Best Debt Consolidation Loans

Single Sparkle

Updated: 21 Jun, 2025 • 0 • min read

Table of Contents

Key takeaways

The average three-year personal loan rate is 13.93% APR, but you might qualify for a lower rate with good or excellent credit.
A debt consolidation loan can help simplify your efforts to pay down debt by combining multiple loans into one loan and payment.
If you make your payments on time and stick to your debt reduction plan, a debt consolidation loan could help you improve your credit score.
Debt consolidation loans for bad credit are available if you have a FICO score of less than 580.

Low-interest debt consolidation loans can help you combine your debts into a single payment with one interest rate. While there are multiple ways to consolidate credit card debt and other high-interest debts, personal loans are considered one of the most accessible approaches.

As of June 1, 2025, the average personal loan rate on a three-year loan was 13.93% APR, while the average personal loan rate on a five-year loan was 18.71% APR, according to Credible. While these are average rates, you might be able to find lenders that offer lower interest rates, making debt consolidation more affordable. With the recent Federal Reserve decision to keep its benchmark the same due to economic uncertainty, loan rates are unlikely to drop in the immediate future.

Our best overall choice for debt consolidation is LightStream, which offers some of the lowest advertised APRs and loan amounts of up to $100,000. However, before you choose, compare the best debt consolidation loans to determine what works best for you.

What is debt consolidation?

Debt consolidation is the process of collecting all of your debts into one place so it’s easier to make payments. Often, you make one payment to a third party, and it handles the logistics. There are different strategies you can use for debt consolidation, including loans and debt management plans.

It’s important to understand that debt consolidation is different from debt settlement. With debt consolidation, you collect your debts in one place to more easily make payments. Debt settlement, on the other hand, focuses on helping you stop payments to creditors so you can negotiate a lower repayment amount.

When does debt consolidation make sense?

A debt consolidation loan can make sense, especially if it helps you get out of debt faster and costs less than your current payoff schedule.

Current debts vs. debt consolidation loan

When considering your monthly budget, a debt consolidation loan can help you reduce hassles while saving you money each month. The table below illustrates your monthly payments for three debts. When added together, you’re making separate payments that add up to $739.61 with an average interest rate of 21.67%. Your last debt would be paid off in 72 months, sticking to this schedule. With consolidation, you can reduce your overall payment, and avoid the need to keep track of three separate debts. You can be completely out of debt in 60 months and gain a little extra breathing room in your budget while reducing your overall APR.

Total debt cost comparison

By consolidating debt using a loan with a lower overall interest rate, it’s possible to save more than $9,000 in total interest paid. Whether you get a lower interest rate depends on various factors, including your credit history. Consider using a loan calculator to compare scenarios to find a consolidation loan that fits your budget while reducing what you pay overall.

Best debt consolidation companies

How to choose the best debt consolidation loan

Debt consolidation loans are often personal loans that combine multiple debts into a single loan. When comparing debt consolidation loans, consider your needs and financial situation. Review the loan's features and consider the potential long-term impact on your credit score.

Interest rates and fees to compare

When comparing debt consolidation loans, start with interest rates. Lower rates mean lower overall borrowing costs. If you can get a lower rate than what you’re paying on your current debt, it can save money and get rid of your debt faster.

Personal debt consolidation loan rates can reach up to about 36% APR, depending on your credit score, the lender and other factors.

Look at fees as well. Some lenders charge origination fees of up to 10% of your loan amount. Review late fees, potential prepayment penalties and other costs that could make the loan less desirable.

Loan terms and repayment flexibility

Debt consolidation loans usually have terms of two to seven years, although you might find lenders that offer longer terms. A longer loan term generally results in a lower monthly payment, which might help your budget. However, the longer in debt, the more you’re likely to pay in interest.

Find out if the lender will let you choose a payment date that matches your monthly budget and cash flow. Review its hardship programs as well, so you know whether you have options if you have a financial emergency later.

Impact on your credit score

A debt consolidation loan can positively impact your credit score by helping you pay off some of your credit cards and reducing your credit card utilization. Additionally, making your payments on time and in full can positively affect your credit score.

However, if you miss payments on your debt consolidation loan, it could damage your credit score. Without a plan to stay out of debt, you might run up credit card balances after consolidating them with a personal loan, which could also negatively affect your credit score.

Other debt consolidation options

Before choosing an online lender for debt consolidation, consider other options that might save you even more money or feel more manageable.

Banks or credit unions that offer debt consolidation loans

Other financial institutions, such as banks and credit unions, also offer debt consolidation loans. Depending on your situation, you might be able to access lower rates. Compare local credit unions and regional banks, and consider national banks before making a decision about debt consolidation loans.

Banks with competitive loan options

National and community banks might also have competitive loans. Check to see if there are available benefits from banks with which you already have an account. You might get a rate discount or other perks.

