Top Personal Loans for Debt Consolidation [2023 Updated]

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Updated: Apr 06, 2023
author photo Written by Hannah Hall Updated: Apr 06, 2023
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You’re feeling overwhelmed by all your debts and you’ve heard that a personal loan can help consolidate, simplify your payment, and reduce monthly interest rates.

But you’re not sure if a personal loan is truly the best option for debt consolidation.

What are the top personal loans for debt consolidation?

In this ultimate guide we will cover the top personal loans for debt consolidation, and how you can choose the right one to get the best deal and stay on top of your finances.

What is Debt Consolidation?

Debt consolidation simplifies debt management by combining multiple debt payments into a single payment, typically through a debt consolidation loan.

It often comes with more favorable payoff conditions, such as a lower monthly payment, a lower interest rate, or a combination of the two. It involves taking out a new loan to settle other consumer debts and liabilities.

Consolidating credit card debt, unsecured personal loans, student loans, and other accounts is possible. Since personal loans come with a fixed interest rate, you have nothing to worry about, as you will be required to pay the same amount every month.

What Are the Interest Rates on Debt Consolidation Loans?

When repaying a debt consolidation loan, you must pay the total amount of money borrowed and the monthly interest on it. A good debt consolidation loan can save you about 5% or more on your debt interest payments. You could save up to 10% on interest rates based on your good credit history.

Interest rates tend to vary from one lender to another depending on certain factors, which include:

  • Debt-to-income ratio: Your debt-to-income ratio (DTI) compares how much you owe each month to how much you earn. And lenders prefer individuals with a low debt-to-income ratio.

  • Credit Score: Debt consolidation loans are typically available to borrowers with credit scores in the mid-600s. Individuals with a higher credit score tend to be offered a lower interest rate. 

  • Income: You need to tender proof of employment to your lender to confirm that you get paid enough to repay the loan.

To have a better understanding of what a personal interest rate looks like, check out the table below:

Credit Class Score Range Average APR
Excellent 720 – 850 10.6%
Good 690 – 719 15.7%
Fair 630 – 689 19.4%
Bad 300 – 629 25.2%

Individuals who do not meet the credit requirements for debt consolidation loan approval may also be able to find a lender willing to lend them money but at a higher interest rate. In cases like this, you can use a cosigner who will be responsible for settling the payment when you cannot make the repayment.

How Much Could I Save With Debt Consolidation?

When it comes to consolidating debt, the first thing to do is to know the amount of money you intend to consolidate and how much you can conveniently pay off monthly. Let's take a closer look at how much you can save with a debt consolidation loan.

For instance;

  • 1st credit card has a total balance of $7,000 with an APR of 25%

  • 2nd credit card has a total balance of $4,000 with an APR of 20%

  • 3rd credit card has a total balance of $ 5,000 with an APR of 17%

  • 4th credit card has a total balance of $2,000 with an APR of 10%

When you settle these balances over twelve months, your total interest will equal $2,010. However, if you take out a debt consolidation loan of $18,000 with a 13% APR at the end of 12 months, you can reduce the interest cost to $1,292.

6 Situations Where a Debt Consolidation Loan Could Be a Good Option

  • You've got a credit score high enough to qualify for a debt consolidation loan at a lower interest rate.

  • You have multiple high-interest debts to settle

    Research has shown that the average personal loan interest rate is about 9.41%, while the average credit card interest rate is about 16%. Therefore, individuals with a large amount of debt to settle can also consider taking out a personal loan for debt consolidation.

  • You have a financial plan to avoid running up your debt again

    It is also important to have a particular plan set to settle your debt. You may even have more debts without a proper repayment plan.

  • You're okay with repaying your loans over a longer period

    Repaying your debt consolidation can take up to 12 months or more, depending on your set plan. Therefore, if you are comfortable with the longer period of time it may take to pay off your debt, you can consider a debt consolidation loan.

  • You have enough cash flow

    With a good source of income, it might be easier to repay your loan. Therefore, only take out a debt consolidation loan when you have enough money.

  • You're committed to paying off the full amount of your debt consolidation loan.

3 Situations Where a Debt Consolidation Loan Might Not Be a Good Option

  • You do not plan on changing your spending habits: A consolidation loan can be attractive because it frees up available credit on your credit card. But if you transfer debt and then accumulate more on those cards you just paid off, you could have a worse financial situation.  

  • You have poor or fair credit: You can still get approval for a personal loan for debt consolidation even with bad credit. However, the downside is that it comes with a high-interest rate, which could increase your monthly payment.

