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Too Many Payments? Too Many Bills? This Option Might Simplify Things
Debt consolidation replaces your existing debts with a single loan, usually with more favorable terms. When you roll multiple debts into a single loan, you can lower your interest rate, shrink your monthly payments or pay off what you owe faster. It’s one of the smartest ways to tackle high-interest debt, especially if credit card balances are weighing you down.
Not sure where to start? We’ll walk you through how to get a debt consolidation loan that fits your budget and helps you breathe a little easier. We’ve researched top lenders and pulled together our favorite picks. In this guide, you’ll find the best debt consolidation loan options for 2025, plus tips to help you choose the right one for your financial goals.
Too many of us know the feeling of being weighed down by debt. You can spend years making payments and feel like you’ve barely made a dent in what you owe. If you’re already doing everything you can to pay off debt and you’re not getting very far, we found some tools to help. From debt consolidation to debt settlement, we found several ways you can start your journey to being debt free.
A debt consolidation loan is a type of personal loan you take out to pay off existing debts. It’s most commonly used to pay off high-interest credit card debt.
The reason this is beneficial, even though you still have to repay the same amount of debt, is that personal loans come with much lower interest rates than most credit cards. You might have a few credit card balances accumulating interest at around 16% to 25%, while personal loans usually come with interest rates closer to 5% to 12%.
Debt consolidation loans work exactly like personal loans on paper, except many lenders send loan funds directly to creditors for you. If they don’t, you could still take out a personal loan and use the funds to pay off debts yourself.
To make a debt consolidation loan worth it, you should receive at least one of these benefits:
Debt consolidation is different from debt settlement (though it’s also a valuable tool for conquering debt). With debt settlement, companies like National Debt Relief can help negotiate down what you owe and make your payments more manageable.
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Debt consolidation loans offer benefits such as reduced interest rates, lower monthly payments and simplified debt management. With these loans, you ideally take a new loan with a lower interest rate to pay off existing debts. Doing so reduces the amount of interest you pay over the life of the loan. This can lead to significant savings, especially if you are consolidating multiple high-interest accounts.
As for lower monthly payments, this occurs when the loan extends the repayment period and/or you secure a loan with a lower interest rate. This benefit helps to free up cash flow and add some breathing room in your monthly budget.
Plus, instead of juggling multiple payments, you’ll consolidate all of your debts into a single payment. That makes it easier to track your progress and manage your debt.
And a debt consolidation loan can improve your credit score as long as you manage the loan responsibly. As you pay down your credit card debt, you’ll lower your credit utilization ratio. This ratio is the percentage of your available credit that you’re using. You’ll also make on-time payments, which improves your payment history (a significant factor in your credit score).
A debt consolidation loan can be a powerful tool for tackling high-interest debt, but it’s not the right move for everyone. Before applying, consider whether this option aligns with your financial habits and goals.
So, how do you know if this kind of loan is a smart move for you?
A debt consolidation loan might be a good choice if:
On the flip side, there are a few situations where taking out a debt consolidation loan might not be the best move.
You may want to think twice if:
Still wondering how to qualify for a debt consolidation loan that makes sense for your situation? Lenders typically look at your credit score, income and debt-to-income ratio. If you meet the requirements and are ready to take control of your debt, a debt consolidation loan can offer the structure and savings you need.
Before you commit to any debt consolidation option, shop around to see what lenders can offer you. Your available terms could vary quite a bit from lender to lender because of how they evaluate your credit history and what kind of borrowers they’re targeting.
Online lending marketplaces like AmOne make it easy to quickly compare pre-qualified offers from lenders side-by-side, so they could save you some time.
To choose the loan that fits your financial goals, consider these features:
Debt consolidation loans come with the typical costs included with any personal loan, including:
As you look for the right debt consolidation loan, you may find it helpful to use loan comparison tools and read customer reviews. With a loan comparison tool, make sure you’re looking at more than just the interest rate. Include the factors we’ve detailed above (repayment terms, loan terms, origination fees, late fees, prepayment penalties) in your analysis so you understand the full cost of the loan. It’s also useful to input as much accurate information about your financial status as you can such as your credit score and debt. That way, you’re seeing information that is relevant and tailored to your specific circumstances.
