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Generally, you will need a personal loan for debt consolidation, which means replacing multiple debts with a single loan. Most personal lenders ask about the loan objective when starting the loan application process, and often, personal loans for debt consolidation have higher interest rates than other personal loans and other loan types.
Flexibility makes Wells Fargo a top contender for the best personal loan for debt consolidation. Wells Fargo distinguishes debt consolidation loans from personal loans, but interest rates are the same.
Benefits include incredibly competitive interest rates, ranging from 5.99% to 24.49% APR, and an autoplay discount of .25% if payment is made to a Wells Fargo account. For unsecured personal loans, the most common type for debt consolidation, available amounts range from $ 3,000 to $ 100,000 and there are no origination or prepayment fees.
Wells Fargo offers several options for personal loans that are not common elsewhere. First, there is an option to secure your loan with a CD or savings account, although this option is only available to current customers. Secured loans allow you to borrow up to $ 250,000, although the basic fee of $ 75 applies to secured loans (unsecured loans do not have a fee).
Wells Fargo can send your loans directly to your Wells Fargo bank account or a credit account outside of Wells Fargo to pay your debts.
APR Range: 5.99% to 24.49% APR
Available Loan Amount: $ 3,000 to $ 100,000 for unsecured loans, $ 3,000 to $ 250,000 for secured loans
watch out for: Secured loan option. Secured loans use collateral to reduce interest rates and increase the amount available for borrowing. But using these savings accounts as collateral can mean losing your savings or CD if you do not repay your loan.
Wells Fargo also has a history of data security and compliance issues. It has faced federal penalties for improper customer referrals and account opening.
Lightstream is a highly regarded lender for many loan types, and has topped Business Insider’s coverage of the best personal loans and best auto loans. However, this lender only works with borrowers with good or better credit, requiring a minimum credit score of 660.
Lightstream consistently offers competitive interest rates, although its minimum interest rate for debt consolidation is higher than the interest rates of its typical personal loan. However, this lender does not have any prepayment or origination fees. Same day funding is available with Lightstream.
APR Range: 5.95% to 19.99% * APR with AutoPay (rates 8/19/2020).
Available Loan Amount: $ 5,000 to $ 100,000. According to Lightstream’s website, credit cards and debt consolidation above $ 50,000 are only allowed for borrowers with excellent credit.
watch out for: Loan terms between Lightstream’s specific personal loans and debt consolidation loans. Only borrowers with excellent credit can borrow up to $ 100,000 maximum, and without excellent credit no one can qualify for the full amount.
Lightstream defines excellent credit history as a variety of credit histories with five or more years of credit history, steady and substantial income for debt, and very little or no credit card debt. If you are looking for a debt consolidation loan, chances are you have a significant amount of debt, and these qualifications may not fit.
Additionally, Lightstream has no way to qualify online. You have to apply for a loan to know what your rates and terms may actually look like, which can make comparison shopping difficult.
A SoFi personal loan is the best option for anyone with a high balance, as this lender makes debt consolidation loans of up to $ 100,000. Debt consolidation loans from this lender are comparable to the rates offered by Lightstream, but Sophie offers a higher loan limit to all applicants, where Lightstream only allows some borrowers to borrow up to $ 100,000. Similarly, SoFi has no application, origination or prepayment fees.
SoFi offers unique features such as unemployment protection, which can hold a loan for up to three months if you withdraw yourself from work.
APR Range: 5.99% to 18.85% (with AutoPay)
Available Loan Amount: $ 5,000 to $ 100,000.
watch out for: String requirements. SoFi personal loan has a minimum credit score of 680. According to NerdWallet, the average income among borrowers is over $ 100,000.
In a reasonable credit limit, qualifying for a personal loan with reasonable interest rates can be difficult – many lenders have a minimum of 660 or 680. Although a credit loan can be a good option for people with a credit score, as much as 640 interest rates are compared to offerings by Lightstream and Sophie, this lender has less stringent requirements.
The richer and best egg compared with competitors, which both have the same minimum 640 minimum credit requirement, lowered payoff interest rates, and may reduce their origination fees.
Available Loan Amount: $ 5,000 to $ 40,000
watch out for: Origination fee Payoff personal loans for debt consolidation offer loans with origination fees between 0% and 5%. The competing lender Prosper and Best Eggs charge 2.41% and .99% origination fees respectively.
With a bad debt, a personal loan for debt consolidation can be expensive, or difficult to qualify for. An avant-garde loan is the best bet for borrowers with bad debts, requiring a minimum credit score of 580.
