Discover is the top lender for debt consolidation
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Kat Tretina is is an expert on student loans who started her career paying off her $35,000 student loans years ahead of schedule. Her work has been published by Experian, Credit Karma, Student Loan Hero, and more.
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Updated on February 26, 2024
Reviewed byCierra Murry
Fact checked byLars Peterson
We independently evaluate all recommended products and services. If you click on links we provide, we may receive compensation. Learn more. According to our research, Discover is the best overall personal loan lender for debt consolidation, due to its low cost, flexible repayment terms, and convenient direct creditor payment process. We researched 70 personal loan lenders and evaluated them on 31 factors, including cost, loan terms, borrower requirements, and additional features. Best Debt Consolidation Loans of 2024 Best Debt Consolidation Loans of 2024 The Bottom Line Guide to Choosing How To Apply Alternatives Frequently Asked Questions (FAQs) Methodology The Balance's Rating 4.5 Why We Chose It Discover offers loans with no origination fee and longer repayment term options. Its APRs for borrowers with excellent credit are lower than the national average, which can help you save money by consolidating your debt. You can apply for a Discover personal loan online and, if approved, receive the loan funds as soon as the next business day. Or, Discover will pay your creditors directly on your behalf. However, there are some limitations to Discover's loans. You cannot use them to consolidate secured debt like car loans or to pay for post-secondary expenses. Using a Discover loan to consolidate Discover credit card balance is also prohibited, so that can be an issue if you're trying to pay down your credit cards. To qualify for a Discover loan, you'll need good to excellent credit. According to the company's annual report, 98% of borrowers with originated personal loans had scores of 660 or higher. Discover doesn't allow co-signers or joint applications, so you'll need to meet its income and credit requirements on your own or find another lender. Pros & Cons Pros No origination fees Funds available as soon as next business day Longer loan term options Cons Relatively low loan maximum No joint applications or co-signers permitted Loan cannot be used to repay Discover cards Qualifications To consolidate your debt with a Discover loan, you need to meet the following requirements. The Balance's Rating 4.8 Why We Chose It If you have a significant amount of debt to consolidate, such as outstanding medical bills or credit card balances, you may struggle to find a lender offering a large enough loan maximum. While other lenders have caps of $40,000 or less, SoFi stands out with its larger-than-usual loan maximum of $100,000. SoFi disburses loans as soon as the same day of approval, and it doesn't charge origination or late fees. This lender also offers perks like unemployment protection and the option to change your payment due date. Good to excellent credit is required. Although SoFi doesn't disclose its minimum credit score, its annual report showed that the average weighted FICO score of approved borrowers was 747—according to Equifax, that score is in the "very good" range. Its minimum loan amount is also relatively high, so if you need to borrow a small sum, you may need to consider other lenders. Pros & Cons Pros Co-applicants permitted No origination or late fees Same-day funding possible Cons Lowest rates only for SoFi bank account holders Good to excellent credit required Higher loan minimum than other lenders Qualifications To qualify for a debt consolidation loan from SoFi, you must meet these requirements: Some lenders like SoFi offer longer repayment terms. You’ll have a lower monthly payment, but be aware that more interest charges will accrue over the life of the loan. The Balance's Rating 3.9 Why We Chose It With debt consolidation loans, rates can be in the double digits, making them less effective tools to save money. But if you have good credit and a steady source of income, you may qualify for lower-than-average rates from Reach Financial. Its lowest-possible rates are better than most lenders offer. Reach Financial has a lower loan minimum than many lenders, so you can borrow only what you need to consolidate your debt. Loan funds can be available as soon as the next business day. Reach Financial isn't available in every state, and it doesn't allow co-signed or joint applications, so you must qualify for a loan on your own. There is also the potential for high origination fees; with Reach Financial, origination fees can be as high as 8% of the loan amount. Pros & Cons Pros Lower interest rates Quick loan disbursem*nt Low loan minimum Cons Potential for