Debt Consolidation Loans With Bad Credit
Looking for the best debt consolidation loan? Personal loans are one of the best types of loans for debt consolidation.
Good credit and bad credit borrowers can qualify for personal loans that can be used for debt consolidation.
Below we will help readers learn about the best personal loans for debt consolidation and provide more insight as to what a personal loan really is.
Online personal loans for debt consolidation can provide the funds you need quickly, making them a top choice for many individuals.
Keep reading to learn more about debt consolidation loans or use our debt consolidation calculator to help visualize payments for a new loan amount.
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What are debt consolidation loans?
Debt consolidation loans can provide funds to pay off multiple unsecured debts and combine them into one fixed monthly payment. Some examples of debts that qualify for debt consolidation loans include medical bills, credit cards, or high-interest unsecured debt. Some lenders can even provide direct payment to lenders. This means all you have to do is provide the debt consolidation loan lender with the information they need to pay off existing debts. If a lender does not offer direct payment they usually deposit the funds into your account and you pay off debts on your own.
Personal Loans for Debt Consolidation
Personal loans are one of the easiest ways to consolidate debt. In addition, they offer competitive interest rates, high loan amounts, and flexible terms. Credit card consolidation loans and personal loans do not dismiss debt but rather make them more manageable. Having multiple credit cards and multiple monthly payments can be overwhelming. You may feel like you are drowning in debt that you will never get paid off. Using a debt consolidation loan can help you avoid late or missed payment fees. They can also help you pay down debt faster and allow more money to go toward the principal of the loan. While debt consolidation loans provide a way to combine debts and make them easier to pay off, they may not make the debt go away forever. We encourage individuals to invest some time thinking about how they got into debt. You should review credit card statements and evaluate spending habits. If you use a debt consolidation loan and continue to spend more than you make, it’s likely that debt will continue to accumulate. Individuals need to make conscious decisions to spend money more carefully and follow budgets. Making a budget can help individuals get out of debt and stay out of debt. In addition, creating a budget can help you determine how much you can afford to pay monthly toward a debt consolidation loan.
Do consolidation loans hurt your credit score?
In some cases, debt consolidation loans may temporarily cause a drop in credit score. However, as old accounts get cleared off your credit report and you make consistent on-time payments, your credit should slowly start improving. Using a debt consolidation loan can also improve your “credit mix.”
Is it hard to qualify for a debt consolidation loan?
Qualifying for a debt consolidation loan may be easier than you think. Lenders usually have minimum credit requirements. If you have fair credit you should apply to a lender that can work with fair credit borrowers. To save yourself time researching and applying to various lenders, you can submit one application online through Acorn Finance. Acorn Finance has lending partners that can help all credit types. Some lenders may allow you to add a cosigner to your application which can increase your chances of approval. If you use a cosigner it should be someone with good credit and consistent income.
What is the smartest way to consolidate debt?
The best way to consolidate debt usually depends on your personal financial situation. However, in most cases a personal loan can be one of the best and easiest ways to consolidate debt. For personalized financial advice, you should consult a professional.
Are debt consolidation loans a good idea?
Consolidating debt into one fixed monthly payment with a low interest rate is usually a very good idea. In most cases, debt consolidation loans allow individuals to save money on interest while paying off debt faster. We recommend evaluating your personal finances and debts to determine if a debt consolidation loan is a good idea for you.
What is the best loan to consolidate debt?
One of the best loans for consolidating debt is a personal loan. Most personal loans are relatively easy to qualify for and offer competitive rates and terms. In addition, some lenders can provide funds the same day.
The 5 Best Personal Loans for Debt Consolidation
Each lender has its own set of perks and specialized target markets. Just because one lender advertises the lowest interest rate, does not mean that is the best lender for you. You should compare actual offers from lenders to determine which personal loan offer is best. So how can you do this without applying to multiple lenders and affecting your credit? Acorn Finance allows individuals to submit one application and receive multiple personalized loan offers for debt consolidation without affecting credit score. Let’s take a look at the top 5 best personal loans for debt consolidation. . .
LightStream offers personal loans between $5,000 to $100,000 for debt consolidation. LightStream is a top-rated lender for borrowers with good credit. They offer low interest rates starting at just 4.99% and zero fees. In addition, LightStream is an Acorn Finance lending partner. To qualify for a LightStream personal loan you should have a minimum credit score of 660. LightStream offers a rate discount for autopayments and is available in all 50 states. If you are approved by another lender with a lower interest rate, LightStram will beat the rate by one-tenth of a percentage point. Of course, they’ll want evidence of the approval and terms before matching the rate. Other lenders may offer direct payment to creditors but LightStream does not.
