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Debt Consolidation Finder

What is debt consolidation, how does it work and is it right for you?

Debt consolidation moves credit card and personal loan balances into a new account for one monthly payment. It's a useful tool to manage multiple debts before they get out of hand and could even help you save on interest — especially if you have good credit and owe less than half your yearly income.

Name Product Filter Values APR Min. Credit Score Loan Amount
Credible personal loans
2.49% to 35.99%
Fair to excellent credit
$600 to $100,000
Get personalized rates in minutes and then choose an offer from a selection of top online lenders.
Best Egg personal loans
5.99% to 35.99%
$2,000 to $50,000
A prime online lending platform with multiple repayment methods.
PenFed Credit Union personal loans
4.99% to 17.99%
$600 to $25,000
With over 80 years of lending experience, this credit union offers personal loans for a variety of expenses.
SoFi personal loans
5.74 to 20.28%
$5,000 to $100,000
A highly-rated lender with competitive rates, high loan amounts and no fees.
Monevo personal loans
1.99% to 35.99%
$500 to $100,000
Quickly compare multiple online lenders with competitive rates depending on your credit.

Compare up to 4 providers

This article was reviewed by Brad Stevens, a member of the Finder Editorial Review Board and 30-year veteran of the credit industry who specializes in rehabilitating struggling banks.

What is debt consolidation?

Debt consolidation is a debt payoff strategy that makes it easier to manage your accounts and in some cases, save on the cost. Generally, it involves taking out a personal loan or credit card and using those funds to pay off your credit card and other accounts that aren't backed by collateral. There a few main reasons to consolidate your debt:

  • It gives you one monthly payment, which is easier to manage than multiple payments.
  • You may qualify for a lower interest rate than you're currently paying. Especially on credit card debt.
  • It gives you a firm repayment plan, which can help motivate you to get out of debt faster.
  • A debt consolidation loan can immediately improve your credit by lowering your credit utilization ratio — or the percentage of your credit card limits that you have in use.

Because debt consolidation involves opening a new credit account, it's best for people who can qualify for a loan or new credit card. You'll have the most options if your credit score is above 670 and your monthly debt payments are equal to less than 40% of your monthly income.

How does debt consolidation work?

Debt consolidation works by moving multiple debts into one new account. You can consolidate your debt with personal loans or balance transfer credit cards.

How to consolidate debt in 5 steps

  1. Figure out how much you owe and how much you can afford to pay each month.
  2. Compare lenders and credit cards.
  3. Apply for a new loan or credit card.
  4. Use those new funds to pay off all other accounts you’d like to consolidate.
  5. Pay off your current loan or credit cards according to the new terms and conditions.

Should I consolidate my debt?

Debt consolidation loans and balance transfer credit cards are not for everyone. When done under the wrong circumstances, it could hurt your finances more than it helps.

Decision tree to help you decide how to consolidate your debt.

Strategies for beating debt based on how much you owe

6 ways to consolidate your debt

Debt consolidation generally involves taking out a loan or credit card, but you have several different types to choose from. The best option for you depends on how much you owe, your income and credit score.

1. Debt consolidation loan

  • Best for: Paying off large amounts of debt over several years at a low interest rate.

A debt consolidation loan is an unsecured personal loan you use to pay off one or more account balances. Typically, you can borrow up to $50,000 with APRs ranging from 5% to 36% that you pay back over three to seven years.

Generally, you need good to excellent credit to qualify.

Personal vs. debt consolidation loans

You can use any personal loan for debt consolidation. But some lenders specialize in debt consolidation, specifically. Often these will pay off your creditors directly and are easier to qualify for with a high debt load.

2. Balance transfer credit card

  • Best for: Paying off credit cards over 21 months or less with no interest.

A balance transfer credit card allows you to move multiple credit card balances onto one new card. Often these come with 0% APR promotional rates that last up to 21 months.

