How to build credit score Safe personal loans Low-interest personal loans with APR Starting As Low As 3.49%

Best Rate for debt consolidation

Having multiple unsecured loans that are either due or have their maturity dates fast approaching is frustrating. Failure to service these debts can put in a financial mess. And, you’ll hurt your credit profile, reducing your chances of getting future loans.


Debt consolidation loans can bail you out. These unsecured loans often have lower interests, saving you some bucks. Plus, they’ll help you stay organized and repay your debts faster, even helping boost your credit profile. 


Traditional banks and credit unions are the most common sources of consolidation loans. In this article, we’ll cover everything you need to know about consolidation loans. But first, here are the lenders with the best rates for debt consolidation loans;

  • Rep APR
  • Credit score
  • 5.99 - 24.99%
  • 640
  • 6.99 - 19.99%
  • 660
  • 4.49 - 20.49%
  • 660
  • Rep APR
  • Credit score
  • 6.94 - 35.97%
  • 580
  • 6.99 - 24.99%
  • 660
  • 7.95 - 35.99%
  • 640
  • APR range
  • Fees
  • Terms
  • Amounth
  • Unemployment protection
Bank 1
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 2
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No
Bank 3
  • 6.95%–35.89%
  • Up to 5% transfer fee
  • 3–5 years
  • $1,000–$40,000
  • No

Table of Contents

What is debt consolidation and how it works?

A debt consolidation loan is an unsecured loan product that helps a borrower to combine different debts and make a single repayment for them. Such include credit card debts, payday loans, and medical bills. 


Consolidation loans should only be considered if the interest rates are lower than that of the combined debts. 


Suitable consolidation loans are those with lower rates, flexible repayment terms, and additional features like direct payment to creditors. 


So basically, for debt consolidation loans, a borrower applies for the exact amount he/she owes to several lenders. Upon approval, the borrower uses the funds to repay existing debts. In other cases, the money can be paid directly to the lenders. 


That then leaves you with a single loan that you’ll be repaying monthly. Debt consolidation loans will help you put your debts under control and pay them sooner.

Average debt consolidation loan rates

Debt consolidation loans typically range between 6% and 36%. Borrowers with excellent credit scores – 720 to 850 – get the lowest interest rates. And, so are the borrowers with good credit scores – 690 to 719.


The loan term is a crucial determinant of interest rates charged by a lender. A longer term means you’ll pay lower monthly repayments, which is considered flexible by most borrowers. However, it could also mean higher interests over time. 


Shorter loan terms will mean a reduced period of paying interest. 


Average loan rates are also based on aggregate, anonymized borrower data who have qualified for loans with specific lenders. Therefore, it’s only normal that you’ll notice inconsistencies and constant changes. 


Basically, the main determinant of interest rates is borrowers’ credit backgrounds and the lenders in question.


Some lenders also have fixed interest rates. That implies that all borrowers will pay the same rates regardless of their loan terms. 


These are often better than variable rates which could be low at the beginning of the loan term but higher overtime based on the market changes.


Pinning down a single average on debt consolidation loans can be tricky because of the multiple sources of these loans. As such, it would do you good to shop around for lenders with the best rates before committing to a single one of them. 

Hot Tip:

To save on interests, try to pay off the loan faster.

What is the Best Rate for debt consolidation?

Consolidation loans generally carry higher interest rates than other loan types. And that’s because of the following reasons;


  • Debt consolidation loans are often unsecured – with debt consolidation loans, borrowers don’t have to offer collateral. That makes them risky to lenders. Hence attracting higher interest rates


  • Debt consolidation loans are mostly borrowed by borrowers with significant amounts of debts. Revolving debts like lines of credit and credit cards with large debts and high usage will pull down your credit score.


  • The work of a consolidation loan is to reduce the rising interests of several accumulating debts. Consolidation loans don’t necessarily eliminate these debts, but takes them all under one roof. Hence the possibly high-interest rate

When to get a debt consolidation

Understanding when exactly to go for consolidation loans is key to utilizing them well and avoiding costs and possible losses associated with making mistakes with such.


Please note that debt consolidation isn’t a lifesaver for debt problems. And it’s not a remedy to bad spending habits or anything that might have caused the debt problems in the first place.


It’s also not where you should be looking at if you have overwhelming debts with no hope of repayment.


Debt consolidation is also not for you if you have a small debt. Typically, anything you can repay within 6 months. In such cases, consolidation will only save you an insignificant amount and you’ll do just fine at your repayment pace. 


Debt consolidation is also not for you if your total debts exceed your total income. In such a case, seeking debt relief would be a viable option instead. 


Successful debt consolidation will require that your total debt, minus mortgage, isn’t more than 40% of your income (gross income).


For successful debt consolidation, ensure you have a consistent cash flow. Ensure it’s enough to cover your debt repayments. 


Ensure you also have measures in place to prevent drowning in debts again. That entails avoiding new loans unless it’s the only option left. 

Hot Tip:

if you have good credit, credit consolidation will also work best. This way, you’ll qualify for debt consolidation loans with low-interest rates.