Best Egg can help fair credit borrowers obtain personal loans for debt consolidation. To qualify for a Best Egg personal loan you should have a minimum credit score of 640. Best Egg offers personal loans between $2,000 to $35,000 with two repayment term options, 3 or 5 years. Since they are willing to approve loans with more risk, they do charge origination and late fees. Compared to other lenders that target similar borrowers, their offers are very comparable. Reviews highlight Best Egg’s transparent offers and terms and excellent customer service. In addition, Best Egg offers financial education for borrowers. Best Egg can deliver funds in one business day and is an Acorn Finance lending partner.
For borrowers with credit challenges, Upgrade offers customizable loan features and a minimum credit score of only 580. When approving applicants, Upgrade focuses on a combination of credit score and cash flow. Upgrade can provide personal loans for debt consolidation for $1,000 to $50,000 with interest rates starting at 6.94%. In addition, applicants can add a cosigner to increase the chances of approval. If you take advantage of Upgrade direct payment to creditors they offer a rate discount. They also offer a rate discount for autopay. Similar to Best Egg, Upgrade only offers two repayment terms of 3 or 5 years and can fund a loan within one day. Customers can utilize a completely online experience with customer service representatives available every day. Upgrade is a proud partner of Acorn Finance.
Prosper is a peer-to-peer lender that specializes in helping fair to good credit borrowers obtain personal loans for debt consolidation. Prosper partners with Acorn Finance and is best for borrowers with a credit score between 630 to 719. They offer personal loans between $2,000 to $40,000 with terms between 3-5 years and rates starting at 7.95%. Prosper charges origination and late fees and does not offer a rate discount for autopayments. In addition, they do not offer direct payment to creditors. However, they still make our list because of their competitive interest rates and flexible qualification standards. Reviews highlight transparent rates and terms and good customer service.
SoFi is one of the best lenders for qualified borrowers. SoFi offers personal loans for debt consolidation with zero fees, rate discount for autopayments, and interest rates starting at 5.99%. They also offer generous loan amounts ranging from $5,000 to $100,000. Customers appreciate SoFi’s user-friendly app that makes managing loans even easier. SoFi can fund loans the same day and provides customers with 7-day support. Borrowers can receive financial education and other perks that are exclusive to SoFi members. SoFi is a top-rated Acorn Finance lending partner.
Is it better to get a debt consolidation loan or personal loan?
In some cases, a debt consolidation loan and personal loan are the same thing. However, if lenders know you are using the personal loan for debt consolidation they may offer direct payment to creditors. This can benefit you and the lender. It benefits you by making the process of consolidating debt easier. It benefits the lender by ensuring the previous debts are paid off. While personal loans usually do not have spending restrictions, lenders may ask if you intend to use the loan for debt consolidation during the application process.
If the lender you use for a debt consolidation loan offers direct payment to creditors, it can be a huge bonus and time savings. However, you should always make sure previous debts are paid off properly and verify you do not need to do anything else. Once your debts are consolidated into one new loan, you can make one monthly payment to the new lender.
See Our Other Loans for Payment Financing and Debt Consolidation
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What credit score do I need for a debt consolidation loan?
The credit score requirement for a debt consolidation loan can vary depending on the lender. In most cases, you will need a FICO 600 or above to qualify. In some cases, you may be able to qualify with a slightly lower FICO if you have plenty of income and job stability. Before you apply for a debt consolidation loan you may want to check your credit score. There are a variety of Smartphone Apps and online tools that allow you to check and monitor your credit score for free.
Can you get a debt consolidation loan with poor credit?
This usually depends on the lender. Some lenders may have less strict requirements and loans that are designed for bad credit borrowers. If you can qualify for a debt consolidation loan with bad credit you should be prepared to pay high interest rates and high loan fees.
If you have poor credit, you might want to consider taking a few months or longer to rebuild your credit score before applying for a new loan. In some cases, the debt consolidation loan may be part of your plan for improving your credit score. If this is the case, you may want to apply and see if you can qualify. The worst case is that you will not qualify.
How long does debt consolidation stay on your credit report?
Most loans and late payments will stay on your credit report for 7 years. When you take out a loan for debt consolidation, the previous debt that is paid off, can stay on your credit report for 7 years. However, this may not be a bad thing as these will just look like paid accounts. If a professional analyzes your credit history they may be able to tell that you use a personal loan for debt consolidation. Again, this may not be a bad thing. In some cases, they may view this as a responsible move. Once you pay off the debt consolidation loan, this too can stay on your credit report for 7 years.
Are Consolidation Loans Worth It?
In most cases, it is a good plan financially. It can take one or many high-interest credit cards or debt you have and roll them into one lower interest rate loan. As a result, you will now only have to worry about one monthly payment as opposed to several. Make sure the interest rate for the consolidation loan is much lower than your current payments and interest rates. Otherwise, the consolidation loan might not make much sense. In addition, you’ll want to pay attention to any fees that may be associated with the transaction.
