The 10 best debt consolidation loans of 2024 to simplify paying off debt (2024)

Managing multiple debts can be overwhelming. If you carry a balance on your credit cards each month, you aren’t alone — the average consumer carried a credit card balance of over $6,000 in the fourth quarter of 2023, according to TransUnion. The Federal Reserve reported that total credit card balances reached an all-time high of $1.13 trillion in the same period.
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If you want to simplify repayment and potentially save money in the process, a debt consolidation loan could be the answer. This process involves using a lump-sum personal loan to roll your high-interest debts into a single monthly payment. If you have good credit scores, you may qualify for low rates and see substantial savings on interest in the long run.
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We analyzed dozens of companies to determine the 10 best lenders for debt consolidation.

Why get a debt consolidation loan?

• Simplify payments. Combining multiple monthly debt payments into a single consolidation loan streamlines your finances and reduces the chance of missing a payment.
• Save money. If you qualify for a debt consolidation loan with a lower APR than your existing rate, you can save money on interest each month and in the long run.
• Expedite payoff. If you select a shorter term than you have on your existing debt, you could get out of debt faster. This is especially true if you’re consolidating credit card (or other revolving) debt with no set repayment end date.
• Improve credit over time. Making loan payments on time and in full is one of the best ways to boost your credit scores. Plus, using loan funds to pay off revolving debts, like credit cards, can improve your credit utilization ratio, which should also help your score.

What is a debt consolidation loan?

Debt consolidation involves using a lump-sum personal loan to repay multiple creditors, rolling your debts into a single payment. If you qualify for a lower APR than the average rate of your current debts, you can save money and potentially pay off your debts faster. Debt consolidation loans are commonly offered at banks, credit unions and online lenders, but be careful — rates can be as high as 36%, so borrowers with poor credit may not save much money with this strategy.

How do debt consolidation loans work?

When you borrow a debt consolidation loan, you use funds to pay off your existing high-interest debts, like credit card balances. Then, you repay the loan in fixed installments over a set term, commonly one to seven years. In many cases, lenders will repay your creditors on your behalf, so you don’t have to worry about handling that part of the process.

Debt consolidation loans are a type of personal loan. As such, eligibility is based on your creditworthiness — borrowers with excellent credit are more likely to qualify and can access competitive rates, while bad-credit borrowers can expect high APRs, if they qualify at all. That said, you could overcome poor or fair credit by recruiting a co-applicant — either a cosigner or co-borrower — who would share the legal responsibility of repayment.

Let’s say you have $20,000 in credit card debt with an 18.00% APR and $600 in monthly dues. It would take 46 months to pay off your balance, and you’d pay $7,427 in interest alone (assuming you didn’t make additional charges). But, if you were to get a debt consolidation loan with an 11.00% APR and a 36-month term, you’d only pay about $3,572 in interest. It would bump your monthly payment to $655, but you’d be out of debt faster and save more money long-term.

The main feature that attracts borrowers to debt consolidation loans is the opportunity to get out of debt faster and possibly save money in the process. You can drastically lower your long-term costs if you opt for a short loan term and qualify for a lower APR.

When juggling multiple debt payments, it can be easy to miss one and damage your credit scores — a debt consolidation loan streamlines repayment. And by making payments on time and using the loan to pay off revolving credit, you can boost your credit scores in the long run.

Of course, there can be drawbacks. For example, if you need a longer repayment term to make the monthly payments affordable, you’ll pay more interest overall, increasing your total cost of borrowing.

Also, you’ll typically need good credit (670 or higher) to qualify, and if your credit score is low, you may end up with a high APR, which may defeat the purpose of the loan. Plus, if you’re looking to save money in the long term, you may have to pay more each month to accomplish that goal.

Keep in mind that a debt consolidation loan doesn’t solve the root cause of debt — if overspending is a problem, you may find yourself back where you started.

Related >> More benefits and drawbacks of personal loans

What to know about debt consolidation and your credit

Your credit scores help lenders determine your loan eligibility and interest rate. If your scores are low, you’ll likely receive a high interest rate, negating any savings you could see from debt consolidation. On the other hand, if you have good credit, a debt consolidation loan could help you pay off debt quickly and save money on interest.

Will a debt consolidation loan hurt my credit scores?

Borrowing a debt consolidation loan can impact your credit scores both positively and negatively. Initially, you may see your scores drop for a few reasons:

• Hard inquiries: Every application for new credit results in a hard inquiry on your credit reports and can drop your scores by about five points. You can reduce the damage by limiting your loan applications to a 14-day window, also known as a “rate-shopping” period.
• Length of credit history: Opening a new loan typically shortens the average length of your credit history. If you close existing credit accounts after paying them off, your credit age could drop further. The age of your credit accounts makes up 15% of your scores.
• Potential for more debt: If you consolidate credit card debt and leave the cards open, you may be tempted to use them again, adding to your total debt load.

