Best Debt Consolidation Loans in October 2021

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The Federal Reserve Bank of New York reported that Americans had $820billion in credit card debt at 2020’s end. While total debt obligations decreased in 2020 than they were in previous years’, consumer debt (auto, credit cards, and personal loans), still accounted for 5.4% in American households’ disposable earnings.

A debt consolidation loans could be a good option if your high-interest debt is credit card debt or personal loans. You can save interest by consolidating the debt into one loan, with a lower interest rate, than your existing debt. Also, you can streamline your finances with one monthly repayment.

It is important to remember that debt consolidation loans are only viable if you are able to get an interest rate lower than your existing interest rates. All fees should be considered. Make sure to compare rates between lenders so you can get the best rate. Once you have compared the rates, take a look at the numbers and decide if debt consolidation is the right option for your situation.

Here are our recommendations for the best loans to consolidate debt.

Best Debt Consolidation Loan October 2021

These Lenders – How We Chosen

This list does NOT represent all the market. The most frequently searched for rates on debt consolidation loans were first analyzed. We limited our selection to lenders that only offered loans specifically designed for debt consolidation loans. It’s worth noting however that other lenders also offer personal loan options that can be used to consolidate debt. We then eliminate all lenders that do not meet these criteria.

  1. Lenders that don’t make loan information easy to find, such as fees, APRs or minimum and maximum amounts of loans, available loan terms, and required information on the loan, have been removed. This information can be easily compared to other lenders by many lenders. We recommend transparent lenders that don’t require personal data to provide a rate comparison if you are looking for debt consolidation loans.
  2. We disqualified any lenders whose maximum annual percentage rate exceeds 30%. The goal of a debt consolidation loan to consolidate high interest debt into one loan with lower interest rates is why we feature lenders whose interest rates are lower that the average credit-card interest rate. Keep in mind that the rates available on lender websites can only be used as a guideline and do not include the maximum or minimum rates. The rate you’re eligible for will likely be between the minimum and maximum rates. This will depend on factors such credit scores and loan terms. It is best to prequalify for or apply to a loan to get an exact rate.
  3. Our list only includes direct lenders. We do not include loan marketplaces or intermediaries. We also excluded credit-unions from the list. Credit unions have specific membership requirements which limit who is eligible for a loan. Credit unions can offer low rates to those who are eligible. You can check the locator for credit unions in your area to find out more.
  4. They do not charge penalties or fees for paying early, or early repayments. We do not believe that you should be charged a fee to reduce your debt. We don’t recommend a personal lender that comes with such a penalty.
  5. Finally, all lenders not rated A+ or higher by the Better Business Bureau were removed.

The information above regarding loan rates and interest rates is current as of October 18, 2019. This information is regularly updated by NextAdvisor. It is possible that rates and other information have changed. AutoPay is a payment method that allows you to get a rate break from some lenders. You will see a clearly marked indication if there is an AutoPay discount included in the advertised rates. You might also find loan options that are only available to you if you live in a certain area. You should keep in mind that only those with excellent credit will be eligible to receive the longest loan terms and the largest loan amounts.

Lender Overview

LightStream

Overview LightStream offers no-interest debt consolidation loans and no fees for borrowers who have good to excellent credit.

Benefits: LightStream offers no fees on loans and the Rate Beat program. This program will offer a rate 0.1% below rates offered by competing lenders for the exact same loan term. LightStream also offers the $100 Loan Experience Guarantee. In this program, if the service was not satisfactory, the company will refund $100.

Cons:LightStream makes you go through the whole application process (including a credit inquiry that can affect you credit score) to get an exact rate. This makes it difficult for you to shop around, compare rates, and make comparisons with other lenders.

SoFi

Overview You can apply online to get prequalified for a loan with no fees. Only people with good credit ratings, who are currently working or are soon to be employed, or who have other income sources, can apply for loans.

Pros SoFi has no origination or late fee charges (although interest on late payment payments will still be due). SoFi offers unemployment protection programs that will help you get a job and stop your payments.

CONS:SoFi has higher eligibility requirements than any other lender on this list. To be eligible to borrow money, you must not only have a high credit score but also need to be working, have sufficient income from another source, or have an offer to work that begins within the next 90 days. Mississippi residents can’t get SoFi loans.

