Earn a one-month payment vacation (interest-free) after making 12 on-time consecutive payments
- Ability to choose your due date when you accept the loan (and again up to two more times after that)
Cons
- Does not accept joint applications and/or co-signers
- Not the fastest funding (can take a week or 10 business days)
- Slightly tougher approval requirements (especially for larger loans/lower interest)
Best for staying motivated
Payoff Personal Loans
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Annual Percentage Rate (APR)
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Loan purpose
Debt consolidation/refinancing
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Loan amounts
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Terms
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Credit needed
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Origination fee
0% to 5% (based on credit score and application)
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Early payoff penalty
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Late fee
5% of monthly payment amount or $15, whichever is greater (with 15-day grace period)
Pros
- Peer-to-peer lending platform makes it easy to check multiple offers
- Loan approval comes with Payoff membership and customer support
- No prepayment penalties
- No late fees
- Fast and easy application
- U.S.-based customer service
Cons
- Higher loan minimums ($5,000)
- Must submit soft inquiry to see origination fees and other details
How Payoff is designed to help you stay motivated:
- Offers borrowers a dedicated “Empowerment Science” team that is available to take questions and provide encouragement
- Free personality tests, stress assessments and cash flow trackers to help borrowers understand their money management style and nail down better habits
- Free FICO tools help members track their progress*
*Based on a study of Payoff Members between February 2020 to August 2020, members who use a Payoff Loan to eliminate at least $5,000 of credit card balances reportedly see an average FICO Score boost of 40 points. (Results may vary and are not guaranteed.)
Best for good to excellent credit
LightStream Personal Loans
On LightStream’s secure site
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Annual Percentage Rate (APR)
2.49% to 19.99%* when you sign up for autopay
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Loan purpose
Debt consolidation, home improvement, auto financing, medical expenses, wedding and others
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Loan amounts
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Terms
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Credit needed
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Origination fee
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Early payoff penalty
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Late fee
Pros
- Same-day funding available through ACH or wire transfer
- Loan amounts up to $100,000
- No origination fees, no early payoff fees, no late fees
- LightStream plants a tree for every loan
Cons
- Requires several years of credit history
- No option to pay your creditors directly
- Not available for student loans or business loans
- No option for pre-approval on website (but pre-qualification is available on some third-party lending platforms)
Best for joint applicants
Prosper Personal Loans
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Annual Percentage Rate (APR)
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Loan purpose
Debt consolidation/refinancing, home improvement, auto/motor, medical or dental, big purchase and more
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Loan amounts
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Terms
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Credit needed
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Origination fee
2.41% to 5.99%, deducted from loan proceeds
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Early payoff penalty
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Late fee
5% of monthly payment amount or $15, whichever is greater (with 15-day grace period)
Pros
- Co-borrowers are permitted
- Repeat borrowers may qualify for APR discounts
- Option to change your payment date according to when works best for you
- Wide range of loan amounts
- No prepayment penalty
Cons
- High late fees
- Origination fee of 2.41% to 5.99%, deducted from loan proceeds
- Only two loan terms to choose from (3 or 5 years)
- Slightly longer wait time to get approved and funded (may take up to 10 days)
Debt consolidation FAQs
1. What is a debt consolidation loan?
A debt consolidation loan is a personal loan that’s used to pay off existing debt across other accounts, including credit cards, student loans and other installment loans.
Debt consolidation loans should not be confused with debt settlement or debt negotiation. If you want one of these loans, most lenders require that you:
- Apply for and get approved for a new personal loan.
- Use the personal loan money to pay off your old accounts.
- Set up monthly payments on the new loan (usually starting within 30 days).
- Pay off the full amount of your loan (typically the combined total of your old balances plus interest), plus any applicable fees.
2. What are the benefits of consolidating debt?
Debt consolidation loans don’t come with a money-saving guarantee, though with a lower APR, they certainly can shave off some interest charges. People who use debt consolidation loans successfully can often save money when they stick to their new, simplified payoff plan and refrain from using their old credit cards to rack up new debt.
Personal loans are most useful when you consolidate credit card debt that has very high APRs. Take this Chase cardholder, for instance: With a 25.74% APR, it would take the cardholder 21 years to pay off a balance of $5,311.57 if they only paid the minimum each month. They would end up paying a total of $15,891 including interest.
Now just imagine if they had two or three credit cards with similar balances and APRs.
The average personal loan interest rate is currently 9.65% APR….
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Read More: Best Debt Consolidation Loans
2021-02-25 17:17:29
