A debt consolidation loan is when a person takes out a single personal loan in order to pay off other debts, such as balances on high-interest credit cards. The borrower then makes fixed, monthly payments to the lender for a set time period, usually between two to five years.

Instead of paying multiple small, unsecured loans, their new single payment is usually less than the combined ones of the previous debts, generally due to a lower interest rate. Consumers usually resort to a debt consolidation loan when they’re having a hard time making payments on multiple small loans, or are unable to negotiate a better interest rate. If their consolidation loan is secured with an asset—most commonly their house—, the IRS can even offer a tax deduction.

One of the most important things to consider when choosing a lender for your debt consolidation is precisely whether the loan will be secured by a form of collateral—which can be easier to obtain, especially if your credit affected—, or unsecured. Also consider possible costs and fees, such as an early repayment penalty, and the interest rate you can qualify for. Above all, compare different lenders before making a final decision, as that is the easiest way to get the best deal.

Though debt consolidation can help boost the borrower’s credit score in the long term, if the principal is paid off more quickly than it would have been without the loan, debt consolidation may also extend the loan term significantly, in which case the potential savings will be offset by paying more interest over time.  If they opt for a secured loan, they will also put their assets in jeopardy, and if they don’t modify the habits that led them into debt, it may result in an even more precarious fiscal situation.


Top 10 Companies

#1
9.6 / 10
  • Lock in lower fixed rate
  • Make only one payment per month
  • Systematically erase up to $35,000 of your higher interest debt
  • Rates ranging from 6.99% to 24.99% APR
  • Payment plans from 36 to 84 months
  • Debt consolidation calculator
#2
9.6 / 10
  • Fixed rates from 5.70% - 14.24% APR (with AutoPay)
  • No origination fees or pre-payment penalties
  • Borrow from $5,000 up to $100,000 at fixed rates
  • Sign documents electronically and receive funds directly to your account
  • Simple online application and quick pre-approvals
  • Personal loan calculator
#3
9.5 / 10
  • Compare and shop loans options from multiple carriers
  • Takes less than a minute to search loans
  • Enter loan amount to get started
  • Loan amount up to $100,000
  • Quick pre-approval process
  • No credit score impact
#4
Our Partner
9.0 / 10
  • Get loan between $5,000 and $100,000
  • Flexible terms
  • Low Fixed Rates with no Fees
  • No origination fee
#5
Our Partner
8.9 / 10

 

  • Request $1,000 to $35,000 for Credit Card Consolidation, Home Renovation, Major Purchase, Medical Bills, and more.
  • Completely FREE and secure loan-finding service that DOESN’T impact your credit score.
  • Huge network of lenders and lending partners.
  • Find out in minutes, repay in 24 to 84 months.
  • APR range from 4.84%-35.99%, minimum credit score 580+.
  • Get money in as soon as one business day.
#6
8.9 / 10
  • A+ BBB Accredited
  • Reduce your interest rate by an average of 30%
  • Improve your credit score by 75%
  • Personal Loan Calculator
  • No credit score impact
  • Fast online application in just minutes
#7
8.8 / 10
  • Online Lenders Alliance Accredited
  • Credit options from $300 to $10,000
  • Get started by simply entering your zip code
  • View rates and amount of approval in as little as 90 seconds
  • Request more cash at anytime
#8
8.8 / 10
  • No prepayment penalty
  • Get rates without affecting your credit score
  • Rates from 4.89% to 29.99% APR
  • Loan amount from $1,000 to $50,000
  • 3 to 5 years loan term
  • Seen on NBC News, Fox Business, Forbes, and Bloomberg
#9
Our Partner
8.7 / 10
  • Fixed rates start at 5.99%
  • Get up to $35,000 in loans
  • 5 years maximum loan period
  • No hidden fees, no prepayment penalties
  • Requires 640+ credit rating
#10
8.4 / 10
  • Consolidate debts into simple monthly payments
  • Payments over the course of 24 to 60 months
  • Flexible and personalized loan for your needs
  • Fixed interest from 9.95% to 36.00% APR
  • Deposit funds directly into your bank account
  • Fund deposit as soon as the next day
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How We Compare Debt Consolidation Loans

Company Profile

10%

Banks have traditionally been the source of debt consolidation loans. Credit unions and banks for example are also called Direct Lenders because they are the direct source for such loans. This is why people in the past searching for the best loan rates had to go from one lending institution to the other.

With the advent of internet and how information is shared, some of today’s companies offer Loan Matching services that lets consumers quickly compare multiple debt consolidation loans online. With a single application that can be quickly finished in a few minutes, consumers are instantly connected with multiple lenders.

