Unsecured loans can be useful when it comes to eliminating your debt. While the best personal loans vary, they all help you pay off debt faster. This helps you achieve financial freedom and live the life you want sooner.
There are numerous options to consider when looking for low-interest loans. This post will help you determine the best choice for your specific needs.
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Best Personal Loans to Consolidate Debt
It is a challenge to pay off existing debt, especially if your interest rate is in the double digits. An online lender can be a great option to lower your interest rates and save money.
Online loan companies typicallycharge fewer fees and offer better rates than local banks. Comparing rates online is quick, easy, and doesn’t hurt your credit score.
As a preview, these lenders provide personal loans that don’t require collateral, have competitive rates, and won’t charge hidden fees.
| Sofi | Credible | Lightstream |
|---|---|---|
APR | APR | APR |
Min. Credit Score | Min. Credit Score | Min. Credit Score |
Loan Amt. | Loan Amt. | Loan Amt. |
Here are the seven best options to consolidate your debt and achieve financial freedom.
1. SoFi
SoFi is one of the top lenders to consider because they have benefits most banks don’t offer. For example, you can open a free online checking account and get credit score monitoring.
Another benefit is SoFi’s unemployment protection when you’re not at fault for losing your job. SoFi pauses monthly payments for up to three months and helps you look for a new job.
This can be a huge help in the event you face a potential financial setback.
Additionally, your rate quote from Sofi might differ from other lenders because SoFi doesn’t require a minimum credit score.
While a score in the high 600s is helpful, SoFi evaluates your employment history, income, and current monthly expenses to see if you qualify.
You can even use SoFi to refinance student loans to save more on monthly loan costs.
Read our Sofi personal loans review to learn more.
APR: 8.99 percent to 25.81 percent (with all discounts)*
Repayment terms: Two to seven years
Loan amount: $5,000 to $100,000
Additional fees: None
Minimum credit score: Undisclosed (680+ for the best approval odds)
2. Credible
Credible is one of the fastest ways to compare quotes to consolidate debt. This loan search engine gives you rate quotes from multiple lenders in just two minutes with a single search.
You receive the same rate quote you’d get if you visited each lender’s website to pre-qualify.
While Credible doesn’t charge any fees, some of the options may charge origination fees. You will see a breakdown of the potential fees, interest rates, and total loan costs on the comparison screen.
There is no obligation to apply for a loan with Credible. You can apply with another lender if they offer a better rate.
Once you decide which loan company has the best rate, you can finish the application on the lender’s website.
You may appreciate Credible if you have fair credit since they partner with lenders for every credit score range.
Credible even lets you compare rates if you add a co-signer when you have poor or no credit.
You can read our review of Credible to see how you can use them to find the best student loan refinance rates.
APR: 5.40 percent to 35.99 percent
Repayment terms: One to seven years
Loan amount: $1,000 to $100,000
Additional fees: Some lenders have origination fees up to 8.00 percent
Minimum credit score: 580
3. LightStream
If you have excellent credit and need an unsecured loan, LightStream is worth considering.
The entire LightStream loan process takes place online. You can potentially receive funds in your bank account on the same day.
Unlike other lenders or local banks, you won’t pay origination fees.
While LightStream does not look for a specific credit score, good to excellent credit is preferred.
Similar to other loan companies, your credit history, income history, payment history, and current assets influence your rate quote.
The loan purpose, repayment term, and loan amount also determine your minimum APR.
Enrolling in AutoPay reduces the interest rate on LightStream’s debt consolidation loans by .50 percent.
Loan amount: $5,000 to $100,000
Additional fees: None
4. Payoff
Payoff is an excellent option if you’re considering consolidating credit card debt. You can refinance up to $40,000 in consumer debt if you have good credit and no current delinquencies.
If credit cards aren’t your concern, you will want to look at other lending platforms to eliminate debt.
One of the main benefits of Payoff is that the company assigns you a member advocate. This advocate is your resource whenever you have needs, questions, or concerns.
Your advocate checks in each quarter to see if you need any help on your debt payoff journey. Additionally, you receive free monthly FICO credit score updates when you use Payoff.
*Related: Need to rebuild your credit? Check out our guide on credit builder loans to see if they’re a viable alternative.*
You can qualify for a Payoff loan with a FICO score of at least 640, a debt-to-income ratio (DTI) of less than 50 percent, and at least three years of credit history.
Payoff loans are currently available everywhere except Massachusetts, Mississippi, Nebraska, and Nevada.
APR: 5.99 percent to 24.99 percent
Repayment terms: Two to five years
Loan amount: $5,000 to $40,000
Fees: Origination fee up to five percent
Minimum credit score: 640
Check Rates
5. Avant
Avant is a good option if you have bad credit and need to eliminate debt. Qualifying borrowers can take out an unsecured personal loan with a credit score as low as 580.