In the long run, however, your credit scores should recover and may even improve as you repay your debt consolidation loan. Here’s why:

• On-time loan payments: Payment history is the most important factor that affects your credit scores, accounting for 35% of the total calculation. Making your debt consolidation loan payments on time can boost your scores, especially if you’ve struggled to make your high-interest debt payments as agreed.
• Improved credit utilization: Carrying large credit card balances means you’re using a high percentage of your available credit, increasing your credit utilization ratio and decreasing your scores. If you use a debt consolidation loan to pay off your credit cards and keep the accounts open, your ratio will improve, which is responsible for 30% of your credit scores.
• Possible credit mix boost: If you don’t already have installment loans (like auto loans, student loans or a mortgage) in your mix of open credit accounts, adding a personal loan for debt consolidation could help, since your credit mix contributes 10% to your scores.

Generally, paying down debt will have a positive impact on your credit scores. If a debt consolidation loan helps you accomplish that goal, you can expect your scores to benefit.

Average debt consolidation rates by credit score

If you have high-interest debt — perhaps credit card debt or payday loans — a debt consolidation loan could reduce the amount you pay in interest, reduce your monthly payments or help you get out of debt faster. But taking out a debt consolidation loan could backfire if your credit scores aren’t high enough to qualify you for the best interest rates.

Here’s a look at the debt consolidation loan rates you can expect, broken down by credit score:

The average interest rate on a credit card was about 22% in the first quarter of 2024, according to the Federal Reserve. If you have bad credit and only qualify for a debt consolidation loan at, say, 30% APR, you’ll end up paying more in interest.

Example: Let’s say you have $20,000 in credit card debt, and the average interest rate across your cards is 24%. Here’s what your repayment would look like on a four-year debt consolidation loan with good credit vs. bad credit:

While both options result in repaying the debt eight months sooner, only the loan with a lower interest rate would save you money. With good credit, you’d save $33 each month and nearly $6,100 overall. With bad credit, your monthly debt bill would go up by $120 and you’d pay $1,280 more in interest charges.

A look at household debt in America

Debt consolidation loans could be a lifeline for the growing number of Americans facing mounting credit card and loan bills. In fact, more consumers than ever may benefit from loans that lower their rates and simplify repayment, as household debt has increased dramatically in recent years.

In the last quarter of 2023, America’s total consumer debt rose by $212 billion to $17.5 trillion overall, according to the Federal Reserve. A good portion of this debt is high-interest debt, with credit card balances rising $50 billion over the same period, to $1.13 trillion.

Unsurprisingly, delinquency rates rose for all types of debt (except student loans). Debt consolidation could help lower payments and rates, making coping with these bills more affordable.

Here’s a look at non-housing debt balances over time — note the dramatic rise in credit card debt since early 2021.

Credit card debt by state

While many Americans are increasingly relying on the plastic in their wallets, credit card debt has become a bigger problem in some places than others. In fact, some states are experiencing much more rapid increases in average card balances.

Western states all saw substantial increases in credit card debt in 2023, according to Experian. In fact, in all states west of the Rockies except for Alaska and Wyoming, balances rose by 11% or more over the previous year. Many southern states, including Florida, Georgia, Tennessee and Texas, also saw average increases of 10%. For comparison, the average increase across the nation was 7% to 9%.

The map below provides more insight into where card balances are the largest.

Are debt consolidation loans a good idea?

Debt consolidation loans can be a powerful financial tool for managing debt — but only in the right circ*mstances. Whether this option is right for you depends on the type of debt you have, your credit scores and your goals. Here are some scenarios in which debt consolidation is a good idea:

• You have high-interest debt. Paying off high-interest debt (think credit cards and payday loans) with a lower-interest loan can help you reduce your interest charges and save you money.
• You can qualify for a lower interest rate. If your credit scores have improved since you took on your current debt, there's a chance you'll qualify for a loan with better terms, including a lower interest rate.
• You want to repay debt faster. When you reduce your interest rate, more of your monthly payment goes toward the principal balance, enabling you to pay off your debt faster.
• You need lower monthly debt payments. If you significantly reduce your APR or spread out your debt over a longer repayment period, you could end up with a lower monthly bill. (Keep in mind that a longer term can result in higher overall interest costs, though this trade-off may be worth it to you if you can’t afford your current monthly dues.)
• You want to streamline repayment. When you use a consolidation loan to pay off multiple debts, you make repayment easier to manage by combining several accounts into one loan with a single monthly payment. This reduces the risk of mismanaging an account or forgetting one of your due dates.

The bottom line: Debt consolidation could be a good idea if it saves you money and helps you accomplish your financial goals. Start by understanding your goals related to your debt: Do you want to reduce your APR? Lower your monthly expenses? Get out of debt sooner? Use a debt consolidation calculator (like Calculator.net’s) to determine whether this strategy is right for you.

