Best Debt Consolidation Loans in March 2024

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ByChristopher Boston
Edited byJonathan Ramos
Contributions by6+ experts

Updated: March 22, 2024

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Our research reveals LightStream stands out as the premier choice for debt consolidation loans, with Upstart close behind. SoFi shines for individuals with good credit, whereas Upgrade leads for those with poor credit scores.

Consolidating multiple debts can streamline your finances by combining them into a single loan, often with a lower interest rate, making management easier and potentially more cost-effective.

If you're considering this path, our detailed guide below outlines the top personal loans for debt consolidation. We provide key insights and factors to consider, equipping you with the necessary knowledge to determine if debt consolidation is the right strategy for you.

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Best Debt Consolidation Lenders of 2023

This year, various lenders have distinguished themselves by offering outstanding debt consolidation loan options. These lenders have been recognized for their competitive interest rates, flexible repayment terms and commendable customer service. Below, we've curated a list of the top performers aimed at helping you simplify your finances and reduce the overall cost of your debt.

Best Overall: LightStream

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Runner-Up: Upstart

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Best for Good Credit: SoFi

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Best for Bad Credit: Upgrade

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Best for Low-Income: LendingClub

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Best for Same-Day Funding: Ally

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Benefits of Debt Consolidation Personal Loans

Juggling multiple debts can be overwhelming. Debt consolidation personal loans provide a means to streamline your financial responsibilities, offering numerous advantages:

Single Monthly Payment: Imagine you're juggling payments for three credit cards, due on the 5th, 15th and 25th of every month. Now, consider the simplicity of having just one payment due on the 10th of every month. By consolidating, you replace multiple payments with one, minimizing the chances of accidentally missing a date.

Potential for Lower Interest Rates: Let's assume you have a credit card with a 20% interest rate and another with 23%. If you secure a debt consolidation loan with an interest rate of 15%, you could save substantially on interest payments over time. Essentially, you'd be getting a discount on your debt.

Improved Credit Score Over Time: Imagine in the past, with multiple debts, you occasionally missed payments simply because it was too much to track. After consolidating, you're more consistent with only one payment to manage. Over months, this consistency and your decreasing debt balance could give your credit score a noticeable lift.

Simplified Financial Management: Picture your finances as a dashboard. Previously, with several debts, it looked cluttered with various readings to track. Now, with only one debt, everything is clearer. Instead of spending hours reviewing statements from different creditors, you could spend just a few minutes on one, leaving more time for things you love.

Potential Risks of Debt Consolidation Personal Loans

Debt consolidation personal loans can be a lifesaver for many. Still, like all financial tools, they come with their own set of potential pitfalls. Being aware of these can help you navigate them more efficiently:

Possibility of Higher Interest Rates: Lenders might view you as a riskier borrower if you have a tarnished credit history. As a result, they might offer you higher interest rates. For example, while someone with excellent credit might get an offer at 10%, you might be looking at rates of 20% or higher if you have bad credit.

Risk of Accumulating More Debt: If you use a debt consolidation loan to pay off credit cards but then rack up balances on those cards again, you'll find yourself in deeper financial trouble. Imagine paying off three credit cards only to fill them up again. Now, you'd have those card payments plus the loan payment.

Losing Collateral on Secured Loans: Some debt consolidation loans are secured, requiring an asset (like your home) as collateral. If you default on the loan, you risk losing that asset. For instance, the lender might repossess your vehicle if you took a loan against your car and can't keep up with payments.

Unexpected Fees: Always read the fine print. Some lenders might have origination fees, early repayment charges or late payment penalties. Let's say you took a $10,000 loan with a 3% origination fee; that's $300.

Types of Debt That Can Be Consolidated

Having many kinds of debts can be confusing. Debt consolidation can help by putting them all together, making things simpler. Below is a table that lists common types of debts and some things to consider if you consider consolidating them.

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Factors to Consider Before Choosing a Debt Consolidation Loan

Think of your credit score as your financial reputation. A higher score (e.g., above 700) shows lenders you're trustworthy, which could get you better loan offers with lower interest rates. But if your score is lower, you might face higher interest rates or stricter terms.

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How to Choose the Best Debt Consolidation Loan for You

Making the right decision about a debt consolidation loan is crucial for your financial health. With various offers, terms and lenders in the market, it's essential to approach the choice systematically. This step-by-step guide will help you navigate the process and choose the most beneficial loan for your situation:

1

Compare Interest Rates

Begin your search by checking the interest rates offered by different lenders. For instance, if you have two credit cards, one with a 23% interest rate and another at 19%, and find a consolidation loan at 15%, you'd save on interest. Aim to find a loan rate lower than your current debts.

2

Examine Loan Term Durations

Loan terms vary among lenders, dictating how long you have to repay. For example, on a $10,000 loan at 15% interest, a two-year term might mean monthly payments of around $480, but a five-year term could reduce that to $240. Choose a term that complements your monthly budget. Shorter terms can lead to higher monthly payments but can clear your debt faster.

3

Calculate Monthly Payment Amounts

Determine the monthly payment amounts. If a loan quotes a $300 monthly payment, but your budget only allows for $250, you should reconsider. Ensure your monthly obligation will maintain your finances.