high origination fees Doesn't allow co-signed or joint applications Loans not available in all states Qualifications Reach Financial doesn't disclose its minimum credit or income requirements, but borrowers must meet the following criteria: The Balance's Rating 4.6 Why We Chose It Although many lenders require applicants to have good to excellent credit, Upgrade has a lower credit score minimum than most. It works with lenders that accept scores as low as 620, and can facilitate loans for borrowers with even lower scores. It also allows joint applications. If your credit or income doesn't qualify you for a loan, Upgrade may offer you a secured loan with your car serving as collateral. By applying for a secured loan, you may better your chances of getting a loan or qualifying for a lower rate. While Upgrade debt consolidation loans have their perks, this lender does charge origination fees as high as 9.99%, and its maximum APR can be quite high. If you're self-employed, qualifying for a loan may be more challenging. You must be able to provide your two most recent tax returns filed. Otherwise, your application will be denied. Pros & Cons Pros Low loan minimum Secured loan and joint loan options Lower-than-usual credit requirement Cons Stringent requirements for self-employed borrowers APRs can be high Potential for high origination fees Qualifications To qualify for a loan through Upgrade, you must meet the following requirements: The Balance's Rating 4.5 Why We Chose It Lenders that issue debt consolidation loans often have limited term options, giving you three to five years to repay your debt. But with NASA Federal Credit Union, you can choose a loan term that fits your budget, with loan terms up to seven years. The credit union also allows co-signers, so you may be more likely to qualify for a loan from NASA Federal Credit Union than you would be with other lenders. NASA Federal Credit Union doesn't charge origination fees, and you can even refinance an existing NASA Federal Credit Union Loan. You must become a member of the credit union to obtain a loan. Membership is open to employees of NASA and the National Academy of Sciences and their families. But if you aren't a qualifying employee, you can join the credit union by joining the National Space Society. The cost ranges by membership tier, but starts at $25 per year. Pros & Cons Pros Low loan minimum Longer loan term options Co-signers permitted Cons Low loan maximum Credit union membership required Minimum APR is higher than others lenders' rates Qualifications NASA Federal Credit Union doesn't disclose its minimum credit or income requirements, but it does have a prequalification option you can use to check your loan eligibility. You must qualify for membership with the credit union to take out a loan. New members must also open a savings account and deposit at least $5. The Balance's Rating 4.7 Why We Chose It If you're an existing Citi customer, you can apply for a debt consolidation loan and receive funding to your Citibank account within hours. Citi doesn't charge origination or late fees, and you can qualify for rate discounts by enrolling in automatic payments with your Citi account. However, only existing Citi customers are eligible for the lender's loans, which have a lower loan maximum than most lenders. The lender doesn't allow co-applicants, so you have to qualify for a loan based on your own credit and income. Pros & Cons Pros Funding as soon as same day No origination or late fees Rate discounts Cons Must be an existing Citi customer Limited loan amounts Shorter loan term options Qualifications To qualify for a Citi loan, you must meet the following requirements: Debt consolidation can help you save money in total interest payments and help you pay down your debt faster. And with Discover—our choice as the best overall lender—you can take advantage of low rates and extended repayment terms to reduce your monthly payments and free up cash in your budget. If you have a larger amount of debt to consolidate—such as $40,000 or more—lenders like Upgrade or SoFi may be a better option. They have higher loan maximums than most lenders, and quickly disburse loan funds so you can consolidate your debt. The right debt consolidation loan for you will depend on your personal circ*mstances. A debt consolidation loan is a personal loan that you take out to pay off your existing debt, including credit card balances, medical bills, or another personal loan. These loans can help you get lower rates than you have on your existing debt, so you can save money and get out of debt faster. Or, they can lower your monthly payment amounts. Debt consolidation loans are available from several sources. Compare several lenders before making a choice to help ensure you get the best possible rate. Consider the following factors when comparing lenders: To qualify