Don’t forget about customer service and satisfaction ratings. Good customer service is essential, especially if an issue comes up during the loan term. With customer reviews, look for patterns. A one-off poor review or stellar review won’t tell you much. But consistent issues and high praise can give you an idea of what to expect from the lender.
Just be sure to verify the source. Ideally, reviews are coming from verified customers and the platforms have some kind of moderation process. Organize reviews from newest to oldest for an accurate reflection of the lender’s current customer service.
There are so many debt consolidation loans on the market that it can be overwhelming to determine which is best for your needs. To make things easier, we’ve shared our top options below along with their key features, pros and cons.
Note: Loan terms accurate as of Oct. 21, 2025 and subject to change. See lenders for most up-to-date information.
Best Debt Consolidation Loans at a Glance
Universal Credit is designed especially for debt consolidation and pay off. It offers rate discounts of between one and two percentage points — pretty significant! — for borrowers who use a Universal Credit personal loan to directly pay off credit card debt. Loans are available for borrowers with fair or bad credit, often within one day, and have a fixed interest rate. The APR is 11.69–35.99% on loan amounts of $1,000-$50,000.
Happy Money’s Payoff Loan is designed specially for credit card debt consolidation. The financial tech company works with community credit unions and mission-driven community banks to provide personal loans to pay off your debt directly. Choose the plan that works best for you, whether it’s a lower monthly payment, lower interest rate or earlier payoff date. The APR is 7.95%-29.99% on loan amounts of $5,000 – $50,000, and the minimum credit score is 640.
LightStream’s personal loans for borrowers with good or excellent credit (minimum credit score of 660) can help you get hold of up to $100,000 as soon as the same day you’re approved. It also eschews fees and offers to beat the rate of any competitor — just submit information about a lower rate you’re offered elsewhere, and LightStream will offer you a rate 0.10 percentage points lower through its Rate Beat program. It offers APRs ranging from 7.24%-23.89% .
Upstart is technically a technology company, not a lender or a marketplace. Its platform uses proprietary AI to connect you with partner lenders, and you manage the loan entirely through the platform. Upstart uses more than a traditional credit score to assess your creditworthiness, so factors like your education and income could help you get a loan even if you have a low or no credit score. The APR is between 6.70%-35.99% on loan amounts from $1,000 – $75,000 and a minimum credit score of 580.
SoFi is an online bank that offers financial services ranging from banking to student loans to investing. It offers debt consolidation loans with no fees, and you can apply and manage your account right from its convenient app. You can qualify for a discounted interest rate if you’re an existing SoFi member with a free SoFi bank account or other product in the app. The APR is between 8.99% – 35.49% on loan amounts from $5,000 – $100,000 with a minimum credit score of 670.
Upgrade is a financial tech platform designed to help you raise your credit score through checking, credit cards, credit monitoring and personal loans. It offers debt management and payoff in one platform, and you may qualify for a debt consolidation loan with a fair or bad credit score as low as 580. There also are zero repayment penalties. The APR is 7.74% – 35.99% on loan amounts from $1,000 – $50,000
Rocket Loans lets you apply online for a debt consolidation personal loan in minutes. The online application starts with a transparent overview of the process, so you know what to expect at each step as you await your loan. You can verify your income and identity entirely online, so you don’t have to worry about phone calls or snail mail slowing down the process. Enjoy no prepayment penalties and same-day funding. The APR is 8.01% – 29.99% on loan amounts from $2,000 – $45,000 with a minimum credit score of 610.
Discover’s debt consolidation loans are fee-free and available to borrowers with a credit score as low as 660. Its repayment assistance options are robust compared to many competitors: If your financial situation changes, you could apply for payment deferral, a short-term shift to interest-only payments or extend your repayment period for lower monthly payments. The APR is 7.99%-24.99% on loan amounts from $2,500 – $40,000.