There is no shortage of companies offering debt consolidation loans. This can certainly be confusing when the time comes to decide. Check for customer reviews as this gives you an accurate assessment on how people generally feel about the company and its services. If the general sentiment is negative then moving on to another company is definitely a better option.


Loan Basics

30%

The maximum loan amount depend on several factors and this vary from lender to lender. These factors can include your credit score, income and loan terms among others.  But before applying for a loan it is important that you determine the maximum amount you can pay back. After all, this is what got you into trouble in the first place.

Just like any type of loan, interest rates play a huge role in determining the amount of payments you make. While a good credit score translate to lower interest rates, people applying for debt consolidation loans have less than ideal credit scores. With this in mind, people could still get the best rates available by simply comparing loan offers from different loan providers.

Loan terms is another factor that should be considered when applying for a debt consolidation loan. Short term loans for example have lower interest rates. However, this translates to bigger monthly payments. Longer loan terms on the other hand have higher interest rates. This is because of the time needed for the loan providers to recover their money. Longer terms however mean lower monthly payments. This is because the principal loan amount is paid over a longer period.

Other factors to consider include processing or origination fees. The amount of fees collected is also subject to the loan provider. Loan fees are deducted only when the loan is received. Be wary of loan providers who charge fees prior to loan approval.


Additional Fees

20%

The costs of taking a debt consolidation loan does not only include interest payments. This can also include fees associated with closing out your loan. Be sure that you check this out with the lender to get a clearer picture of how much a loan is going to cost you.

Just like any type of business, lenders take great care in ensuring that they get the most out of the money they invest in. So while paying off your debt is highly ideal for both the lender and you, it also means that the lender won’t be making the same amount of money if loans are pair early. Prepayment penalties are charges made to borrowers who manage to pay their loans early. Look for lenders who don’t charge prepayment fees.

Debt consolidation loan borrowers are people who find themselves having difficulty making payments on their existing loans. This is different from a person who is taking out a home loan for example who is generally more financially capable of making payments. In the unfortunate event that you find yourself missing payments, lenders are most likely to charge late or missed loan payments. Be sure to discuss this with your lender and learn how much this would cost you.


Qualification

10%

Debt consolidation is a financial strategy that allows people who find themselves unable to pay their existing debt to restructure their debt into a single account. Debt consolidation makes debt payments easier by allowing you to work with a single company. It gives you the option of paying existing loans that are past its maturity date and stop recurring interest payments.

Qualifying for a debt consolidation loan depends on several factors which are similar to those in any type of loan. But because you are in a less than ideal position financially, opt for lenders who can extend loans to borrowers with a poor credit score.

  • Credit Score
  • Employment history
  • Additional sources of income

With debt consolidation you are now able to make smaller payments with lower interest rates and more time to make those payments. Debt consolidation is just one of the debt-relief strategies that can be employed for those who find themselves struggling with debt payments.

If you are having problems qualifying for lower interest rates please check our Top Ten List of Credit Repair Services.


Application

10%

A credit check plays a large role in helping lenders determine the maximum loan amount and interest rate. With the nature of debt consolidation loans as a financial instrument to help pay existing loans, interest rates are definitely higher compared to other types of loans. This is because borrowers are considered high risk thus the higher interest rates.

Faced with this reality, lenders may lower their minimum credit score requirements accordingly. Loan matching services in general offer a simple online application process that require little information from debt consolidation borrowers. This information is then submitted to multiple lenders and borrowers are given results based on matching lenders.

Applying for a debt consolidation loan may require simple information such as your personal details, Social Security Number, address, checking and financial information. Borrowers are also required to be US citizens or at least permanent residents to qualify.

Initially applying for a debt consolidation loan can be done by submitting information online. However, some lenders may require hard copies or fax documentation in order to proceed with your loan application.


Services and Features

10%

People applying for debt consolidation loans are under enormous stress to make payments on their previous loans. And any type of help in terms of the services that a lender can provide makes this a little bit easier.

Online application that can be done in minutes, loan consultants, direct deposits are just some of the services which makes the whole process less stressful. Most lenders in our Top Ten list offer a convenient online application process which can be accomplished in a few minutes. Loan Matching services for example give you the option of comparing loan offers from multiple lenders. This helps borrowers make better informed decisions in terms of selecting the best loans with the best rate.


Customer Support

10%

A little bit of assistance can go a long way in applying for a debt consolidation loan easier. Customer support from these companies are available in a variety of channels which includes emails, online chat or help lines. Some lenders even have dedicated loan experts that help you through the process of applying and getting approved.

Since most lenders have an online application portal, sensitive personal and financial information is shared online. Check the lender’s website if it is secured with encryption. The company’s privacy policy can also give you an idea on how it uses your personal information. Some lenders may use your information in their marketing campaigns or even share it with other companies. The result is an endless barrage of phone and email marketing offers.