Pros and cons

Pros Cons
Reduced interest expenses – the whole idea of consolidation is to target lower interests. Debt consolidation loans often have lower interest rates compared to that of multiple debts especially when defaulted. This way, you’ll save on general loan costs.
Possibly higher rates – Most debt consolidation loans are unsecured. That makes it risky to lenders. As such, they’ll most probably charge higher rates.
Keeps your debts organized – consolidation helps bring all your debts under one roof. This way you can easily plan for repayment. And, you’ll hardly miss out on any repayment
Extended repayment terms – this might seem like a practical move in the short run. However, extending repayment terms will have a borrower paying higher interests. Instead of encouraging a borrower to aggressively repay his/her loan fast. This could be a reason to relax
Boosts your credit score – Debt consolidation loans will pay off all your existing loans as per your agreement with the lender. When that happens, respective lenders will update your credit profile positively. Hence, boosting your credit score. That opens the door to more loan products with better terms and lower rates
Might put a borrower in a worse debt situation – instead of addressing the risky problem of over-borrowing, it puts a borrower in a more compromising situation by opening up new loan opportunities. Borrowers will likely have excess capacities to borrow. And, because of the low monthly repayments, borrowers will be likely tempted to borrow, and live beyond their means. This further ruins their credit profiles
Simplified loan repayments – debt consolidation will see you deal with only a single lender instead of multiple lenders. This is easier than juggling between different loans with multiple repayment dates

How to qualify

Qualification requirements for different loan products differ from one lender to another. Debt consolidation loans are no exception.


The basic requirement for almost all lenders is that you must be a legal resident of the United states. You should also be of legal age. The lender verifies by looking at the copy of your ID, driving license, or passport. 


Lenders will check your credit and loan repayment history. Most lenders will also require that you have a credit score of above 600. That’ll earn you better loan products with lower rates and flexible terms


To determine whether or not you are a financial risk, lenders will ask for proof of income to be sure you’ll be able to repay your loan. They’ll also go over your income-to-debt ratio for the assurance that you can accommodate a new loan.


Once you find a suitable lender, familiarize yourself with their policies. If it conforms with your goals, proceed to submit a formal application. 


You’ll be required to fill in such personal details as your name, address, social security number, and the details of your next of kin.

Alternatives to personal loans for debt consolidation

Debt consolidation is a smart move. However, not in all circumstances. And, it might not always work for everyone. The following are some of the viable alternatives to personal loans for debt consolidation;


  • Home equity loans

Going the home equity way is a common way of paying off debts. Here, borrowers use their homes as collateral to secure their loans. Since it is less risky to the lender, you’ll probably be charged lower, and you might also get more flexible loan terms. 


However, please note that you risk losing your house should you default payment

  • Debt relief 

Debt relief services, otherwise called debt settlement companies are a possible shot if you don’t qualify for debt consolidation. 


Debt settlement companies will approach your lenders on your behalf and negotiate lower interests and better terms for your loan. 


Debt relief is a common move for people avoiding bankruptcy. 


Keep in mind that you’ll part with some fees for the services of debt relief companies. And, the fees are mostly high. Before settling on a relief company, be sure to research and fully understand its policies, fees, and what others have to say about it.


You’ll also do well comparing different debt relief companies. This way, you’ll likely get better terms.


  • Debt counseling 

Debt counseling is a smart move and a viable alternative to debt consolidation for borrowers in out-of-control debt situations. Most credit counseling companies are non-profit making organizations. 


Apart from debt counseling, the companies also help with debt management plans (DMP). This is where a borrower makes a single payment which the company then divides among the existing lenders to pay off their loans. 


The company also tries to negotiate lower rates and monthly repayments so you get to pay off your debt faster and more easily. 


DMP is rarely free. And, you may, in most cases, have to part with up to $50 and a monthly fee of between $20 and $75, to the company for a three to five-year successful debt management.


  • Credit card balance transfer

Balance transfer credit cards can help you offset your debts in a single line of credit. Most balance transfer cards often come with 0% APR for a specific laid-out period. This way, you can save on interests for up to 21 months.


With the low-interest balance payments, you’ll be able to pay off your loan faster.


  • Debt snowball 

Instead of putting all your loans together, this method will have you tackling your small debts first as you maintain the minimum payment for other debts. 


Upon full repayment of each debt, your old payment debt is added to the next repayment on your list. That accelerates the payment for each debt. You basically eliminate all your debts, one after the other until all of them are cleared.


  • Debt avalanche 

This method is similar to the debt snowball. Here, you start with the debt with the highest rate on your list. Unlike the snowball method, debt avalanche doesn’t come with a quick debt psychological win. However, it’ll save you higher interests and help you pay your debts faster.

Consolidate high-interest credit card debt

Debt consolidation is an excellent move for those looking for a solution for revolving debts like credit card debts. These often come with interests and if left to accumulate for a long time, could place a borrower into a deep financial mess. 


Consolidating these debts will not only save you from paying high interest but also help you clear your credit debt faster and boost your credit score. This will open doors to even better credit loans.


However, that shouldn’t be the reason to take on new debts that might not be needed.

Frequently Asked Questions (FAQ)

Yes, it is possible, but you have to prove to creditors that you have other sources of income to repay your debt. Usually, if the only reason for your lack of a job is due to unexpected unemployment, but you have a good credit score, there is a good chance that lenders may grant you the loan.

Yes, it is possible to do so, but it would be much easier if you have one because your account is where lenders deposit the money you borrowed. Also, without a bank account, your options may be limited to high-fee lenders.

A private lender is either an individual or group of individuals who are not necessarily in the business of lending money but may pool funds to finance investments or businesses, one of which may include extending loans with the sole purpose of earning a decent return.

It sometimes is because it frees you of any debt, which saves you money in the long run, and it might even improve your credit score. However, the disadvantage is that you might pay an early settlement fee or a prepayment penalty fee.

The answer is yes. It is entirely up to you to decide what to do with the sum of money you borrowed. Still, you have to remember that lenders ask what your loan’s purpose is in your application as it is one of their criteria for determining their risk in lending you money.

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