Reducing your total debt is always a good idea and will lower your debt-to-income ratio. This can raise your credit score and make you appear more financially stable. Initially the debt consolidation loan may not lower your total debt but over time it should. You should now have one fixed monthly payment and a set term. This means as long as you make the monthly payment for the full loan term, your balance should be $0 by the end of the term.
If you are having trouble remembering all your payments and when to pay them, consider a debt consolidation loan. It can be a smart way to reorganize debt while making it easier to manage. Sometimes having a new payment or new perspective will give you the resources and time you need to get to your money in order and make the payments on time.
What are the drawbacks of a debt consolidation loan?
Just like with any debt or loan, there are some drawbacks. Depending on your current situation, the drawbacks might be worth it. Other people may find the drawbacks too cumbersome and decide not to take a debt consolidation loan. Here are some of the most common cons:
Added costs. This may include origination fees, balance transfer fees, closing costs, and annual fees. Make sure you know the true cost of all the fees you might inquire about and ask the lender what all of them mean before signing the loan documents.
Raise your interest rates. Sometimes debt consolidation loans will charge a higher interest rate than your current debit or credit cards. While the one monthly payment might be convenient, the higher interest rates could make you owe more money as the years or months go by.
Doesn’t solve financial issues. Getting a debt consolidation loan may help make your debt more manageable. However, if you are unable or will struggle to cover the monthly payment, it may leave you in a worse situation.
May encourage more spending. Paying off that credit card balance means you have a higher spending power now and you might be tempted to rack up debt again. If you feel like you can’t control your spending habits or won’t be able to pay off the new credit card balances, debt consolidation might not be the best option.
Risk making the new payments. You will always want to ensure you can take on new payments and have the income to ensure you won’t be struggling with new payments. Missing payments can put your credit score at risk and may negatively affect your ability to borrow in the future.
How do I apply for a debt consolidation loan?
The first step toward applying for a debt consolidation loan is choosing a lender. When choosing a lender you will want to make sure you work with a trustworthy lender that has competitive loan offers. Without applying with several lenders, it may be hard to know who can really offer you the best deal. This is where Acorn Finance can help. At Acorn Finance, you can check offers for debt consolidation loans from top national lenders. The best part just might be that you can check offers within 60 seconds or less with no impact to your credit score. At Acorn Finance we only partner with trustworthy lending partners so that all you have to worry about is selecting the offer that is best for you.
What is debt consolidation?
Debt consolidation is when you combine existing debts into one loan. The idea is to make your debt more manageable and help you pay it off within a set time frame. If you have several high-interest credit cards, you may want to consider a debt consolidation loan. Debt consolidation loans are usually just personal loans. Some lenders may have more efficient processes for consolidating the debt. For example, some lenders may offer automatic payment to creditors so that you don’t have to manually transfer balances.
The goal here is to lock in a lower interest rate and fixed monthly payment. As a result, you should be able to save money and pay your debt off. Debt consolidation loans are often used for student loan debt as well.
It’s also important to know that debt consolidation is not the same as debt settlement. With debt consolidation, your debts are not forgiven or changed in any way. You are simply taking several debts and combining them into one. You will still owe the same amount of money, just with more favorable terms.
If your debt is extremely unmanageable, you need to have some of it forgiven. You might want to look into debt settlement instead. Usually, a legal representative will negotiate on your behalf with the creditors and try to get some of your debt dropped. You will then pay the difference or potentially not have payments at all. It depends on what the negotiator does. Debt settlements can also affect your credit score and history. It will likely make your score drop significantly while terms are being negotiated and you are not making payments on any of your debt. This is one of the reasons why debt settlement is usually used as a last resort option.
Debt consolidation should not affect your credit score very much. It might drop a few points when the lenders are checking on your credit report or when they add your new loan to your credit history. However, paying down your credit cards and other debt should eventually improve your credit score and financial well-being.
Is debt consolidation a good idea?
Debt consolidation can be a good idea if you have several high-interest debts that need to be paid down. Trying to pay down credit cards can feel impossible. With unpredictable monthly payments, you may be struggling financially to keep up. For most individuals who are overwhelmed by debt, debt consolidation is a good idea. The ability to manage one monthly payment as opposed to several can alleviate stress and help you make on-time payments, which can in turn improve your credit score. You may even be able to set the debt consolidation loan on automatic payment. This can help make it even more manageable.
However, you should know that debt consolidation is not always a good idea. Before taking out a debt consolidation loan you should check offers. Once you know what you qualify for you can compare total loan costs to your current debt loan costs to determine how much you will or won’t save. At Acorn Finance you can check debt consolidation loan offers within 60 seconds or less with no impact on your credit score.
Can you get a debt consolidation loan with bad credit?