Payoff

Overview.Payoff from Happy Money specializes at debt consolidation loans. The requirements for this lender are lower than others. You can also prequalify for a loan online without requiring a hard credit assessment.

Comments:Payoff needs a minimum FICO Credit Score of 640. Experian rates this score as “fair”. This makes Payoff easier for people with bad credit. But credit score is not the only factor that lenders consider when granting loans. Payoff members receive monthly FICO score scores updates.

Pros: For a Payoff Loan, you need at least three year of established credit. Payoff Loans are not available in Massachusetts and Mississippi, Nebraska, Nevada, and Nevada.

Best Egg

Overview Best Egg has debt consolidation loans available with a simple application process and the ability to prequalify electronically. Best Egg offers loans for borrowers with “fair” credit (640+).

Best Egg:Best Egg is quick to submit an online application, which allows you receive funds in less than one business days.

The cons: Best Egg does not offer loans to individuals with bad credit. You will need to earn at least $100,000 per year and have a minimum FICO credit score (700) to be eligible for the lowest APR.

Marcus by Goldman Sachs

Overview Marcus is Goldman Sachs’s subsidiary and offers debt consolidation loans with no fees to borrowers who have good-to-excellent credit.

Pros:Marcus offers you an on-time payment incentive. This reward is available if you pay your loan in full and on time every month for 12 years. You can also get an interest-free, one-month-long payment deferral. Marcus does not charge any origination fees. Sign-up fees and late fees.

Con:Marcus doesn’t indicate a minimum credit score required to obtain a loan. However it does state you will need excellent or good credit (700 – 850) in order to get the best rates.

Find out

Overview This popular credit and banking company also offers loans for debt consolidation. It charges no origination fees, has flexible repayment terms, and can make decisions within the hour in most cases.

Benefits: Discovery charges no origination fee and no other fees if you pay on-time. Discover offers same-day service in most cases. They also offer direct payment to creditors. If you withdraw your consent to the loan, no interest will be charged.

Pros: In order to be eligible for a loan from Discover, your household must have at least $25,000 in income. A loan cannot be used for the payment of a secured debt or to pay off Discover credit cards.

Rocket Loans

Overview Rocket Loans, which is a subsidiary to mortgage company Quicken Loans offers debt consolidation loans for people who have “poor credit”, although they may charge higher interest rates.

Con: Rocket Loans require a minimum credit score (540) to make it viable for people with poor credit. Rocket Loans also offers same-day funding.

Contraries: Rocket Loans have a maximum interest rate of 9%, while the minimum rate is 1%. Remember that your credit score can affect the interest rate you receive. Therefore, those with poor credit may get lower rates. Rocket Loans is limited to two loan terms: three-year and five-year.

What is Debt Reconsolidation?

Consolidating debt means consolidating multiple sources of income, such credit cards, personal loan, payday loans, medical bills, etc. into one loan. Consolidating debt for a variety of reasons is possible.

  • Combining your debt into a single monthly repayment simplifies your finances
  • Consolidating high-interest debt, like credit card debt, into a lower-interest loan
  • Consolidating variable-interest debt into a fixed interest loan
  • A longer term loan can help you reduce your monthly repayments
  • You can budget more effectively with fixed, monthly payment

Balance transfer credit cards and consolidation loans are two of the most popular methods for consolidating debt. A debt consolidation loan lets you borrow money to pay off your existing debt and repay it over a specific time. A balance transfer credit is available with an introductory rate of 0%, making it a smart move if one is available to you. Either you use a debit consolidation loan or a balance credit card, it is important that you have a plan for paying off your consolidated debt.

What is a Consolidated Debt Loan?

A debt consolidation loans is a personal loan to consolidate your debt. Although some lenders offer specific debt consolidation loans products, they are typically the same product as personal loans. They also have the exact same loan terms and APRs but under a different title. Some debt consolidation loans can offer benefits to people looking to consolidate credit. They allow you to pay your lenders directly and will save you one step.