Regions Bank
Discover
Wells Fargo (you must be an account holder for at least 12 months to qualify for a loan)

Credit unions that offer debt consolidation loans

Consider comparing rates from credit unions. If you belong to a credit union, you might be able to get a low-rate debt consolidation loan and favorable terms. Some credit unions that offer online debt consolidation loans include:

Freedom Federal Credit Union
Connexus
PenFed
First Tech

Some credit unions have specific requirements to join, so research membership criteria before applying for a debt consolidation loan.

Credit cards that offer 0% APR on balance transfers

If you have a relatively small amount to consolidate and you qualify for a 0% APR balance transfer, it might make sense to open a new credit card.

Depending on the offer, you might be able to get 0% APR on your balance for up to 18 months or more. If you can pay off your debt in that amount of time, you can speed up the process and pay no interest on your debt consolidation. However, your APR increases at the end of the introductory period, so if you don’t pay off your balance, interest payments can hinder your efforts to pay down debt.

Balance transfers generally work well for those with good credit who can qualify for the offer. Additionally, you must receive approval for a credit line large enough to pay off your other loans.

Debt management plan

A debt management plan isn’t a loan. Often, debt management plans are administered by credit counseling organizations. Credit counselors help you create a budget and map out a plan to pay your debt. You make one payment to the credit counselor and they distribute the appropriate payments to your creditors.

Some credit counselors negotiate lower interest rates or payment amounts on your behalf. This can help you get out of debt sooner without needing another loan. Debt management plans might be appropriate for those with low credit scores who can’t qualify for a bad credit debt consolidation loan or get a competitive interest rate on a debt consolidation loan.

When looking for a credit counselor with a debt management plan, start by checking out the National Foundation for Credit Counseling or the Department of Justice’s approved list of credit counselors .

How to apply for a debt consolidation loan

While the process varies by lender, many follow a similar approach to applying for a debt consolidation loan.

Documents and requirements needed

When borrowing money, you generally need to provide the following identification and documentation:

Social Security number
Birthdate
Address
Driver’s license or other government-issued identification
Income (connecting to your bank account or uploading bank statements)

Many lenders check your credit and use your credit history and credit score to determine whether to approve your loan. Additionally, your income and credit influence your interest rate and available terms.

How to improve approval chances

If you’re concerned about being approved for a debt consolidation loan, some strategies can help you improve your chances.

Take steps to improve your credit: Review your credit report and identify errors. Challenge those mistakes to potentially improve your credit score. Paying down some of your debt and making on-time payments can also help you improve your credit. While there are debt consolidation loans for bad credit , they might come with a higher APR.
Provide collateral: If you don’t qualify for an unsecured debt consolidation loan, a secured loan might improve your approval chances. You can provide something of value, such as a deposit account, vehicle or home equity. Not every debt consolidation lender allows secure loans, however.
Find a cosigner: A cosigner who meets credit and income requirements can help you qualify for a debt consolidation loan. Your cosigner agrees to be responsible for the loan if you don’t make payments.

How long does the process take?

Some lenders offer same-day funding for borrowers who complete the paperwork by a certain time. Lenders that offer a soft credit pull often provide prequalification within a few seconds. A full application and approval can take several minutes to complete. If the lender requires additional documentation, you might need to wait a few days for approval.

Generally, though, the entire process can be completed, with funds deposited in your account, between one and three business days after approval.

Methodology

Buy Side from WSJ evaluated the best loans for debt consolidation across more than 30 partner and non-partner lenders based on minimum and maximum interest rates, available loan amounts, funding times, repayment terms, fees, discounts, loan uses, minimum credit and income requirements and other factors. Our team of experts gathered information from each lender's website, customer service department, directly from our partners, from third-party review platforms and via email support. A senior editor verified each data point to make sure it was accurate and up to date. Some lenders above are financial partners of Buy Side from WSJ.

Please read our personal loans methodology page for more information on categories, criteria and weightings used to establish star ratings.

FAQ

What credit score do you need for a debt consolidation loan?

Every lender has its own credit requirements for debt consolidation loans . You generally need a credit score well above 700 to qualify for the best advertised rates. Some lenders approve borrowers with scores below 600, but you might need to pay a higher APR to get a debt consolidation loan for bad credit.

Are debt consolidation loans worth it?

Debt consolidation loans can be worthwhile if they meet your needs and help you simplify your debt repayment plan. You can potentially save money in interest and get out of debt faster. On the other hand, there’s a chance that you could end up in more debt.

How do debt consolidation loans impact your credit?

Applying for a loan can potentially lower your credit score by a small amount due to the hard inquiry when you apply. However, if you make on-time payments and reduce your debt over time, your credit score could potentially improve. On the other hand, if you miss payments, you could damage your credit score.

Can you consolidate credit card debt with a personal loan?

Yes, you can use a personal loan to consolidate credit card debt.

Are there alternatives to debt consolidation loans?

Instead of getting a debt consolidation loan, you could create a debt payoff plan using the debt snowball, debt avalanche or some other method. You can also consider signing up for credit counseling to get help managing your debt.