While it is possible, it will likely be difficult. Lenders usually view bad credit borrowers as high risk. While they may appreciate and acknowledge that you are trying to improve your financial well-being with a debt consolidation loan, they have to make sound financial decisions for their institution. In some cases, you may qualify for the loan but the terms may be unfavorable. With a high interest rate, a debt consolidation loan may not offer you much or any savings. If you qualify for a debt consolidation loan with bad credit you should check the terms and conditions as well as the interest rate.
Do you need excellent credit to get a debt consolidation loan?
A credit score of about 650 is usually the general starting range when it comes to lenders being willing to give you a debt consolidation loan. Some lenders might accept borrowers with scores of 600 or less, but this is rare. The lower your credit score, the higher your interest rate will be. If you are only offered a loan with high interest, try to spend a few months raising your credit score before trying to apply for another loan. This usually involves lowering your current debt-to-income ratio. You will also need to make all your payments on time and ensure that your credit card utilization is not over 30%.
If you have an excellent credit score, it should be much easier for you to get a new loan with favorable terms. Borrowers with excellent credit are considered highly-qualified applicants with less risk than a borrower with bad credit. Therefore, lenders should be much more motivated to offer you a loan with a low interest rate.
Whether you have excellent credit or fair credit, it’s important to compare loan offers. So how do you compare loan offers? The best way to check and compare loan offers is through Acorn Finance. Our network of top national lenders compete for your business. All you have to do is submit an online form and see what you qualify for. Checking offers at Acorn Finance does not impact your credit score.
Where can you get a debt consolidation loan online?
Many online lenders offer debt consolidation loans. While some may be shy about using an online lender, there are many advantages to using an online lender. The first is the competitive nature they face. As a result of the competition, they may be willing to offer some of the most competitive terms. In addition, they usually have less overhead. Therefore, they can operate on lower profit margins. So how do you go about finding offers from online lenders? At Acorn Finance you can check offers from online lenders without impacting your credit score.
Alternatively, you may also want to check with your primary financial institution to see if they offer debt consolidation loans. Once you have collected a few offers you can determine which offer is the best and if debt consolidation is the best decision. Whether a lender is solely online or not, they usually offer online application processes.
If you already have a credit card or cards, you may be able to take advantage of a promotional transfer offer. In some cases, a credit card company can offer a low interest rate for transferring a balance. If you can pay the balance in full before the promotional period ends, this can be a cost-effective way to consolidate and pay off debt.
How long do you have to pay back a debt consolidation loan?
This depends on your loan amount and the lender who is giving you the funding. Some loans will have longer repayment terms than others. Usually, debt consolidation loans have repayment terms of 2-7 years. Usually, the longer the repayment terms, the smaller your monthly payments will be. However, you might also be paying more in monthly interest if you have a long repayment term.
Will my bank give me a consolidation loan with bad credit?
Although your personal bank may be the first place that you would think to ask for a debt consolidation loan, often it may not be in your best interest to do so. Your personal bank may have some of the highest standards when it comes to loan approvals. Since for-profit financial institutions are heavily regulated, they may need to follow stricter guidelines that outline specific parameters on risk-based lending. Any inclination that they are operating outside of these guidelines, and they may be audited or even fined. Credit unions still have to follow some, if not all of the same guidelines, however, since they are not publicly traded, they have a little more leniency than a traditional for-profit institution.
The first place outside of your personal bank that you should look for a debt consolidation loan is online. Numerous online lenders specialize in debt consolidation loans for borrowers with bad credit who are looking to improve their credit situation. Your chances of being approved for a debt consolidation loan may be exponentially higher than qualifying with your personal bank as you will have access to dozens of lenders throughout the United States.
How do I get out of debt with no money and bad credit?
If you are looking to get out of debt, but you have no money and bad credit, there are several things you can begin to do to be able to create some extra monthly income to pay it down. The first thing you will have to do is limit your spending and avoid making any big-ticket purchases. Avoid purchasing any new electronics, cell phones, designer shoes or clothing, or other items that are not needed and that come with a premium price tag.
You can also make sure you are cooking meals at home rather than dining out frequently. Packing lunch to bring to the office is a great way to start trimming down your food expense bill. Also, sometimes cooking meals can be more expensive than actually going to a restaurant to eat, so make sure when you are cooking meals you are skipping the premium ingredients and cooking more basic food for a while. Cook more rice, eat more vegetables, avoid spending money on expensive salmon and high-grade cheeses and focus on more of a basic healthy and balanced diet. If you like to indulge in a good bottle of wine during your meals, I am sorry but you may need to consider either cutting it out from your meal entirely or choosing something that is far less expensive than your normal tastes may require.
Take a look at what other expenses you might be able to cut out of your monthly budget. Maybe you might have to get rid of the premium sports package, or you have other subscription services that you may not necessarily need. The main idea is that getting out of debt is not going to be easy and that you may have to make some sacrifices that will alter the comfortability you have grown accustomed to. Once you start to see where these extra sacrifices are freeing up cash flow, go ahead and start making extra payments on your credit cards, loans, and other outstanding debts that you can identify.