Compared to other personal loan lenders offering debt consolidation loans for bad borrowers, Avant’s terms are the most lenient. Interest rates range from 9.95% to 35.99%. While there is an administration fee, it may be less than the competitors’ fees with a cap at 4.75%. Avant also has the benefit of quick, available funds the next day.
APR Range: 9.95% to 35.99%
Available Loan Amount: $ 2,000 to $ 35,000 for unsecured loans; $ 5,000 to $ 25,000 for secured loans
watch out for: Secured loan option. Like Wells Fargo, Avant offers the option of securing your loan with collateral like your car. While this can be helpful in lowering interest rates, it can put your car at risk if you do not pay. The administration fee for secured loans is 2.5%, and the maximum amount is $ 25,000.
We believed others and why they didn’t make the cut
- LendingClub: This lender has the ability to have higher origination fees that can add to the cost of borrowing. The average origination fee is 5.2%.
- Prosper: Prosper’s minimum credit score requirement is 640, but borrowers with this score may receive lower interest rates and potentially lower fees than payoffs.
- Best egg: Like Prosper, borrowers with a credit score of 640 or higher can receive minimum interest rates and at least maximum fees from payoffs. To qualify for the lowest possible interest rates, borrowers require a minimum FICO score of 700 and an income of at least $ 100,000 per year. Only three and five-year loan terms are available, making these loans less flexible than other options.
- search: Discover’s personal loan rates are higher than other lenders’ loans, but borrowers who meet the minimum lending score requirements may receive a lower interest rate from Lightstream, which is lower. However, Discover makes payments directly to creditors, which can simplify your payment process. Wells Fargo is the only other bank on our listing to offer that option.
- Marcus by Goldman Sachs: Like Discover, borrowers who qualify for a Marcus personal loan can get a lower minimum interest rate with Lightstream, Sophie, or Wells Fargo.
- Exos: This lender’s personal loan requires a minimum credit score of 720. For borrowers with this type of credit, a lower interest rate can be found elsewhere.
- OneMain Financial: OneMain A minimum credit score is not required to apply, which may make it a viable option for those who do not meet the Avant’s 580 minimum. But interest rates range from 18% to 35.99%.
Why trust our recommendations?
Personal Finance Insider’s mission is to help smart people make the best decisions with their money. We understand that the “best” is often subjective, so in addition to highlighting the obvious benefits of a financial product, we also outline limitations. We spent hours comparing features and contrasting the fine print of different products so you don’t have to.
How did we choose the best debt consolidation loan?
To find the best personal loan for debt consolidation, we combed through the fine print and met the terms of about a dozen personal loans that were best suited to help consolidate debt. We considered four main features:
- APR Range: For the most help with debt repayment, a personal loan for debt consolidation requires a lower interest rate than your consolidated credit card or other loans. We looked for loans that had the lowest rates possible for each credit range and purpose. The average credit card interest rate in the first quarter of 2020 was 15.09%, so we focused on those loans that had the potential to defeat it.
- Appropriate loan amount: We looked for personal loans that had the most variety of loan amounts. According to loan comparison site Reliable, the average amount of consolidated debt in May 2020 was $ 18,000. To benefit the most borrowers, we included personal loans with a maximum limit of more than $ 10,000.
- Minimum Credit Score Requirements: Where available, we considered the minimum credit score requirements for each company. We considered lending loans into categories for outstanding, fair and bad loans based on these credit score requirements.
- Charges: We considered fees in our decisions such as origination or administrative fees, looking for loans with the lowest or lowest fees. There are no prepayment penalties in any of the best loans listed.
- Nationwide Availability: We only considered loans with availability in most or all 50 US states.
What is debt consolidation?
Debt consolidation takes all types of debt, including credit cards, medical loans, or usually any other type of unsecured debt, and rolls it into a single debt.
To consolidate the loan, you will get a loan for the total amount of the loan you want to combine. Then, you use those funds to pay off personal, small debts. Finally, you have all your debts rolled into one monthly payment, a deadline for loan repayment and a small interest rate.
Can I use any personal loan for debt consolidation?
Most personal loans allow a wide variety of uses, and most involve credit card consolidation or debt consolidation, not all do. Be sure to read the fine print of any personal loan you are applying for and ensure that debt consolidation is an acceptable use of your loan. All of the loans we considered had an option to use the loan for debt consolidation, if not a separate loan, for which we included details.