You can receive loan amounts of up to $35,000. This is a lower amount than what you can find at other lenders, but most lenders only offer larger loans to those with the best credit scores.
Avant sets itself apart by having an approval process that usually takes just one business day. This means you receive funds the next business day if you are approved.
Other lenders may take up to a week to disburse your loan amount.
Since Avant caters to people with fair credit or worse, borrowers with high credit scores usually qualify for better rates at other lenders.
If that’s your case, you may want to compare multiple lenders at Credible to save time and money.
Avant is not available in Iowa or West Virginia.
APR: 9.95 percent to 35.99 percent
Repayment terms: Two to five years
Loan amount: $2,000 to $35,000
Additional fees: Origination fee up 4.75 percent
Minimum credit score: 580
Check Rates
6. Fiona by Even Financial
Fiona by Even Financial is another free loan comparison site that lets you evaluate rates for online loans quickly. You can see rates for up to 17 lenders for free.
It’s possible to search results by lender, repayment terms, interest rate, credit score requirements, and estimated monthly payments.
You start the loan search by entering your zip code to find lenders for your state. Like other loan marketplaces, Fiona doesn’t issue any loans.
The final loan offer you receive may differ from Fiona’s initial rate quote. Even if you have bad credit, they can help you find a potential loan offer.
Fiona by Even Financial is available in all 50 states.
APR: 2.49 percent to 35.99 percent
Repayment terms: Two to seven years
Loan amount: $1,000 and $250,000
Additional fees: Origination fee up to six percent with some lenders
Minimum credit score: 580
Check Rates
7. Prosper
Prosper is a big player in the peer-to-peer lending space and offers loans between $2,000 and $40,000. Instead of receiving money from an online bank, private investors fund your loan request.
If you don’t have debt, Prosper can be a good resource to use. You can take out loans to fund home improvements as well.
Prosper personal loans can be a little more difficult to secure since they take your credit utilization ratio seriously. Regardless, it can be worth a few minutes to compare their rate to an online institution.
Your minimum repayment term is three years. There is an origination fee between 2.41 and five percent.
Prosper is one of the few lenders to offer joint loans. You and a co-borrower can apply for one loan if your combined DTI is below 35 percent.
Applying together can help you qualify for a better rate.
You can receive your loan funds in as little as four days. This delivery speed can be quicker than local banks that require more paperwork.
APR: 7.95 percent to 35.99 percent
Repayment terms: Three years or five years
Loan amount: $1,000 and $40,000
Additional fees: Origination fee between 2.41 and five percent
Minimum credit score: 680
What Is An Unsecured Loan?
An unsecured personal loan is something you typically get to consolidate and pay off debt. A personal loan often results in lower interest rates.
These lower rates reduce your monthly payment, allowing you to save money on interest and pay more towards the principal. There is collateral required to receive a personal loan.
As a result,you usually need good credit to qualify for an unsecured loan. You can qualify for loans with minimal credit history.
Keep in mind that your interest rate will likely be higher than other loans but lower than keeping a credit card balance.
Some lenders will accept co-signers and co-borrowers to help you get a lower rate.
In the case of credit card debt, you likely have a variable interest rate which means different payments each month.
Factors to Consider When Taking Out a Loan
There is a lot to remember when taking out a personal loan. The goal of a loan is to save money on your monthly payments, consolidate multiple bills into one, and eliminate debt quicker.
Acting too fast can sabotage your efforts and may cost you more money. Here are some things to remember when comparing loan options.
Prequalify if Possible
Personal loan companies often allow prospective borrows to prequalify for a loan. This allows you to provide the required information so they can determine rates and repayment terms.
Prequalifying has the added benefit of a soft credit inquiry so that you can comparison shop without impacting your credit.
Watch Out for Fees
Lenders love to charge fees. Origination fees, prepayment penalties, and documentation fees are all fees that are common.
Most of the lenders on our list do not charge fees, but you will want to keep an eye out for them so it doesn’t cost you more.
Customer Service
Customer support is essential during your loan process. You want a lender that offers the support tools you need.
If they don’t, you might find the repayment process burdensome if you’re unable to get assistance in the way you want.
Limit Your Hard Inquiries
Hard inquiries can negatively impact your credit score. That can cost you more money in the future if you have new loan needs.
A comparison tool like Credible or Fiona is a good way to mitigate this. Getting prequalified is another helpful way to reduce your inquiries.
Transparency
Lenders should be very clear about what the loan process is like. Their rates should be listed, and their process should be communicated thoroughly.
This should also be the case in their mailings and when you call their customer service department. If you get the feeling the company is being less than forthright, move on to a different lender.
Stop Spending
Spending more than you earn is a common reason for needing personal loans. If you’re working to pay off debt, it’s necessary to curb spending after securing a loan.
Otherwise, you’re liable to end up in the same situation again in the future.
