Written by: Brittney Mayer
Edited by: Lillian Guevara-Castro
Reviewed by: Ashley Fricker
A few weeks ago, while in line at the grocery store, I glimpsed a woman whose wallet held more credit cards than I’ve ever seen in one place. Her straining pocketbook held the financial equivalent of a Baskin Robbins — it looked like she had an entire 31-flavor buffet of credit cards.
Though this woman may be an extreme example, most of us do tend to have a variety of credit lines at any given time — usually a combination of installment loans (mortgages, student loans, auto loans, etc.) and credit cards. In many cases, having multiple credit accounts in good standing can improve your score — but, when you fall behind on one type of debt, it can strain your ability to keep up with the rest.
For some, a good way to get a handle on their debt is to get it all in one place through a debt consolidation loan. Keep reading to learn more about debt consolidation, or skip ahead to find reviews of our top companies for best debt consolidation loans. We’ll define exactly what debt consolidation loans are, how the process works, review some of our favorite companies, and also provide some bad credit approval tips.
How it Works | Company Reviews | Bad Credit Approval Tips
What is a Debt Consolidation Loan and How Does it Work?
In a sentence, debt consolidation is the process of taking out one large loan to pay off multiple, smaller loans. The key idea is to combine — or consolidate — several loans with different terms into one loan, hopefully with more favorable terms.
For example, let’s look at our hypothetical friend, Pete. Our friend Pete has a total of $10,000 of debt, spread across four accounts, like so:
| Debt Amount | APR | Lender |
|---|---|---|
| $1,000 | 9% | Student Loan Company A |
| $3,000 | 11% | Personal Loan Company A |
| $2,000 | 21% | Credit Card Company A |
| $4,000 | 17% | Credit Card Company B |
Not only does each of Pete’s debts have a different lender, but they all have different interest rates — some of them quite high. So, Pete is currently paying four different people, at four different times, with four different interest rates.
In an ideal consolidation world, Pete would be able to pay off all four of his loans with a single, larger loan that averages out to a lower interest rate than his current debts carry. Not only would he be able to simplify his payments, but he’d lower them, as well. This would be good for Pete in the long run.
At the very least, Pete could lower his monthly payments by getting a new loan with a longer term length — up to 30 years in some cases. While this will mean he’ll pay more interest over time, it may help him better manage his payments in the short term, helping to prevent missed payments or even default. This would also be good for Pete.
Credit Card & Other Unsecured Debt Consolidation
Credit cards and other high-interest unsecured debt (debt not backed by collateral) are the main reasons many people consider debt consolidation. A large number of credit cards can carry interest rates in the high double-digits; rates of 20% to 25% (or even more) are especially common in the subprime markets.
Those high interest rates come with high monthly payments, and it can be easy to get caught in the “minimum payment” cycle — which only leads to an ever-growing balance. Paying off your credit cards with a consolidation loan can help you avoid that cycle, as well as any credit score hits from missing payments when the balance becomes unmanageable. Be sure to look for an interest rate lower than that of your current debts.
Student Loan Debt Consolidation
Student loan consolidation can be a big help to recent graduates struggling to pay multiple student loans after leaving school. It can be a good way to simplify the payments — a new student loan for every year or semester can mean a number of different hands in your pocketbook — as well as potentially trade a variable interest rate for a fixed one.
The thing to know about student loan consolidation is that not all student loans can be consolidated. While most federal student loans can be consolidated, private education loans are not eligible. You also won’t be eligible for consolidation if you are already in default on your student loans.
Top 7 Debt Consolidation Loan Companies
Choosing the best company for your debt consolidation loan will be mostly a matter of research. You’ll want to comparison shop loan terms, as well as check out the reputation of the providers, before entering an agreement. Of course, the best place to start is by reading the expert reviews on our top companies below.
1. Avant
- Personal loans of $2,000 to $35,000
- Compare rates in 2 minutes without affecting your credit
- Best for low origination fees for bad credit
- 550 minimum credit score required
- Powered by Credible
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $2,000 to $35,000 | 9.95% – 35.99% | 12 to 60 Months | See representative example |
Avant is an excellent choice for a debt consolidation loan because it can provide funding up to $35,000 spread out over five years. The lender caters to consumers with all types of credit profiles, even working with those well below 600 credit scores.
You can also see what you qualify for before you apply so you can make a more informed decision prior to Avant performing a hard credit inquiry.