for a personal loan, you generally need good to excellent credit and a reliable source of income. But if you don't meet those requirements, you may be eligible with a co-signer, joint applicant, or secured loan. You can apply for a debt consolidation loan by following these steps: If a debt consolidation loan doesn’t fit your budget or financial situation, there are alternatives to consider. If you’re hoping to simplify your bills and get out of debt faster, debt consolidation might help. Debt consolidation is most likely to make sense when you have good credit, but your debt amounts might be too high to complete a credit card balance transfer. A debt consolidation loan may also be a good move if you don’t want to use the equity in your home to manage your unsecured debt. Start by deciding what’s important, whether it’s fast funding, low or no fees, or the ability to consolidate a large amount of debt. Some lenders also offer longer repayment periods, which could lower the amount you pay per month. Additionally, if you have poor to fair credit, you might need to look for a lender that specializes in offering personal loans to those with credit problems. Pay attention to origination fees and other costs, and compare your loan options. Depending on what you qualify for, you might have no choice but to pay an origination fee. Opening a loan to consolidate debts may ding your score slightly, but if you stay on top of your payments you should typically have nothing to worry about. While checking your loan options with a lender may not affect your credit score, officially applying for and securing a loan will. Consider doing all your personal loan shopping within 30 days to reduce the number of inquiries to your credit. This varies by lender and circ*mstance. Our choice for best for bad credit is Upgrade, which will accept credit scores as low as 620, and also offers secured loan options for borrowers with less-than-perfect credit. It depends on the circ*mstances. Loans in good standing remain on your account for as long as they are open and for another 10 years after they've been closed. Collection accounts and late or missed payments will remain on your report for seven years. So, for example, if you use a personal loan to consolidate debts that were in collections or had late payments, those consolidated debts would still stay on your report for seven years. To evaluate and rank personal loan providers we collected hundreds of data points across 70 lenders, including traditional banks, credit unions, fintechs, and special interest finance companies. We researched and evaluated APRs, loan amounts and terms, fees, customer experience, and much more. To rank the lenders in our database and to generate star ratings, we weighted the data we collected, based in part on what consumers told us were the most important features of a personal loan and lender in a survey we conducted. We grouped those factors into four broad areas: Learn more about how we evaluated personal loans in our complete methodology. Article Sources Experian. "How Long Does It Take for Information to Come Off Your Credit Reports?." U.S. Securities and Exchange Commission. "Discover Financial Services: 2022 Annual Report 10-K." Discover. "Explore Frequently Asked Questions-Qualifying for a Personal Loan." SoFi. "Personal Loans." Equifax. "What Is a Good Credit Score?" SoFi. "Form 10-K." SoFi. "Eligibility Criteria." Federal Reserve. "Consumer Credit - G. 19." Reach Financial. "Personal Loans With Customizable Options." Reach Financial. “Licenses.” Upgrade. "Upgrade Inc." Upgrade. "What Is an Auto Secured Loan?" Upgrade. "FAQs for Self-Employed Applicants." Upgrade. "What Are the Minimum Borrower Requirements?" NASA Federal Credit Union. "Unexpected Costs Come Up - We're Here to Help." National Space Society. "Join the Team for Space." Citi. "Citi Personal Loan - Get Started." MyFICO. "Credit Checks: What Are Credit Inquiries and How Do They Affect Your FICO Score?" Experian. "How Long Does It Take for Information to Come Off Your Credit Reports."Best Debt Consolidation Loans of 2024
Best Overall : Discover
Best for Large Loans : SoFi
Best for Low Interest Rates : Reach Financial
Best for Bad Credit : Upgrade
Best for Repayment Terms : NASA Federal Credit Union
Best Big Bank : Citibank
The Bottom Line
Guide to Choosing the Best Debt Consolidation Loan
What Is a Debt Consolidation Loan and How Does It Work?
Where To Get a Debt Consolidation Loan
Comparing Debt Consolidation Loans
How To Qualify For and Apply For a Debt Consolidation Loan
Alternatives to a Debt Consolidation Loan
Frequently Asked Questions
When does debt consolidation make sense?
How should I choose a personal loan for debt consolidation?
Does consolidation hurt credit?
What credit score do you need to consolidate?
How long does debt consolidation stay on your credit file?
Methodology