How Debt Consolidation Works

While some lenders have slightly varying requirements and processes for debt consolidation, it’s generally a simple four-step process.

  1. Determine how much debt you wish to consolidate into a single, potentially lower, monthly payment. Your lender may be able to help you figure out what you can and can’t include.
  2. Apply for debt consolidation. If your lender or lending marketplace offers pre-qualifying that won’t affect your credit score, take the opportunity to discover what loans and rates you qualify for before formally applying for a loan.
  3. Obtain approval and disperse the funds to your creditors. Many lenders will pay your creditors for you for even more convenience.
  4. Make the single monthly payment on time each month to potentially increase your credit score over time.

With $1.12 trillion in credit card debt available in the United States, competition for your debt consolidation loan is fierce—meaning there are many options to consider and you control to choose the best option for your situation.

What to look for in a Debt Consolidation Company

Trust

Trusting the organization that will handle your debt consolidation is a must. The idea behind debt consolidation is to pay down debt without adding stress. Choose a reputable lender or provider with excellent ratings and a solid history to ensure trust.

Ease

When it comes to debt consolidation, simpler is better. Choose a lender or provider who can make the process as easy as possible. If the company offers a pre-qualification step, take it and use the information you receive to choose the best option.

Fees

Origination and other fees are common when dealing with debt consolidation. However, they’re far from being the rule. Choose a lender or provider with minimal or no origination, management, or other fees to maximize your savings and efforts.

Best Debt Consolidation Companies

1
Our Top Pick for July 2024
9.8 Excellent

  • TCR Editor's #1 Pick
  • Lower Monthly Payment
  • No Credit Score Required
  • Loan Options Available
  • A+ Rating with BBB
2
9.2 Great

  • Compare Rates for Free
  • Loans up to $200,000
  • Receive funds as soon as tomorrow*
3
NMLS #1136
8.4 Very Good

  • Minimum Credit Score: 600
  • Soft Credit Check To Pre-Qualify
  • Home Equity Credit Options Available
4
7.8 Good

  • Loans Funded In One Week
  • Get A Lower Rate With A Co-Borrower
  • 3- 5 years term and $1,000- $40,000
Via Credible.com's Website
5
7.4 Good

  • No Minimum Credit Score
  • Soft Credit Check To Pre-Qualify
  • Get Funding In One Day

Here’s What to Look Out For When Choosing a Debt Consolidation Provider

While debt consolidation is a powerful tool for handling credit card debt, there are a few things to look out for when choosing a lender and beyond.

  • Avoid predatory lenders. Not all predatory lending is illegal. Predatory lenders take advantage of customers in tough financial situations. Payday loans are the best-known offenders. Avoid predatory lending by working with an established company with solid reviews and recognition from the Better Business Bureau.
  • Avoid high fees. While the temptation to sign with any lender willing to give a loan is high, take time to read the small print in the contract before signing to ensure you understand and can comply with the details of the agreement.
  • Change your spending habits if necessary. Consolidating debt and keeping credit card accounts open can create more room to go deeper into debt than before. If your spending habits need adjusting, address the issue before applying for debt consolidation or plan on closing the accounts after consolidation.

Understanding Loan Rates

  1. Credible – Rates for personal loans provided by Credible range from 6.40% to 35.99% APR with repayment terms from 12 to 84 months.
  2. LendingTree – Rates for personal loans provided by Lending Tree range from 5.99% to 35.99% APR with repayment terms from 12 to 120 months.
  3. LendingClub – Rates for personal loans provided by LendingClub range from 9.57% to 35.99% APR with repayment terms from 24 to 60 months.
  4. Upstart – Rates for personal loans provided by Upstart range from 7.8% to 35.99% APR with repayment terms from 36 to 60 months.

Personal loan offers provided from the lenders on this page will have a rate no higher than 35.99%, with repayment terms ranging from 36 to 72 months. Actual rate depends on credit score, loan term, and other factors. Please visit the lender’s website for a representative example of the total cost of the loan, including all applicable fees.

A representative loan example: For a $10,000 personal loan with a 36 month repayment term, 18.49% APR (including a 5% origination fee), you would receive $9,500 and your required monthly payments would be $346.65. Over the life of the loan, you would pay back a total of $12,479.52. The APR for your loan may be higher or lower than this amount. Actual rate depends on credit score, loan term, and other factors. Please visit the lender’s website for a representative example of the total cost of the loan, including all applicable fees.

*Loans typically fund between one and five business days depending on the lending partner and your application.