2. Upstart
- Personal loans starting at $1,000
- Find loans you prequalify for, complete your application, and close your loan
- Loans for 300+ FICO Scores
- Checking rates doesn’t impact your credit score
- Powered by Credible
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $1,000 to $50,000 | 6.40% – 35.99% | 3 or 5 Years | See representative example |
Upstart is a newer lending platform, having only been in business since 2012, and was founded by previous Google employees who wanted to disrupt predatory lending practices often found in the subprime space.
Upstart offers loans of up to $50,000, and borrowing terms are based on far more than just your credit score, such as your career trajectory and income.
- Personal loans from $500 to $35,000
- All credit types are considered and welcome
- Simple, no credit impact form
- Helping consumers since 2001
- 4.7 out of 5 Trustpilot rating with 2,000+ reviews!
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $500 to $35,000 | 5.99% – 35.99% | 60 Days to 72 Months | See representative example |
24/7 Lending Group has made a name for itself by working with consumers in all types of credit and financial situations. When debt piles up and starts driving your credit score down, contact 24/7 Lending Group to see if you qualify for a debt consolidation loan of up to $35,000.
The group partners with some lenders who specialize in working with consumers who have bad credit. It also offers loan terms of up to six years to help give borrowers a little more breathing room on their path to financial freedom.
- Loans from $250 to $35,000
- Large lender network
- Fast loan decision
- Use the loan for any purpose
- Funding as soon as one business day, if approved
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $250 to $35,000 | 5.99% – 35.99% | 3 to 72 Months | See representative example |
PersonalLoans.com is not a lender — it works as a network to connect consumers “seeking fast, hassle-free financial assistance with skilled, reputable lenders can who can provide it.” This effectively eliminates the need to complete multiple loan applications.
- Loans from $500 to $10,000
- Get connected with a lender
- Simple form & quick funding
- Get your money as soon as next the business day, if approved
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $500 to $10,000 | 5.99% – 35.99% | 3 to 60 Months | See representative example |
BadCreditLoans.com truly advocates for the poor credit borrower, as their site provides information and resources that help consumers improve their credit and financial standings. These include resume writing tips, scam alerts, an educational blog, and more.
6. CashUSA.com
- Loans from $500 to $10,000
- Receive a loan decision in minutes
- Get funds directly to your bank account
- Use the loan for any purpose
- See official site, terms, and details.
| Loan Amount | Interest Rate | Loan Term | Loan Example |
|---|---|---|---|
| $500 to $10,000 | 5.99% – 35.99% | 3 to 72 Months | See representative example |
Whether it’s debt consolidation or any other financial need, CashUSA‘s online referral process helps make it possible for you to obtain the funds you need to achieve your monetary goals.
7. OneMain Financial
OneMain Financial has been around for more than 100 years. You’ll need to visit a branch to apply for a loan of up to $25,000, but that shouldn’t be a problem, as 5 out of 6 Americans live within 25 miles of a branch.
Different loan providers will have different requirements, so if your top pick doesn’t offer you favorable terms, try another lender. That said, don’t enter into an agreement with a company with whom you don’t feel comfortable doing business, regardless of the terms they offer.
How to Get a Consolidation Loan with Bad Credit
When you’re already struggling with poor credit, trying to manage a variety of high-interest loans can make matters even worse. Not only are you forking over your hard-earned cash to pay on those interest rates, but juggling multiple payments each month can lead to forgotten or missed payments. Unfortunately, it’s more difficult to qualify for the lowest interest rates when you are in need of a subprime loan, so you may not be able to lower your payments through interest rate reduction alone.
That said, you can still lower your monthly payments, making your debt more manageable on a monthly basis, by getting a consolidation loan with a longer loan period than your current loans. By spreading your payments over a longer period of time, you can lower your overall monthly payments. Of course, extending the amount of time you make payments means you’ll be paying more interest in the long run.
If you’re having trouble getting a consolidation loan through conventional lenders, you may need to look for lenders who specialize in subprime loans, like the top-rated providers picked by our experts. The terms will likely be less favorable, but can still be preferable to default.
Make the Most of Consolidation with Low Interest Rates
Whether you have a handful of installment loans or an entire buffet of credit card flavors, debt consolidation can help simplify your finances, making it easier to manage your payments.
You’ll get the most out of the consolidation process by focusing on your interest rate; the lower the rate, the lower your overall payments. Try to find a consolidation loan with an interest rate that is lower than that of the majority of the debt you’re going to consolidate to avoid actually increasing the amount of interest you are paying on some of your debt.
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