But it’s not free. Often there’s also a balance transfer fee, which can range from 3% to 5% of the amount you transfer, usually with a minimum. You might also pay an annual fee. Generally, you need a credit score of at least 670 to qualify — what lenders consider to be good credit.

Debt consolidation loans vs. balance transfer credit cards

3. Secured personal loan

  • Best for: Getting a more competitive rate with mediocre credit.

A secured loan is a personal loan that you back with collateral. This can be anything of value that you own, like a savings account or CD. They’re typically easier to qualify for than other types of funding and can be a great option if your credit is less-than-perfect or you have a high debt-to-income (DTI) ratio.

4. Home equity loans and HELOCs

  • Best for: Homeowners with large amounts of debt or mediocre credit.

Also known as a second mortgage, a home equity loan or a home equity line of credit (HELOC) is backed by the amount you currently own in your home — or equity.

These typically come with lower rates than unsecured personal loans. But the risk is greater: You could lose your home if you default.

5. 401(k) loan

  • Best for: Anyone with rock-solid job security and a 401(k) retirement account.

A 401(k) loan allows you to borrow from your retirement fund balance at a low interest rate — without paying early withdrawal fees.

You’re effectively paying interest to yourself, but you’re doing it with after-tax income — otherwise 401(k) contributions are before you pay taxes. You also stand to owe it all back in one lump sum if you leave your current employer — and you could be hit with penalties if you can’t pay it back immediately.

6. Student loan refinancing

  • Best for: Anyone repaying student loans who wants better rates or terms.

The best way to consolidate your private student loans is by combining them into one new loan with a student loan refinancing provider. This allows you to change up your loan term, get a more competitive rate — or both.

Generally, you need to have at least a year of repayment history and excellent credit to qualify.

What about student loan consolidation?

Student loan consolidation usually refers to a federal Direct Consolidation Loan, which you can use to consolidate multiple federal student loans into one.

It won’t change your rate, but it can help you qualify for more repayment and forgiveness options. But it’s not available for private student loans — only federal.

What types of debt can I consolidate?

Understanding what types of debt you can consolidate is the first step toward deciding which consolidation options you might want to consider — if any. People generally consolidate these kinds of debts:

  • Credit cards
  • Unsecured personal loans
  • Medical bills
  • Business loans
  • Retail credit cards
  • Tax debt
  • Student loans

Debt consolidation risks

Consolidating debt can be helpful for some people, but it’s not a silver bullet. Consider these risks before you sign up

  • Opportunity to get into more debt. If you’re in debt because of spending habits, consolidating your debt won’t help unless you also take steps to cut back. In fact, it can make it worse by freeing up your revolving credit.
  • Might increase interest cost. Taking out a loan with a long term to reduce your monthly debt payments means there’s more time for interest to add up.
  • Unhelpful with large amounts of debt. If you owe more than half of what you make in a year, you might not qualify for a loan or balance transfer credit card.

Weigh the pros and cons of debt consolidation before you decide on this option.

Debt consolidation options for members of the military

Look for offers for service members and veterans. Often these have lower rates and more favorable terms than your average personal loan. Especially if your credit is less than perfect.

If you enter active duty talk to any of your current creditors, too. Your rates may be lowered in accordance with the Servicemembers Civil Relief Act.

Do consolidation loans hurt your credit?

When you take out a new loan or credit card, creditors do a hard credit check that temporarily lowers your score by a few points. However, if it helps you pay off your debt faster and make on-time payments, your score could improve in the long run.

Debt consolidation alternatives

If debt consolidation doesn’t seem like the best option for you, consider one of these alternatives.

  • Credit counseling. Set up a free meeting with a financial adviser to go over your options and come up with strategies to get out of debt at a credit counseling agency.
  • Debt management. Have a credit counseling agency negotiate with your creditors to reduce your interest rate and monthly payments and set you up with a debt management plan.
  • Debt settlement. Sign up to have a debt relief company negotiate down your balance in exchange for a one-time payment.
  • Bankruptcy. Best saved as a last resort, you can file for Chapter 11 or 13 bankruptcy to have a judge either eliminate or reduce the amount you owe to your creditors.