How can a debt consolidation loan help you if you get too far into debt?
A debt consolidation loan can help you clear off some debt immediately by providing the upfront cash that you need to make all the necessary payments to each creditor in full. Some debt consolidation lenders will even do this portion for you if you request it. Once each of the different creditors has been paid in full, you are then able to simply pay the lender monthly payments for a predetermined period of time. This predetermined repayment period combined with the interest rate of the consolidation loan will determine how much your monthly payments will be.
By having all your creditors taken care of, you can then begin the slow process of paying off your new loan as well as making some significant lifestyle changes to make sure you do not go down this path again.
How do I clear debt quickly?
While there is no magical solution for getting rid of debt there are ways to make it more manageable. A debt consolidation loan can allow you to combine several high-interest debts into one loan. If you use a fixed personal loan for debt consolidation, you can take advantage of one fixed monthly payment that is fixed. Even if you just have one high-interest loan you can still use a debt consolidation loan with a lower interest rate. With a fixed monthly payment and set term, you can finally see the light at the end of the tunnel. As long as you can stay out of debt once taking action to consolidate debt you should see your way out of debt in no time.
Can I get my debt written off even with bad credit?
Debt may be the cause of your bad credit. If you feel that there is no way to pay your debt off or make it manageable, you may need to take legal action. Legal action may include settlement agreements with lenders or bankruptcy. However, even with bankruptcy, you may not be able to wipe out certain kinds of debts.
Are there grants for debt relief?
The short answer to this question is no. There might be many advertisements that you hear on television or see in the newspaper claiming that there are government grants available to help people get rid of credit card debt. Most likely, advertisements like these are from a debt consolidation company using misleading branding or misleading language to entice people to call, and once they find out the details of the program, it is a simple debt consolidation process that everyone else can offer.
Is there a government program for debt relief?
Contrary to what you may hear at times, there is no actual government program that forgives or that works to minimize credit card debt by removing account balances on an individual’s credit card account. Instead, there are numerous 501(c)3 nonprofit consumer credit counseling services that can work with you to provide some sort of debt relief. These nonprofit organizations are typically funded through grants and credit card companies. Their job is to help you fix your certain credit situation through a loan consolidation service. The reason they get classified sometimes as a government program by mistake is because they get some of their funding in the form of government grants. They are not part of the United States Federal Government.
Government debt relief vs debt consolidation
Life can be expensive, thus forcing some of us into debt that we cannot manage. There are government programs that can help with debt relief. For example, you can access credit card counseling services through the government. Learning how to properly manage your finances is critical and resources are available. In some states, you may even be able to qualify for financial aid to help with debt relief. Debt consolidation is an action that you need to drive. It’s a choice that you need to make if your debt is unmanageable or costing you a fortune in interest. If you are buried in debt and unsure of what the right decision is, you should use a government resource to receive professional financial advice.
In conclusion, personal loans are an easy option for debt consolidation. Online lenders usually offer competitive rates and terms and have less strict qualification guidelines. In addition, online lenders can offer a seamless and quick process. Most individuals prefer online debt consolidation loans. Acorn Finance partners with credible online lenders that can simplify debt consolidation. Individuals can submit one application through Acorn Finance and receive multiple personalized loan offers within minutes without affecting their credit score. Whether you are confident about obtaining a debt consolidation loan or not, you can use personalized information provided by Acorn Finance to make an educated decision.
Discover the best debt consolidation loans. . . apply online today!
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Best Debt Consolidation Options for 2022
Best Debt Consolidation Loans of January 2022
Debt consolidation is the process of rolling multiple debts into a single monthly payment. There are a couple of main reasons you may want to consider using a debt consolidation loan to organize your finances. First, many people who seek debt consolidation loans often end up saving hundreds or thousands of dollars in interest payments by consolidating high-interest debts like credit cards and high-interest loans. One scenario that is common is a borrower who applied for credit cards and maybe for a personal loan when they had a fair or poor credit score. The interest rates on both credit cards and personal loans could be quite high. But now, the borrower has taken 6-months to a year to seriously rehabilitate their credit and they can qualify for personal loans with much more favorable APRs. This would be as good of a time as any to get the lump sum payment upfront you need to pay off all of your high-interest credit cards and loans, and then simply pay back the loan amount with the much lower interest rate with monthly installments.
The second main reason debt consolidation loans may be useful for organizing your finances is by allowing you to create one payment due date to cover all of your current debts rather than having them spread out between 3, 4, or more payments all with different due dates. If you have multiple lines of credit open, it can get confusing trying to keep track of all your different due dates, even if you have autopay set up, you still may want to make sure your pay cycles match up with your debt payment cycle to prevent overdrafts which can lead to incredibly high fees. Also, having multiple debt payments each month, all with different interest rates can make it extremely difficult to keep track of how much money you are paying towards the principal of each credit account versus interest.
