The best personal loans to help you consolidate debt, for anyone with fair to excellent credit (2024)

Credit card debt is common, and sometimes we end up in over our heads before we even realize it.

The average credit card balance is $5,910, according to Experian's latest data. And while that number has been on the decline over the last few years, even debt in the low four figures can cost you a lot in interest when you only make the minimum payment.

If you're stuck in a no-win situation with credit card debt you can't afford to pay off (but also can't afford not to), a personal loan for debt consolidation might be your ticket out.

Debt consolidation also helps people with multiple student loans lump them together into one loan, ideally with a lower interest rate.

One obvious benefit of using a personal loan for debt consolidation is that it helps you avoid getting overwhelmed by too many bills and too many different due dates. Imagine taking all those payments you're juggling and streamlining them into one monthly bill. That's one of the big benefits of a debt consolidation loan.

However, there are a few considerations to make when looking for the right debt consolidation loan. You'll want to make sure you are getting the best interest rate and that the repayment plan works within your budget.

CNBC Select rounded up the top personal loans for debt consolidation, looking at fees, interest rates and flexible repayment options for different credit scores. We tried to prioritize loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores. Some of the options ahead have origination fees and/or APRs — make sure you understand the terms of the loan before you sign up. (Read more about our methodologybelow.)

• Best for student loan consolidation: SoFi
• Best for fair/average credit: Upstart
• Best for consolidating debt while improving financial literacy: Upgrade
• Best for staying motivated: Happy Money
• Best for good to excellent credit: LightStream
• Best for joint applicants: Prosper

Find the best personal loans

• What is a debt consolidation loan?
• What are the benefits of consolidating debt?
• Does debt consolidation hurt your credit score?
• How does debt consolidation work?
• Do you have to close credit cards after debt consolidation?

A debt consolidation loan is a personal loan that's used to pay off existing debt across other accounts, including credit cards, student loans and other installment loans.

Debt consolidation loans should not be confused with debt settlement or debt negotiation. If you want one of these loans, most lenders require that you:

1. Apply for and get approved for a new personal loan.
2. Use the personal loan money to pay off your old accounts.
3. Set up monthly payments on the new loan (usually starting within 30 days).
4. Pay off the full amount of your loan (typically the combined total of your old balances plus interest), plus any applicable fees.

Debt consolidation loans don't come with a money-saving guarantee, though with a lower APR, they certainly can shave off some interest charges and save on high-interest debt. People who use debt consolidation loans successfully can often save money when they stick to their new, simplified payoff plan and stop using their old credit cards to rack up new debt.

Personal loans are most useful when you consolidate credit card debt with very high APRs. For example, for a credit cardholder with a 25.74% APR, it would take 21 years to pay off a balance of $5,311.57 if they only paid the minimum each month. They would end up paying a total of $15,891 including interest.

Now just imagine if they had two or three credit cards with similar balances and APRs.

The average personal loan interest rate at the time of this writing is 11.48% APR. While that's still high, it's much less than the average credit card APR of 20.68%.

Consolidating your debt into a personal loan can have a positive impact on your credit score and overall finances, but it's important to understand the process so you can ensure the greatest benefit.

Debt consolidation will impact your credit score and credit report in the following ways:

1. It will add at least one hard inquiry to your credit report.
2. It will add an active installment loan to your credit report.
3. Your monthly payments will be tracked and reported to the credit bureaus until the loan is paid off.
4. Your credit utilization ratio will drop when you move revolving credit card debt onto the new installment loan.

Personal loan applications require a credit check, so you'll want to know your credit score before you apply. There's no direct penalty for getting denied a loan but having too many applications on your credit report could be a red flag to future lenders.

Also, once you're approved for a personal loan, make sure you avoid making a late payment since payment history holds the biggest weight in determining your credit score. A late payment on any lines of credit can cause your credit score to drop. To avoid late payments, make sure you know your payment due date and enroll in Autopay if you can.

Personal loans deliver cash directly to your bank account, which you then use to pay off your existing debt. Within 30 days, you'll start making a fixed monthly payment on the new loan until all of the debt is paid off. Most personal loans come with fixed-rate APRs, so your monthly payment stays the same for the loan's lifetime.

In a few cases, you can take out a variable-rate personal loan. Before you choose this option, make sure you're comfortable with your monthly payments changing if rates go up or down.