4

Research Lender Reputation and Customer Reviews

A lender's track record speaks volumes. Suppose you come across a lender named "QuickLoans" with an appealing rate. However, online reviews reveal frequent complaints about hidden fees. Such insights can help you sidestep pitfalls.

5

Check Eligibility Requirements

Lenders have distinct criteria, like minimum credit scores. If a lender requires a score of 680 and yours is 670, consider improving your score or seeking a more lenient lender.

6

Look Out for Additional Fees and Charges

Always inspect the fine print. A lender might advertise a fantastic rate but tack on a 4% origination fee for a $10,000 loan that immediately adds $400 to your debt.

7

Ask About Flexibility

Life is full of surprises. What if you suddenly can't make a payment on time? It's essential to know if your lender would allow a brief deferment without extra charges.

8

Seek Expert Advice

Always appreciate expert input. Imagine being torn between two loan offers. By highlighting nuances you hadn't considered, a financial advisor could save you significant money and stress in the long run.

Alternatives to Debt Consolidation Personal Loans

While debt consolidation personal loans are a popular option for many individuals looking to manage their debts, it's essential to recognize that they're not the only solution available. Other alternatives might be more suitable or appealing depending on your financial situation, goals and personal preferences. In the list below, we delve into various options to help you make an informed decision.

Balance Transfer Credit Cards: These cards often offer an introductory period (e.g., 12 or 18 months) with low or 0% interest. Transferring your high-interest debt to such a card can save you on interest, but be cautious of rates after the promotional period ends.

Home Equity Loans or Lines of Credit: By borrowing against the equity in your home, you can often secure lower interest rates. However, since your home is collateral, failing to repay can lead to foreclosure.

Debt Settlement or Management Programs: A third party negotiates with your creditors to reduce your debt or change repayment terms. This can reduce your debt load but negatively impact your credit score.

Bankruptcy: This should be considered only when other avenues are exhausted. Bankruptcy can offer a fresh start, but it has significant implications for your credit.

401(k) Loan: Some people opt to borrow from their 401(k) retirement accounts. This can have lower interest rates and no credit checks, but you must be aware of potential penalties, taxes and the impact on your retirement savings.

Peer-to-Peer (P2P) Lending: Platforms like LendingClub or Prosper allow direct individual lending. While borrowers sometimes get lower rates than traditional loans, credit scores are still a factor.

Credit Counseling: A credit counselor can offer guidance, establish a debt management plan and negotiate with creditors, providing a structured way to tackle debt.

Personal Savings: Using personal savings to pay down high-interest debt can be smart, but retaining an emergency fund and keeping all savings is crucial.

Negotiate Directly with Creditors: Communicating with your creditors might secure reduced interest rates or better repayment terms, simplifying your debt management without additional loans.

Frequently Asked Questions About Debt Consolidation Loans

In the short term, applying for a debt consolidation loan might result in a slight dip in your credit score due to the lender's credit inquiry. However, in the long run, if managed correctly, consolidating loans can improve your credit by reducing your credit utilization ratio and establishing a history of on-time payments.

The difficulty in securing a debt consolidation loan largely depends on your credit score, income and the total amount of debt you wish to consolidate. Those with higher credit scores are more likely to be approved and get favorable terms.

Consolidating debts can simplify your financial management by combining multiple payments into one. If you secure a lower interest rate than your current debts, it can also save you money. However, evaluating the terms and ensuring you can maintain the consolidated loan payments is essential to avoid further financial strain.

Yes, the primary purpose of a debt consolidation loan is to pay off multiple debts, combining them into a single loan with one monthly payment.

Benefits include the potential for lower interest rates, a single monthly payment, improved credit scores over time and simplified financial management.

Some potential downsides include the risk of higher interest rates for those with bad credit, the possibility of getting into further debt if not disciplined, the potential loss of collateral on secured loans and additional fees.

Many debts, like credit card balances, medical bills and other personal loans, can be consolidated. Some, like federal student loans, come with benefits that might be forfeited when consolidated with a personal loan.

A debt consolidation loan offers a lump sum to pay off multiple debts, which you repay in installments over a set term. A balance transfer credit card allows you to transfer debts onto a new card, often with a promotional low or 0% interest rate for a specific period.

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Methodology

We reviewed over 30 personal loan lenders using 35+ individual data points across six key categories: loan affordability, accessibility, consumer friendliness, customer service, flexibility and lender transparency.

Within each ranking criteria category, we considered several data points that carry the most weight when choosing a personal loan lender for debt consolidation. These factors include APR ranges, available loan amount, minimum credit score, minimum income amount, application fees and disbursement time.

Here at MoneyGeek, we value you — the consumer — so we also factor in each lender’s customer support, business ratings and additional features that could make your experience easier and more accessible — like pre-qualification, payment options and mobile apps.

After careful consideration and calculation, our picks are chosen with your best interest in mind. Our personal loan recommendations and expert tips are meant to help you make the best decision when choosing a lender to consolidate your debts and meet your needs.

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About Christopher Boston


Christopher Boston headshot

Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.

Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.


sources
Shield Insurance

The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.