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LendingClub calls itself an “online marketplace bank.” It offers checking accounts and personal loans, including loans for debt consolidation, up to $40,000. It can be a good option if you have a low credit score; loans may be available for lenders with scores as low as 660. You’ll get funds within 48 hours and there are no repayments penalties. The APR is 7.04%-35.99% on loan amounts as low as $1,000 with a minimum credit score of 600.
Prosper is one of few peer-to-peer lending platforms left — individuals and financial institutions can invest in personal loans to support borrowers and earn a little bit of a return. You don’t have to deal with investors directly; Prosper manages the application and loan origination. Loans are available from $2,000 to $50,000 with a credit score as low as 600. The APR is 8.99%-35.99% with no prepayment penalty.
Avant offers personal loans up to $35,000, with funding as soon as the next business day after approval. The lender’s minimum credit score is just 580; most borrowers have FICO scores between 600 and 700. The APR is 9.95–35.99% on loan amounts from $2,000 – $35,000.
LendingPoint assesses creditworthiness with a proprietary algorithm that looks beyond traditional FICO scores, so it’s able to lend to borrowers with scores as low as 600. Its loans are available in every state except Nevada and West Virginia. The APR is 7.99% – 35.99% on loan amounts from $1,000 – $36,500.
Ready to apply for a debt consolidation loan? Here’s our five-step process on applying for your loan:
Start by making sure you understand your current financial situation. List out all of your current debts, from credit card balances to auto loans and student loans. Jot down the outstanding amounts, interest rates and minimum monthly payments. Then, calculate your total debt so you know how much debt you need to consolidate.
Finally, assess your monthly income and essential expenses. You want to determine how much you can afford to pay each month on your new loan.
Don’t skip this step. Your credit score plays a key role in determining your eligibility for a debt consolidation loan and the interest rate you’ll be offered. You can request a copy of your credit report from major credit bureaus, and you’re entitled to one free report per year from each bureau through AnnualCreditReport.com.
As you review your credit score, look for any inaccuracies. You can dispute errors with the corresponding credit bureau. If you have any overdue accounts, do what you can to get those taken care of before applying for a loan.
Use online comparison loans and articles like this one to compare interest rates, fees, loan terms and reviews. Look for the most favorable terms and rates that will work with your credit score and needs. You may find some lenders have prequalification options where you can see your potential terms without requiring a hard inquiry on your credit. This is a good avenue to pursue to narrow down your options.
Before you apply, make it easy on yourself by gathering the following documents:
Once you’ve narrowed down your options and selected your lender, fill out your application. Be as thorough and as accurate as possible. You may need to upload or scan documents into the application. Make sure you understand every aspect of the loan and its conditions before signing and submitting. Monitor the application status via email or through the lender’s portal. If you’re approved, you’ll receive details via a final loan offer. This information should be reviewed carefully to ensure it matches what was offered during the application process.
As you consider debt consolidation loan options, there are some factors to be aware of that will impact the total cost of the loan. Here’s what to keep in mind:
Interest rates are first on this list for a reason. The interest rate you receive on your loan will significantly impact the total amount you end up repaying. You’ll want to understand if you have a fixed or variable interest rate as well as the annual percentage rate (APR). A fixed interest rate will remain constant throughout the life of your loan so your monthly payment will be predictable. A variable rate, on the other hand, can change over time based on market conditions. As for the APR, this figure tells you the total cost of borrowing, including the interest rate and any additional fees.
When looking at debt consolidation loans and interest rates, research current rates before applying and consider how your credit score will affect what you’re offered.
The loan term is the length of time over which you’ll repay the loan. The term will affect your monthly payment and the amount of interest you paid. Usually, a shorter term leads to higher monthly payments but lower total interest costs. You accrue less interest this way because you are paying off the principal at a faster rate.
With a longer term debt consolidation loan, your monthly payments will be lower. However, you’ll pay more total interest because you are paying down your principal at a slower rate.