How do you consolidate debt?
There are two main ways to consolidate your current debts. The best way for you to consolidate your debt depends on the amount of debt you have, the types of debt you have, and your credit score. For example, if you only have a few thousand dollars in credit card debt with no other loan types, then you may be able to simply apply for a new credit card that is offering a 0% APR introductory rate, transfer the balances of your old credit cards to your new card, and then pay off the entire debt before the 12 or 18-month promotional period is over. Again, this typically will only work if all of your current debts are credit cards or if your creditors will allow you to use a credit card to pay off your loan balance. Also, for this to work, you will require the credit score necessary to qualify for a 0% APR credit card with a high enough credit limit to cover all the current debt you have. You will likely need at least good or excellent credit to qualify for a credit card with everything you need to use it as a debt consolidation tool.
The other main way to consolidate debt is through a fixed-rate debt consolidation loan. With a debt consolidation loan, you can get the money you need upfront to pay off all of your debts and then pay back the loan over a predetermined amount of time. The best part of a personal debt consolidation loan is that the money could be used to pay for almost any type of debt rather than just credit cards. For example, you could use the lump sum payment to pay off your credit cards, other higher interest personal loans, medical bills, dental bills, catch up on utility bills you may have fallen behind on, cell phone bills, internet bills, etc. Once you are approved for the loan amount and the funds hit your account, you can use the money to pay whichever creditors you would like.
It may be best to start with the creditors who charge the highest interest rates and then work backward. Also, if you are looking for a personal debt consolidation loan, you may want to find a lender who can offer you a rate discount if you allow them to do you the service of sending the funds directly to your creditors. This may be a good move to save you time and effort and to get a possible rate discount, but it may also be a good idea to avoid temptation. One day you wake up with a large sum of money in your checking account and you may be tempted to only pay some of your creditors and to use some of the money to buy things you may not necessarily need. Ultimately, that is your right.
Once approved for a personal loan, you are free to use the funds for almost anything you would like, however, it may not be the most financially intelligent move. By paying the creditors directly, you can avoid that temptation and start working to get your finances back on track. One other thing to consider is that you can always ask for a few hundred dollars more than what you need to pay to your creditors and then use that money to buy something you have been eyeing for a long time. If you are going to buy the item anyway, using the funds from a lower interest personal loan may be much better than using one of your newly debt-free credit cards.
Two additional ways to consolidate debt that may be an option for you are home equity loans and 401k loans. If you own your home and have at least 20% equity, then a low-interest home equity loan could be a good option for you to get a large lump sum payment to pay off all your current debts and even have enough leftover to complete some home improvement projects around the house. If you have a 401k retirement account, you may be able to borrow up to half of your retirement account balance for a maximum of 5-years. The max loan amount is $50,000. A 401k comes with a lower interest rate that you pay back to your own retirement account. Additionally, there is no impact to your credit score to take out a 401k loan, however, you could be missing out on some serious gains while your money is not in your account, and if you happen to fall behind on your payments and are unable to pay back your loan, then there could be some serious tax implications and penalties. Typically, there is at least a 10% minimum tax penalty plus you may have to count the funds from the loan as taxable income.
If you have reviewed all your different debt consolidation options and you find that a personal debt consolidation loan is your best option, then you may want to consider one of these debt consolidation lenders below. Each of these lenders works with all different types of borrowers who are looking to consolidate their debt, however, some lenders may be a better fit than others depending on your circumstances.
Upgrade – 560 min score
Top pick for: debt consolidation loans for bad credit
Qualifications Needed: Upgrade is a debt consolidation lender who works with bad credit borrowers to help them get their finances back on track by providing them with loans to pay off their high-interest credit cards and other debts they may have piling up. To qualify for an Upgrade personal consolidation loan, borrowers should have a minimum credit score of 560. If you are a bad credit borrower with a credit score of less than 560, you may still be able to qualify for a debt consolidation loan by using an asset as collateral to secure the loan. You can use your home, a vehicle, a retirement account, or any personal property that the lender deems valuable enough to secure the loan amount you need. Loans from Upgrade range from $1,000 to $50,000 and come with loan terms spanning from 3 to 7-years. APRs can range from 6.94% to 35.97%, and each loan may come with an origination fee that can range from 2.9% to 8%. If you are going to use the debt consolidation loan to pay your creditors on your own, then you can see the funds in your personal account in as little as one business day. If you would like Upgrade to pay your creditors on your behalf, then it can take up to 2-weeks before all the creditors are paid in full.
Wide range of loan amounts and loan repayment periods
Ability to prequalify on the Upgrade website with no impact on your credit score
Offers to pay creditors on your behalf for debt consolidation loans
Secured loan options are available for poor credit borrowers or for any borrower hoping for a lower APR
Higher APRs than other lenders
Charges an origination fee
Not available in all 50-states.