  • You don't have much debt: If there is a chance of you settling your credit card debt within a period of 6 months to a year, it would not recommend considering a debt consolidation loan.

How To Pick the Best Lender for A Debt Consolidation Loan?

You can take out a debt consolidation loan via credit unions, traditional banks, and various online lending platforms. When it comes to selecting the best lenders for a debt consolidation loan, certain factors need to be taken into consideration, some of which include the following:

  • Annual percentage rates: This is determined majorly by your credit score. It refers to the total amount of money added to your principal amount every month.

  • Loan term or repayment term: Ensure that whichever option you choose offers you a viable repayment option that enables you to repay your debt comfortably.

  • Loan cost: While seeking the best choice, compare the loan cost, the origination fee, and various other charges.

  • Lenders features: Some of the features to look out for include the new creditor making direct payments to your existing lender, a hardship program, credit monitoring, and lots more.

  • Prequalify: Many lenders offer borrowers the opportunity to prequalify for the loan. With this, they can tender information concerning their income, financial needs, and other details to determine the amount of the loan and repayment terms.

  • Lender's customer support: This is another essential factor to consider. Ensure that you check out your lender's customer support service if you are experiencing financial challenges and need help to make payments during the repayment period. Make sure they have a good review from previous borrowers.

5 Steps to Get a Debt Consolidation Loan

Calculate the combined interest rate on all current debts

The first step in obtaining a debt consolidation loan is to have a clear picture of your current debt. The main amounts you need to consider and note are your entire debt, the amount of money you are applying for, and your combined interest rate since you are considering a consolidation loan with a lower interest rate.

Undergo the prequalification process and compare various loan options

To compare loan offers from various lenders, you can consider prequalifying with a couple. With this, you can have an understanding of your potential loan terms and the APR, and it does not have any effect on your credit score. Prequalification is common with online lenders. Sometimes it's available with credit unions or banks, but it depends.

Request a debt consolidation loan

You can now request the loan upon deciding which lender to borrow from. Loan applications are mostly completed online and require personal details such as your SSN, contact information, and address. There is also the need to provide proof of employment, income, and identity.

Settle your creditors

Some lenders might send the money directly to your creditors; others might deposit the funds into your personal bank account. Then it is your responsibility to ensure that the appropriate amount is applied to each debt.

Start repaying your current loan

Immediately after clearing your existing loan, just a single loan is left to settle. Plan how to pay off the new loan monthly while keeping your credit card balance near or at zero until you are entirely free from all debt. Also, please do not close your account, as it can reduce your credit score.

Get a Fast Debt Consolidation Loan at a Low-Interest Rate with CreditYelp

CreditYelp is known to be an online broker that is aimed at connecting them with suitable direct lenders to get loans. It provides borrowers with comprehensive information, including expert comparison and evaluation, to help them make accurate financial decisions.

Whether you have a good or bad credit score, CreditYelp is available to help you select a suitable lender based on your specific situation to alleviate your financial stress.

Get a Debt Consolidation Loan Now!

Most lenders and banks will likely see you as a credit risk if your credit falls into the bad credit range. This is where CreditYelp comes to the rescue.

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Steps to Get a Loan on CreditYelp

Getting a debt consolidation loan with CreditYelp is a relatively straightforward process. All you have to do is follow three basic steps:

  1. Fill out a form: The first step is to complete the form, and your request will then be distributed to a couple of online lenders.

  2. Accept offers: Lenders willing to offer you the loan will send you a customized offer. Then you can compare their offers to decide on the best one.

  3. Get your money: Upon the finalization of the deal, the funds will be deposited into your account as soon as the next business day.

How does CreditYelp compare

Why Choose Us?
How much am I allowed to borrow?
Up to $35,000
No hidden fees or charges
How long is the loan repayment period?
Up to 36 months
Various repayment options
Do lenders check my credit?
Soft Check Only
Do lenders Accept bad credit?
Friendly to Bad Credit Borrowers
Chances of approval
High Approval Rate
How to apply?
Apply online
No paperwork needed
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Pros of CreditYelp

  • Our partner lenders will give you suitable loans regardless of your credit score and financial status.

  • CreditYelp has access to over ten reliable lenders with certified NMLS ID.

  • Our network of lenders offers high loan limits to borrowers.

  • Expect affordable interest rates when you join CreditYelp.

  • You have a higher chance of getting your loan approved with us.