Personal loan APRs average 9.65%,according to theFed'smost recent data. Meanwhile, the average credit card interest rate is around 16.28%. Your interest rate will be decided based on your credit score, credit history and income, as well as other factors like the loan's size and term. Most loan terms range anywhere from six months to seven years. When choosing your repayment terms, pick the monthly payment that fits best with your budget, but also note how much interest you'll pay over the lifetime of the loan.

Be sure to check if the lender charges an early payoff or prepayment penalty, especially if you think you might pay your loan down faster than your agreed-upon term.Sometimes, lenders charge a fee if you make extra payments to pay your debt down quicker, since they're losing out on that prospective interest.

Once you're approved for a personal loan, the cashis usually delivered directly to your checking account within a week or less. You can sometimes ask your lender to pay your credit card accounts directly. Any extra cash leftover will be deposited into your bank account or returned to the lender.

You can keep your credit cards open even after you take out a debt consolation loan. Ideally, you should use your loan to pay off credit card debt, then use credit cards only to pay for what you know you can afford to pay off at the end of each month. If you're worried about racking up credit card debt all over again, look into how closing the account(s) will impact your credit score.

You might decide to keep one or two cards open for emergencies or daily spending, and close the rest of your credit cards. Use a credit score simulator like CreditWise from Capital One to see how much your score might drop before you start closing accounts.

There are many lenders out there that cater to a variety of financial needs and circ*mstances, including bad credit scores. However, keep in mind that when applying for a loan with bad or poor credit, while your application may still be considered, you'll be subject to some of the highest interest rates. The lowest interest rates typically go to individuals with good credit and better.

Because of this, it's generally recommended that you try to improve your credit score before applying for any form of credit if you don't urgently need the funding. Your credit score is also just one factor lenders consider. Eligibility may also depend on other factors, like how large of a loan you're applying for and whether or not you have co-signer.

Even if you receive a lower rate, you should do your homework to make sure you're accepting terms you're comfortable with. This could mean reviewing several loan options and comparing loan rates before ultimately deciding on one.

To apply for a debt consolidation loan, first consider how much of a loan you need to apply for. This can be done by simply adding up the debt balances you wish to consolidate. Once you start browsing for lenders, make sure their minimum loan amount and funding range aligns with how much money you're looking to borrow. For instance, if you need to borrow $1,000 and the lender's minimum loan amount starts at $3,000, you won't be approved for such a small loan.

You'll also want to double check any minimum credit score requirements. This lets you avoid taking a hit to your credit score only to not be approved for the loan. Keep in mind that you can consider credit unions, an online lender or even an in-person bank. You should also make sure you're aware of any fees, including application fees, a late payment fee, prepayment penalties and more.

Some lenders also let you submit information to see what rates you may prequalify for without damaging your credit score. You can also compare rates this way to make sure you're applying for a loan with some of the lowest rates available to you. Keep in mind that personal loans are a form of unsecured debt, which means you can't use collateral to secure the loan in case you default.

Once you decide which lender you want to go with, you'll submit an application with complete details. Once you're approved for the loan, your lender will use the funds to make a direct payment to each of your creditors — you'll just be responsible for repaying the personal loan.

Before you even submit a loan application, you should make sure you have a debt management plan in place. Consider factors like the loan amount, the loan rates, and the life of the loan (also called the loan term). Make sure the monthly payments are within your budget since on-time payments are crucial for avoiding a poor credit score, as well as being approved for the best loan rates in the future.

Also make sure you're able to manage your personal loan payments alongside any other debt payments you already have.

To determine which personal loans are the best for consolidating debt,Selectanalyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions. When possible we chose loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores on this list. Some of those options have origination fees.

When narrowing down and ranking the best personal loans, we focused on the following features:

• Fixed-rate APR:Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan's term, which means your monthly payment won't vary, making your budget easier to plan.
• Flexible minimum and maximum loan amounts/terms:Each lender provides more than one financing option that you can customize based on your monthly budget and how long you need to pay back your loan.
• No early payoff penalties:The lenders on our list do not charge borrowers for paying off loans early.
• Streamlined application process:We considered whether lenders offered same-day approval decisions and a fast online application process.
• Customer support:Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
• Fund disbursem*nt:The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
• Autopay discounts:We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
• Creditor payment limits and loan sizes:The above lenders provide loans in an array of sizes, from $1,000 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.

Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee your interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.

*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR with a term of three years would result in 36 monthly payments of $313.32.