The FTC recommends assessing your finances and contacting your creditors before looking into debt consolidation alternatives. If you’ve been rejected for debt consolidation, find out why before you turn to alternatives. You might be able to qualify in the near future by paying off your debts or taking steps to boost your credit score.

When to turn to debt relief

When your debt becomes unmanageable and a balance transfer credit card or consolidation loan just won’t cut it, you may want to consider turning to debt relief.

Debt relief comes in several forms such debt settlement, bankruptcy, debt management, negotiation or credit counseling. Generally, debt relief is for those whose debt is over 50% of their annual income or have only a nominal chance of paying off their unsecured debts within a reasonable time frame.

Compare debt relief providers

Explore your options by costs and requirements. Select the Go to site button for more information about a particular lender.

Name Product Costs Requirements
Accredited Debt Relief
Charges and fees vary by the company you're ultimately connected with
Must be at least 18 years old and a legal US resident; additional terms may apply based on services and products used.
This A+ BBB-rated service offers free consultations to lower your monthly payments help you get out of debt faster.
National Debt Relief
15–25% of total enrolled debt
Must have a legitimate financial hardship which is preventing the ability to pay creditors and a minimum of $7,500 in debt.
Get back on your feet with a top-rated company that works with multiple types of debt.
Freedom Debt Relief
Monthly payment based on enrolled debt, no upfront fees
Must have at least $7,500 in unsecured debt, have a hardship is preventing the ability to pay creditors, and live in a serviced state.
Freedom Debt Relief works to help people with unmanageable, unsecured debt get back on their feet.

Compare up to 4 providers

Compare more debt relief options

Bottom line

Debt consolidation can be a great option if you’re looking for lower rates or more manageable repayments. If that’s the case, you can learn more about how to apply and what to expect by reading our guide to personal loans.

But it’s not ideal if you have poor credit or a high DTI. In that case, you might want to consider other debt relief options.Back to top

Frequently asked questions

Answers to common questions readers have about debt consolidation.

Can I consolidate by debt with bad credit?

It’s possible to consolidate your debt with bad credit. Some lenders provide debt consolidation loans to individuals with less-than-perfect credit. In these cases, the APR you qualify for may not be as low as for someone with better credit.

Other options like 401(k) loans, secured personal loans and HELOCs might be easier to qualify for. But you risk losing your collateral, retirement funds or even your home if you can’t repay. And generally, balance transfer credit cards aren’t available to bad credit applicants.

Can I transfer my existing debts to a loan that a friend or relative takes out?

No. You can only transfer your existing debts to new loans that you take out in your own name.

Do debt consolidation providers pay my creditors directly?

That depends on the lender. Some like Discover that specialize in debt consolidation will send your repayments directly to your creditors. But general-use personal loan providers might not provide that service.

Does debt consolidation look bad to lenders?

No, debt consolidation can actually make you look good to lenders. It shows that you’re on top of your finances and have taken steps to change bad habits. But if you fall behind on repayments or continue to rack up debt, that will hurt your next loan or credit card application.

Can I pay off a debt consolidation loan early?

Most likely, yes. Many lenders offer loans with no prepayment penalties. If you’re interested in that benefit, be sure to check that the lender you’re considering offers it.

Are debt consolidation loans taxable?

No, the IRS doesn’t consider loans as income, so you won’t have to pay taxes on it. If your creditor reduces the amount of debt you owe, however, that’s generally subject to income tax.

Is debt consolidation the same as debt consolidation refinancing?

Debt consolidation refinancing is a type of debt consolidation. It involves refinancing your mortgage into a loan that includes other types of debt. Generally, you won’t benefit from this unless you can qualify for a better rate than you have on your current mortgage.

How do I save money to get out of debt?