Why choose: Upgrade is the best debt consolidation lender for borrowers with bad credit. They accept borrowers with credit scores as low as 560 and they offer secured loan options for borrowers who may not meet the minimum requirements or who are looking to get a lower APR. Upgrade also offers to pay creditors directly which can help save time and energy as well as reduce the temptation to use the funds for unintended purposes.
SoFi – 680 min score
Top pick for: No fee debt consolidation loans
Qualifications Needed: SoFi has some of the highest minimum requirements to qualify for a personal loan. SoFi requires a minimum credit score of 680 and a minimum income of $50,000/yr. In return, if you can meet the higher minimum requirements, SoFi offers larger loans with some of the most competitive interest rates. APRs average between 5.99% and 20.94% for personal loans between $5,000 and $100,000 with repayment periods that span 2 to 7-years. Additionally, SoFi is not just a lender that can help you with debt consolidation, they also offer a number of free services like financial planning, investment strategies, and they often have special networking events and guest speakers.
Zero fees. No origination fee, late fee, or early pay-off penalties
Co-applicants are allowed to increase their chances of qualifying or to access lower interest rates
Higher credit score and income minimum requirements
Co-applicant loans can take two weeks longer to be approved
Why choose: SoFi is a good debt consolidation lender if you can meet all the minimum requirements and if you are looking for a lender who can provide you with the funds you need, not charge additional fees, and who can provide you with some free financial advice and mentoring.
Best Egg – 600 min score
Top pick for: fair credit debt consolidation loans
Qualifications Needed: BestEgg offers 3 and 5-year debt consolidation loans to borrowers with a minimum credit score of 600. APRs can range from 5.99% to 29.99% with origination fees of 0.99% to 6.99%. If you are looking for a quick debt consolidation loan for an amount between $2,000 and $50,000, then BestEgg may be a good option for you to consider.
Offers direct payments to creditors for debt consolidation loans
Flexible due dates
No early pay-off penalty
Higher than average APRs
Charges an origination fee
Does not permit co-applicants
Why choose: BestEgg is a good lender for smaller debt consolidation loans that borrowers are looking to pay off over 3 or 5-years. Smaller amounts spread out over 3 or 5-years can bring a completely manageable monthly payment that does not stretch the budget too much. Also, if you are a freelancer and you get paid sporadically, BestEgg may be a good option for you because they can be quite flexible when it comes to the payment due date.
Prosper – 600 min score
Top pick for: peer-to-peer debt consolidation loans
Qualifications Needed: Prosper can offer personal debt consolidations loans for amounts that range from $2,000 to $40,000 with APRs that average between 7.95% and 35.99%. Loans are either for 3 or 5-years, and they come with an origination fee that averages between 2.41% and 5%. Prosper personal debt consolidation loans are available to borrowers with a minimum credit score of 600.
Allows joint applications
Offers debt consolidation loans of up to $40,000
Charges an origination and late fee
Not available in every state.
Why choose: Prosper may be a decent debt consolidation lender to consider if you have a good or excellent credit score due to having lower APRs available for excellent credit borrowers. Interest rates can go as low as 7.95%. However, if you are a bad credit borrower, interest rates can reach as much as 35.99%. Prosper may be a good lender for someone looking for a smaller loan amount.
LendingPoint – 600 min score
Top pick for: fast debt consolidation loans
Qualifications Needed: LendingPoint is a trusted lender who offers debt consolidation loans for as little as $2,000 or as much as $25,000. Loan repayment periods can span between 2 and 4-years with APRs that average between 15.49% and 35.49%. Each loan can come with an origination fee of up to 6%. Minimum credit score requirements begin at a credit score of 600 and borrowers should have a minimum income of at least $30,000/year.
Lower credit score requirements
Fast loan approval and funding times
Offers smaller loans with 2 to 4-year repayment terms
No co-signer or secured loan options
Higher than average APRs
Charges an origination fee of up to 6%
Why choose: LendingPoint may be a good debt consolidation lender option for subprime borrowers looking for quick financing to begin paying off their creditors immediately. They offer a wide range of loan amounts, but their sweet spot may be smaller loans with 2-year loan terms.
LightStream – 660 min score
Top pick for: good credit debt consolidation loans
Qualifications Needed: LightStream is a popular lender for borrowers with good or excellent credit, although, LightStream does extend some loans to borrowers who are at the very top of the fair credit category. LightStream may extend debt consolidation loans between $5,000 and $100,00 to borrowers with a minimum credit score of 660 and a minimum income of $50,0000/year. LightStream loans come with competitive interest rates ranging from 3.99% to 17.49% and loan terms between 2 and 12-years. They also offer fast loan approval and account funding as well as a discount when you enroll in autopay.