Consolidated debt loans can be classified into one of two categories: secured or unsecured. Secured loans will require you to pledge an asset, such as a home or a car, as collateral. If you default on your loan the lender could seize that asset. Unsecured loans don’t require collateral. Secured loans are more risky for the lender and usually have lower APRs. Credit score requirements may also be lower. But, be aware that you can lose your collateral if your payments fall behind. It is best to avoid trading unsecured debts for secured debt, as this can increase your risk.

Benefits from a Debt Consolidation Mortgage

When used correctly, debt consolidation loans can help you to reduce your debt and improve the financial health of your family. The following are some of the benefits of a consolidation loan for debt:

  • Lower APR. For high-interest debts such as credit card debt, consolidating your debt could be possible with a loan that has a lower APR. A lower interest rate means you’ll pay less over the life of the loan. You may also be able to pay down your debt sooner. The rate of interest will vary depending on factors like credit score and debt to income ratio. Therefore, it is important to get prequalified for a loan. If you don’t qualify for a lower rate, a debt consolidation loans is not an option. Remember that fees can cut into your savings. Make sure you crunch the numbers before applying for a debt consolidation loan.
  • Regular fixed-rate payments. A debt consolidation loan may be an option if your credit card debt is too high and you don’t have a plan for paying it off. A debt consolidation loan is a loan that will enable you to budget more effectively by making monthly payments. The fixed interest rate is better than credit cards’ variable rates, and will not be subject to unexpected increases in interest.
  • Streamline your finances. Consolidating multiple sources of debt such as credit cards and personal loans into one monthly installment can simplify your finances. You will be able to track your payments better. A missed payment on credit cards or loans can result in high fees or a significant decrease in your credit score. A debt consolidation loan is a way to reduce the number of bills that you have to pay and avoid missing payments.

Take into account that a loan consolidation will only be of benefit if you make a payment plan. Before taking out a debt consolidation loan:

  • To ensure that your money is being saved, you need to calculate interest and other fees
  • Plan to include the loan payments within your budget
  • Pay attention to payment deadlines in order to ensure you don’t miss a single payment.

Debt Consolidation Loan, vs. Balance Transfer Credit card

A balance transfer loan credit card is an option to a debt consolidation loan. A balance-transfer credit card is a credit line that offers an introductory period at 0%, typically ranging from 6 to 12 months. A balance transfer card credit card can be used for consolidating debt. The credit card allows you to put existing debts onto the card and then pay it off before your introductory period ends. Although you will not be charged interest, a balance transfer fee is typically around 3.3%.

The greatest benefit of a balance-transfer credit card is the ability to pay off the balance before your introductory period expires. This allows you to avoid paying interest. Balancing transfer cards can be difficult to use without a plan. You’ll have high APRs after the introductory period ends. The best balance transfers cards are available only to people with good credit. Personal loans for those with less credit may not be as affordable.

Alternatives for a Debt Consolidation Lender

Other than the balance transfer credit card, there are other options for debt consolidation loans and personal loans to consolidate debt. These include:

HELOC – Home Equity Loan

You can draw on your home equity to obtain immediate cash. A home Equity loan is a secured, installment loan. It allows you to borrow a lump payment and then pay it off with interest over a predetermined period. HELOCs work like credit cards. You can draw as much cash as necessary (up to the credit limit) and pay it back over the repayment period. HELOCs are home equity loans that use your house equity as collateral. They can be lower than unsecured credit cards and personal loans. It is important to note that the lender could foreclose your house if you default with the loan.

Refinance Cash-Out

Similar to a HELOC (home equity loan), a cash-out refinance lets you access cash from your house. The process is different. With a cash out refinance, you take out an additional mortgage with a greater value than your current one, pay off your mortgage with the extra money, and then keep the difference for cash. The current mortgage rate is relatively low so a cash-out loan may be more advantageous than a personal loan or home equity loan.

Credit Counseling

Many credit counseling agencies provide services to help people who are in debt. Credit counseling is not like debt settlement. For-profit companies negotiate directly with your creditors to resolve your debt for a lesser amount than the actual amount. For their services, debt settlement companies often charge steep fees. A smaller amount than the original amount may result in a significant drop in your credit score. Nonprofits often offer credit counseling, either free of charge or at a modest fee.

Javier E. Swan

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