The first and most important thing is to stop taking on new debt outside of debt consolidation. This means avoiding loans, but also curbing your credit card spending to only what you need. Go over your spending habits and be honest about what you really need. It’s OK to keep a few luxuries in your life if they aren’t incredibly expensive and you actually use them.

After you’ve whittled your spending down to a manageable amount, make room in your budget to put aside some cash to start saving. And treat your monthly credit card payments as a priority as important as your rent.

Is it smart to consolidate debt?

Debt consolidation can be a smart move depending on your financial situation. Generally, consolidating debt is a good idea if you owe less than you make in a year and a credit score that’s high enough to help you qualify for a loan. Otherwise, consider other options to pay off high-interest debt.

It can give you a lower monthly payment more manageable and give you a lower interest rate than you’re currently paying to help you save over the life of the loan.

Can my bank consolidate my debt?

It depends on whether your bank offers personal loans for debt consolidation. If personal loans are available, compare the rates, loan amounts, terms and requirements to other providers available. Also check your bank account to make sure it’s in good standing and ask if the bank offers a relationship discount.

If your debt is with the bank, double check to make sure that debt is eligible for consolidation. Some creditors won’t let your refinance or consolidate a loan if they’re currently the lender.

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9 Responses

    Default Gravatar
    RedDen21October 3, 2017

    Hello. I am looking for a debt consolidation loan/credit card that I can use to get a better rate and consolidate my $8,000+ debt with. But I have a slightly above 600 score with 4-7 aplications in the last year. I have been declined for just about every loan/cc I have applied for.

      Default Gravatar
      DanielleOctober 4, 2017

      Hi there!

      Thank you for contacting Finder.

      I can understand your concern. There are several reasons why you can be denied a debt consolidation loan which include your employment status, your credit score, outstanding loan, other liabilities, and your overall capacity to repay the loan amount. That is why before you apply for any loan, it’s very important to check the eligibility criteria and requirements to see if you can qualify so you can avoid multiple rejections as that could also have a negative impact on your credit score.


    Default Gravatar
    RobertSeptember 24, 2017

    Typically what kind of loan works best to pay off attorney fees?

      Avatarfinder Customer Care
      MariaSeptember 24, 2017Staff

      Hey Robert,

      Thank you for your comment. You can check out our page on personal loan uses to find out what you can and cannot use a loan for with certain lenders.

      As Finder is a financial comparison website providing general information, we are not permitted to provide our users with personalized financial advice.

      I hope this helps.


    Default Gravatar
    AshSeptember 7, 2017

    Hello Judy,

    Thank you for reaching out to us.

    The first thing you need to know is the legitimacy of a preapproved loan offer. After that, you can also check legitimate payday loans to ensure you don’t get scammed.

    I hope this information helps.

    Let us know if there is anything else that we may assist you with.


    Default Gravatar
    LorrieAugust 14, 2017

    I’m low income my husband is a vet. We need 25, 000.00 to pay off all that we owe.

      Default Gravatar
      DanielleAugust 14, 2017

      Hi Lorrie,

      Thank you for contacting finder. We are a comparison website and general information service, we’re more than happy to offer general advice.

      You are on the right page. You may customize, review, and compare the offers available on the table. Once you have selected one, you may proceed by clicking the green “Go to Site” button.

      I hope this helps.


    Default Gravatar
    LuisJuly 27, 2017

    Where are areas I can get loans in Puerto Rico? Or Who lends to U.S Citizens who reisde out there?

      Avatarfinder Customer Care
      HaroldJuly 27, 2017Staff

      Hi Luis,

      Thank you for your inquiry.

      At this time we do not have access o lenders that offer loans to US citizens living in Puerto Rico. It may be worth checking with local banks and private lenders in Puerto Rico to see if they offer any personal loans that you may be eligible for.

      Please make sure that you meet all the eligibility criteria and read through the loan Terms and Conditions before applying and making a decision on whether it is right for you.

      I hope this information has helped.


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