Benefits of Personal Loans
Personal loans can be an excellent tool to pay off debt quickly and save money on interest. Here are a few of the main benefits of an unsecured loan:
- Can get a lower interest rate and monthly payment
- No prepayment penalties
- Online lenders make it easy to compare rates and total loan costs
- Combine multiple debts into one payment
If you make timely payments, an installment loan is a good tool to kill your indebtedness and improve your credit score. This can have a long-term impact on your finances.
Drawbacks of Unsecured Loans
There are many good reasons to consolidate your debt into one payment. However, it doesn’t always work for everyone.
Here are some reasons why you may not want to take out a personal loan:
- Some lenders charge an origination fee
- May need a minimum 680 credit score to qualify
- Might not qualify for a lower interest rate
- Most lenders have a minimum $5,000 loan amount
Like any other major financial decision, do your due diligence before taking out a loan.
Balance Transfers vs. Loan Consolidation
Balance transfer credit cards can be another helpful tool to reduce your interest rate and repay indebtedness.
Instead of taking out a loan through a lender, you open a new credit card and move the debt to the new card. That new card often has a zero percent introductory rate.
Unfortunately, the rate only stays that way between six and eighteen months. If you don’t repay the debt within that time, you risk being charged interest on the entire amount you moved starting from day one.
You will want to read the terms and conditions of the credit card before taking it out to determine if this will happen to you.
Regardless, you will start accruing interest on the remaining balance when the promotion ends.
You will pay a one-time transfer fee of up to three percent of the indebtedness.Despite the upfront fee, your total interest savings can be more than getting a loan.
Transferring your balance might make sense if you can pay it off quickly. Also, you should transfer instead of consolidating when the transfer fees are less than your total loan costs.
Another time to consider balance transfers is when you have a small balance. For instance, most personal loans require you to borrow at least $5,000.
Here are some balance transfer cards that can help you save money while paying off debt.
Does Consolidating Debt Ruin Your Credit?
In the near term, it is possible that consolidating your debt into a personal loan can impact your credit. The hard inquiry will go to the credit reporting agencies, which will ding your credit score temporarily.
As long as you don’t incur multiple hard inquiries, your score will typically recover fairly quickly.
If you don’t have regular late payments and don’t continue to spend, your credit should recover as you reduce your loan.
Bottom Line
If you’re dealing with debt, try to lower your rate and pay it down as soon as possible. Working with a loan company can help you do this.
Remember that best loan providers don’t charge hidden fees or high interest rates.
It’s easy to compare rates for unsecured loans online and quickly research your best options. Once you find the right option for you, it will make it much easier for you to get out of debt fast.
What has been helpful to you in paying off debt?
*Personal Loan Disclaimer: Fixedratesfrom 8.99% APR to 25.81% APR reflect the 0.25% autopay interestratediscount and a 0.25% direct deposit interestratediscount. SoFirateranges are current as of 05/19/23 and are subject to change without notice. Not all applicants qualify for the lowestrate. SeePersonal Loan eligibility details. Lowestratesreserved for the most creditworthy borrowers. Your actualratewill be within the range ofrateslisted and will depend on the term you select, evaluation of your creditworthiness, income, and a variety of other factors. SeeAPR examples and terms.
Loanamounts range from $5,000– $100,000. The APR is the cost of credit as a yearlyrateand reflects both your interestrateand an origination fee of 0%-6%, which will be deducted from anyloanproceeds you receive.
Autopay: The SoFi 0.25% autopay interestratereduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.Autopay is not required to receive aloanfrom SoFi.
Direct Deposit Discount: To be eligible to potentially receive an additional (0.25%) interestratereduction for setting up direct deposit with a SoFi Checking and Savings account offered by SoFi Bank, N.A. or eligible cash management account offered by SoFi Securities, LLC (“Direct Deposit Account”), you must have an open Direct Deposit Account within 30 days of the funding of yourLoan. Once eligible, you will receive this discount during periods in which you have enabled payroll direct deposits of at least $1,000/month to a Direct Deposit Account in accordance with SoFi’s reasonable procedures and requirements to be determined at SoFi’s sole discretion. This discount will be lost during periods in which SoFi determines you have turned off direct deposits to your Direct Deposit Account.You are not required to enroll in direct deposits to receive aLoan.
The following payment example depicts the APR, monthly payment and total payments made during the life of a personal loan with a single disbursem*nt. All loan rates below are shown with the autopay discount (0.25%) and direct deposit discount (0.25%). The monthly payment for a $30,000 loan with a 60-month term and a fixed annual percentage rate (APR) between 12.95% – 25.03% would be $681.82 – $881.07 in monthly payments, with total payments between $40,909.47 – $52,864.05. Your actual interest rate may be different than the loan interest rates in these examples and will be based on term of loan, your financial history, and other factors, including your cosigner’s (if any) financial history. Lowest rates reserved for the most creditworthy borrowers. See SoFi.com/eligibility for details.
John Schmoll
Website | + posts
I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.