Alternatives to debt consolidation loans

If you don't want a debt consolidation loan or it just isn’t the right choice, you have other options. Here’s a quick overview of four alternatives and who they’re best for:

5 tips to qualify for a debt consolidation loan

If you're applying for a debt consolidation loan, there are some steps you can take to help you qualify and get a great rate. They include the following:

• Improve your credit scores. Lenders evaluate your credit scores when determining whether you qualify and what interest rate to offer. If you can improve your scores, you'll be more likely to get approved and pay a lower rate. Start by reviewing your credit report for errors (and then disputing any inaccuracies) and making all payments on time.
• Consider a co-applicant. Applying with a creditworthy second person can improve your eligibility and help you access low rates, particularly if your credit scores are low. Both cosigners and co-borrowers agree to take responsibility for the debt if you default, but only co-borrowers share equal access to loan funds.
• Compare lenders. Each lender sets its own rates and terms, so shop around to find the lowest rate available. You don't have to stick with lenders that specifically offer "consolidation loans," either — you can use any personal loan to consolidate debt, as long as you’re transparent with your lender about how you intend to use the funds. Consider different types of lenders, including your current bank or credit union as well as other online options.
• Offer collateral. A secured loan presents less risk to lenders since they can seize the collateral backing the loan if you don’t keep up with the payments. This lower risk means you’re more likely to qualify and may even receive a lower rate. Commonly accepted collateral for debt consolidation loans include vehicles, savings accounts and other deposit accounts.
• Don't ask for too much. Keep your desired loan amount as low as possible, as it's less risky for lenders to loan smaller sums. Also, don’t request a loan amount you can’t realistically afford to repay. Use a free online loan payment calculator (like Calculator.net’s) to estimate monthly dues and ensure they fit into your budget easily.

Related >> Personal loan requirements and how to meet them

How to get a debt consolidation loan

1. Assess your debts. To find the best lender for you, understand exactly how much money you need to borrow and how much you currently pay in interest. Start by reviewing each debt account and making note of your current balances and APRs.
2. Check your credit. Lenders primarily base your debt consolidation loan eligibility on your creditworthiness, so check your credit scores to ensure you qualify for affordable rates and favorable terms. Many credit card companies provide free access to your credit score, and you can review your credit reports from all three credit bureaus at AnnualCreditReport.com.
3. Gather your documents. Typically, you’ll need to provide documentation to verify your identity (like a Social Security number and form of ID) and income (like pay stubs or W-2s). Many lenders can repay your creditors directly, so gather information on each of your debt accounts, including creditor names, account numbers and debt balances.
4. Get pre-qualified. This can give you an idea of the rates and terms you might qualify for without hurting your credit. (These aren’t formal offers, and your rates and terms may change if you formally apply.) Personal loan pre-qualification can help you narrow your list of potential lenders. Consider factors like APRs, loan amounts, repayment terms, funding timeline and eligibility requirements.
5. Apply with your preferred lender. When you’ve found a lender that meets your borrowing needs, submit a formal application. In addition to providing your verification documents, you’ll have to agree to a hard credit inquiry, which can temporarily cause your credit score to drop by about five points. Some lenders offer loan decisions in minutes, while others may take up to a week to process your application.
6. Sign your loan documents. If your application is approved, you must sign a loan contract to finalize your loan. Before signing on the dotted line, carefully review the repayment terms.
7. Consolidate your debt and begin repayment. Your lender may disburse loan funds the same day you’re approved, but if you opt for direct creditor repayment, it can take a few weeks for your lender to finalize debt payments. Be sure to use your loan funds for their intended purpose (repaying debt), and start paying your debt consolidation loan on the outlined schedule.

Methodology

To determine the best debt consolidation loans, our data research and analysis team gathered nearly 900 data points from 35 primary sources, including lender websites and independent organizations like the Consumer Financial Protection Bureau (CFPB) and the Better Business Bureau (BBB). In partnership with our editors, we analyzed data for 32 lenders across the following five categories to narrow our list to the 10 best lenders for debt consolidation.

Loan cost (25%)

For many borrowers, the goal of debt consolidation is to save money. To that end, it’s critical that the lenders we feature offer competitive rates and opportunities for rate discounts.

Loan details (20%)

We examined the basics of each loan product to produce an apples-to-apples comparison. We assessed details like:

• Loan amounts
• Funding timelines
• Applicable fees
• Direct-to-creditor payments

Eligibility and accessibility (25%)

In our estimation, the best debt consolidation loan is available to a wide variety of borrowers. In this category, we assessed eligibility criteria, such as credit score and income requirements, and accessibility metrics, like geographic availability and citizenship requirements.

Repayment (20%)

When you’re consolidating debt, ease of repayment is often top of mind. To judge lenders in this category, we considered factors like the flexibility of repayment terms, hardship options and credit reporting policies.

Customer experience (10%)

In this final category, comprising eight data points, we aimed to capture the quality of each lender’s customer service. We reviewed data from independent organizations like the BBB and the CFPB, and analyzed service features like whether the lender offers a mobile app or provides weekend customer service.

What didn’t make the cut

We reviewed 32 lenders to determine the 10 best companies for debt consolidation. Some popular lenders didn’t measure up in various categories, including the following three financial institutions that offer debt consolidation loans:

• Happy Money, BHG Money and Universal Credit have high starting APRs.
• LendingPoint, Upgrade and Upstart have high maximum APRs.
• Prosper and Rocket Loans don’t offer direct creditor repayment.
• Axos Bank and Achieve have high starting loan amounts.

Additional reporting by Sarah Brady and Christy Bieber

Frequently asked questions (FAQs)