Debt consolidation loans typically have origination fees. This is a fee charged by the lenders to process your application. It is generally a percentage of the loan amount and can be deducted from the loan or paid by you upfront. You may also encounter prepayment penalties if you pay off your loan before the loan term ends. Likewise, it’s good to be aware of potential late fees for missed or late payments. Consider setting up automatic payments to avoid this fee.
Lenders use your credit score to determine your eligibility for the loan. It will impact how much you are approved to borrow, the terms and interest rates. Generally, the higher your credit score, the more favorable terms and rates you will receive. Before applying for a loan, do what you can to improve your score by avoiding other hard inquiries as well as late or missed payments.
A credit card consolidation loan typically involves transferring outstanding balances from multiple credit cards to a single credit card with a lower interest rate. They may also offer 0% APR for a certain period of time as an incentive to perform a balance transfer.
The advantages of credit card consolidation loans include:
The following disadvantages are important to be aware of:
A personal loan, on the other hand, is an unsecured loan provided by a bank, credit union or other lender. It is used to pay off or down debts. The borrower then makes monthly payments on the loan at a fixed interest rate. Here are the pros to this means of debt consolidation:
Compared to credit card consolidation loans, personal loans have some cons:
To determine which is right for you, consider your outstanding debt, income and credit score. If you have a high credit score and relatively low balance, a credit card consolidation loan may be a better choice. If you have a lower credit score and more debt to pay off, a personal loan may be the better option.
Debt consolidation loans aren’t the only avenue for tackling your debt. Consider these other options and their effect on your credit score and financial goals before committing to a loan:
Balance transfer cards: These credit cards let you transfer the outstanding balance of an existing card, or several, to a new creditor. Balance transfer cards usually offer an interest-free period of about a year to 21 months, giving you time to pay down your debt without worrying about interest.
Debt Settlement: You can negotiate with creditors to reduce what you owe, also known as debt settlement. You can also go through companies like National Debt Relief, which will do the negotiating for you.
Refinancing: If you have a single loan with unfavorable terms, you could return to the lender and ask to refinance. This could get you a lower interest rate or different monthly payment, depending on your financial situation and needs.
Debt forgiveness: A debt management plan usually comes with some amount of forgiven debt, which could offer a tremendous amount of relief. You might also be able to negotiate a reduced repayment amount on your own directly with your creditors. This kind of settlement usually shows up on your credit report as a negative mark.
Deferment: Check the terms of your existing debt to see if your lender offers deferment or other flexible repayment options. You may just need a month or two off of monthly payments or interest to get back on track, and that could save you the trouble of applying for a whole new loan.
Up for a debt challenge?
In 10 days, these 10 practical steps could help you get back on the right financial track.
Before applying for a debt consolidation loan, make sure you’re setting yourself up for success. These tips can help you find a loan that works for your goals and your budget:
Once your loan is approved and the money hits your account, these next steps can help you stay on track and avoid slipping back into debt:
Have questions about how debt consolidation loans work or whether one makes sense for your situation? We’ve answered some of the most common ones below to help you make a more informed decision.
Plenty of lenders make loans available for borrowers with bad or fair credit scores in the high 500s to mid 600s. Just watch out for the interest rate. It doesn’t usually help you to replace your existing debt with a loan with a higher interest rate. And a monthly payment you can’t pay won’t improve your situation, either.
The higher your credit score, the better odds you’ll always have for landing a loan and getting favorable terms. But you don’t necessarily need a good or excellent credit score to get a debt consolidation loan.
Your credit score can be hurt temporarily by a debt consolidation loan. It can also hurt your credit utilization score. However, meeting the payment deadline on the consolidation loan will help your score over time.
Debt consolidation loans are most helpful for people with credit card debt. The consolidation loans often have a lower interest rate than credit cards which means more of your money is going to pay down the loan amount. They also work if you meet the payment deadline.
Contributor Dana Miranda is a Certified Educator in Personal Finance® who has written about work and money for publications including Forbes, The New York Times, CNBC, Insider, NextAdvisor and Inc. Magazine. Freelancer Veronica Matthews contributed to this post.
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