Best Debt Consolidation Loans of 2024

The Bottom Line

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 circumstances.

Guide to Choosing the Best Debt Consolidation Loan

What Is a Debt Consolidation Loan and How Does It Work?

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. 

Where To Get a Debt Consolidation Loan

Debt consolidation loans are available from several sources.

• Banks and credit unions: Traditional banks and credit unions offer various installment loans. If you're an existing customer, you may qualify for discounts. 
• Online lenders: Online lenders may offer more options than banks and credit unions. They have lower overhead costs than brick-and-mortar institutions, so they tend to offer lower rates. 
• Marketplaces: Online marketplaces allow you to comparison shop quickly and easily in one place. Although these sites won't include all major lenders, they can be useful tools to find loan options that match your credit profile.

Comparing Debt Consolidation Loans

Compare several lenders before making a choice to help ensure you get the best possible rate. Consider the following factors when comparing lenders:

• Loan amount: Minimum and maximum loan amounts vary by lender. Make sure your desired loan amount falls within the given range. You don’t want to borrow more (or less) than what you need.
• Interest rate: Is the rate fixed or variable? (Most are fixed.) What will your rate be? What are rates based on and how can you lower your rate? The better your credit score, the lower your rate usually is.
• Prequalification: Can you prequalify to check your rates without hurting your credit score? Most lenders offer prequalification, and it's a great way to quickly shop around.
• Fees: Look for prepayment fees, origination fees, and late fees. It'll be worth your time to find a lender with few or no fees.
• Repayment periods: You need to know how long you have to pay back the loan and when your payments are due; you can often pick from a few options. Some lenders offer flexible terms and others are stricter. Compare the different options between lenders, and note that in some cases shorter terms come with higher monthly payments—but you'll pay less money in the long run.
• Funding times: If you need your money in a hurry, choose a lender with same-day or next-day loan funding. Funding times vary, and your access to the money will also depend on your bank, but money is usually disbursed within a few days of an approved loan application.

How To Qualify For and Apply For a Debt Consolidation Loan

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: 

• Decide which debt to consolidate: When you consolidate debt, you don't have to consolidate all your outstanding accounts. You can decide to consolidate only certain kinds, such as your credit cards or medical bills, and leave lower-rate forms of debt, such as auto loans, untouched. 
• Gather documents: When you apply, you'll need to provide a copy of your ID, proof of income, and creditor details, including your account numbers and balances. 
• Get prequalified: Many lenders allow you to prequalify for a debt consolidation loan, so you can view your options without affecting your credit. Compare loan rates, fees, and repayment term options to choose the best loan for you. 
• Submit the loan application: When you've chosen a lender, fill out the lender's application and consent to a hard credit inquiry. In most cases, you'll receive a decision within minutes. 
• Continue making payments: If you're approved and opt for direct creditor payments—meaning the lender pays off your outstanding balances on your behalf—continue making payments until you receive confirmation that the accounts have been paid in full. Otherwise, you risk missing a due date and incurring late fees and damage to your credit. 

Alternatives to a Debt Consolidation Loan

If a debt consolidation loan doesn’t fit your budget or financial situation, there are alternatives to consider.

• HELOC: A home equity line of credit, or HELOC, is based on the equity in your home. You might be able to pay off a lot of debt at a reasonable interest rate. However, you’re securing that line of credit with your home, so if you run into any financial problems in the future, you could potentially lose your house.
• Credit card balance transfer: It’s possible to use a balance transfer credit card to consolidate and pay off your debts. Many balance transfer cards offer 0% APR for a certain introductory period of time, too, so you can save on paying any interest for, say, 21 months. You may be able to pay off your debt faster when the entire payment goes toward one low-interest balance.
• Debt snowball: Rather than putting everything together at once, the debt snowball method has you tackle your smallest balance first while maintaining your minimum payments on all other debts. As each debt is paid off in full, you add your old payment amount to the next debt on your list, accelerating the rate at which you pay down your next debt.
• Debt avalanche: Similar to the debt snowball method, this strategy starts with your highest-interest debt. The debt avalanche method will save you the most money on interest and may be faster overall.

Methodology

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:

• Loan costs (advertised APR, fees, and six other factors): 29.25%
• Loan terms (loan amount, repayment term, and three other factors): 22.25%
• Borrowing requirements (credit score, membership requirement, and six other factors): 28.5%
• Additional features (online application, prequalification, and eight other factors): 20%

Learn more about how we evaluated personal loans in our complete methodology.