No fees (origination, late, early pay-off)
Joint applications are allowed
Rate discount for signing up for autopay
No prequalification application on the LightStream website
High minimum credit and income requirements
Inflexible due dates
Why choose: If you are a good or excellent credit borrower looking to consolidate some debt, then you may want to consider LightStream to take advantage of their competitive APRs and zero fees.
Why should you consolidate debt?
Debt consolidation is typically a good idea for anyone who has several high-interest loans or credit cards that they are currently paying on. However, you will want to make sure that your credit score has improved enough to qualify for a debt consolidation loan with a lower interest rate than your current debts. Also, make sure that you do not take on a debt consolidation loan to pay off all of your credit cards only to run up the balances again once your credit limits are opened up again. Debt consolidation is a process of changing behaviors and taking a hard look at your finances. You may have to accept some ugly truths or even seek help from a debt counselor who can help you get back on track and tackle some of the underlying issues to your overspending and poor money management.
How do you choose the best debt consolidation lender?
When you are looking at different lenders to take on a debt consolidation loan, there are a few factors you may want to look at first to help quickly eliminate some lenders immediately. The first thing to look at is the minimum credit score and income requirements. You can easily check a few lenders off the list if you have a lower credit score. Other factors to look at right away include whether a lender offers direct payments to creditors, what kinds of loan amounts they offer, length of loan repayment periods, and average APRs. Also, take a look at what kinds of fees they charge. If you have good or excellent credit, you may be able to find a lender who offers zero fees and lower APRs than most of their competitors.
What are the advantages of debt consolidation loans?
There are many advantages to seeking a debt consolidation loan. You can streamline your finances by combining multiple monthly payments into one easy monthly payment, you can have a set pay-off date for your debt when a credit card may not, and your debt consolidation loan could come with a much lower interest rate than your existing debts. Also, with a debt consolidation loan, you have the best chances of improving your credit score.
What are the disadvantages of debt consolidation loans?
As there are many advantages to debt consolidation loans, there are some disadvantages that need to be considered as well. With a debt consolidation loan may come additional fees like origination fees, late payment fees, and early pay-off penalties. you will want to review each lender carefully to see what kinds of fees one of their debt consolidation loans may come with. Also, some people seek debt consolidation loans to clear out their credit card debt but then they just go out and max out their credit cards again. Debt consolidation loans do not address the underlying issues of people who have problems managing their money and/or spending within their means.
Does a debt consolidation loan help build credit?
Debt consolidation loans can help increase a credit score over time, however, immediately it may decrease your credit score by taking on a new line of credit. Continue to make all your payments on time and you may see an increase in your credit score once you make some significant progress in bringing down your overall debt.
Who can get a debt consolidation loan?
Depending on the lender, typically any US citizen with a minimum credit score of 560 or higher may qualify for a personal loan. Some lenders may have a higher minimum credit score and income requirements, but some lenders may work with someone with a credit score as low as 560.
What debt consolidation lender is best for high-income earners?
SoFi has many attractive features and benefits to higher-income earners looking for a debt consolidation loan. They also offer loans up to $100,000 depending on how much debt you are trying to consolidate. If you need some free financial planning advice, SoFi can offer that as well.
What debt consolidation lender is best for longer repayment terms
For those who qualify, LightStream can offer personal loans for up to 12-years depending on the loan amount. Additionally, LightStream offers some of the lowest APRs on the lending market.
What debt consolidation lender is best for fair to poor credit?
The most popular lender for poor credit borrowers with credit scores as low as 560, is Upgrade. If you have a credit score below 560, Upgrade does also offer a secured loan option or they allow you to use a co-signer.
What debt consolidation lender has the highest customer satisfaction?
BestEgg has a reputation of being a straightforward lender without all the bells and whistles that other lenders may have, but their customer service is on point and their terms and conditions are well-spelled out on their website. There are no surprises with BestEgg.
What debt consolidation lender has the best rates?
It is no secret that LightStream offers some of the best rates available on the lending market. To qualify for these rates, you should make sure you have good credit at a minimum, however, for the best rates, you should have an excellent credit rating.
What debt consolidation lender has the lowest fees?
SoFi offers a wide range of personal loan amounts and terms with zero fees. That means no origination fee, no late fees, and no early pay-off penalty. In addition to no fees, SoFi has some of the most competitive interest rates for borrowers who qualify.
How do you know which debt to consolidate?
When you are consolidating debt, always start with the debt with the highest interest rates. Try to prioritize these debts and hopefully, you will qualify for an amount that covers all your debts, but if not, then you will for sure at least take care of the most expensive debts first.
What are alternatives to debt consolidation loans?
Some alternatives to a debt consolidation loan may be acquiring a 0% APR credit card with a generous promotional period, a home equity loan, or taking out a loan against a 401k retirement account.
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