  • The average loan funding time with our partner lenders is one business day.

  • Lenders who cooperate with us offer reasonable repayment terms and plans.

  • There will be no hidden charges or surprise fees when you choose us.

What are the Pros and Cons of Debt Consolidation Loans?

Generally, a debt consolidation loan is a good idea if you can pay off the new debt, have a high credit score to get good rates, and like the stability of a fixed monthly payment. However, taking out a debt consolidation loan can also have its drawbacks. Below are some of the advantages and disadvantages of debt consolidation loans.

The advantages of a debt consolidation loan

  • Potential lower interest rates: Individuals with high credit scores can apply for debt consolidation loans with low-interest rates. With this, they can save money over the repayment period.

  • Pay down debt quicker: Paying only the minimum amount needed monthly on your credit card can extend your repayment period for a long time. With a debt consolidation loan, you can fast-track your payments as you can make more monthly payments.

  • Simplify your monthly payment: It is more comfortable and convenient to cater to a single payment than several payments with separate due dates. Taking a debt consolidation loan decreases your chances of falling behind on payments, and this will help improve your credit score.

  • Set a repayment schedule: Many debt consolidation loans come with fixed payments. This implies that you know the exact day you must have completed your payment and don't have to worry about multiple due dates.

  • Credit score improvement: Considering the hard credit inquiry, seeking a new loan might temporarily drop your credit score. However, a debt consolidation loan can improve your credit score in various ways.

The risks of a debt consolidation loan

  • Inability to solve all your financial challenges: After using the debt consolidation loan to settle your debt, you might feel the urge to use your credit card again. However, this increases your total debt, affecting your credit score.

  • You might be required to pay some upfront fees: Certain debt consolidation loans come with fees, including balance transfer fees, origination fees, annual fees, prepayment penalties, and lots more.

  • You may need to pay more interest: Based on your debt-to-income ratio, loan amount, and credit score. You might be offered a higher interest rate when compared to your initial debt.

  • You could delay payments: A delay or missed payment can adversely affect your credit score and might also attract some fees. Therefore, ensure you are comfortable with your preferred payment plan to prevent this.

5 Alternatives to a Debt Consolidation Loan

  • Balance transfer credit card
  • Certain credit card providers enable people to transfer their debt to a relatively new card with a 0% introductory rate. This is to pay off the existing balance before the introductory rate expires to save cash on interest. This alternative is most suitable for borrowers who can settle their loan payments quickly.

  • Home equity
  • Home equity loans allow borrowers to use their homes as collateral to obtain funds. This alternative is most suitable for borrowers who have built up home equity.

  • Credit counseling
  • This company is a primarily non-profit organization that provides borrowers various services such as a debt management plan. With this plan, you can make a single payment to the organization, which then shares the money among your creditors.

    This method best suits borrowers who need assistance structuring and managing their debt payments.

  • Debt relief services
  • This is also known as a "debt settlement company. These companies provide alternative ways to pay off your debt if you are ineligible for a consolidation loan. This alternative is most suitable for borrowers in a challenging financial situation who cannot pay off their debt.

  • 401(k) loan
  • This plan enables users to borrow money from their retirement savings. People use this low-interest loan option when they want to consolidate credit card debt. This alternative is most suitable for individuals with existing retirement savings.


Does a debt consolidation loan hurt my credit score?

When you decide to consolidate your debt, it affects your credit score positively and negatively. Some of how debt consolidation can hurt your credit score include a new credit application, a new credit account, and a lower average age of credit.

However, with consistent and fast payments on your consolidation loan, you can help recover and eventually improve your credit score in the long run.

Can I get a debt consolidation loan with bad credit?

You can get a debt consolidation loan, even with bad credit. You must improve your application by increasing your DIT ratio to be approved. This can be accomplished by increasing your income flow by paying off smaller and more manageable debts or starting a side hustle.

With this, you can improve your credit score and, at the same time, pay off some of your debt. You can also consider applying for secured loans, which are more available to individuals with bad credit because they lower the lender's risks and usually have lower interest rates.


A debt consolidation loan can help you manage your debt more effectively, but only if you find the right loan. As a result, it is sensible of you to seek professional advice and carefully weigh your options. CreditYelp is available to assist you in securing the ideal debt consolidation loan that suits your financial situation.

author photo

Written by

Hannah Hall


Hannah Hall specializes in student loans, financial aid, fed grants, and college budgeting. She also has extensive work experience in personal finance and college administration.

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.
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