Low-Interest Debt Consolidation Loans – Get out of Debt
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As the Federal Reserve tries to beat surging inflation by imposing the biggest interest rate hike in 28 years, credit cards and other types of debt will likely become more expensive.
Low-interest debt consolidation loans can help. Consumers can cut their interest rate by half to two-thirds if they have high credit scores and qualify for the lowest rates on debt consolidation loans, compared to paying 20% or so on credit card balances.
And that’s the key to using these loans. If a new loan has a lower interest rate and you can consolidate multiple credit card balances into lower monthly payments, you can save money by having a fixed monthly payment. Credit card interest rates can change monthly, causing borrowers to possibly face higher monthly payments a month or so after the Fed raises the federal funds rate.
Consumers can consolidate credit card debt with a balance transfer card at a lower rate than they already pay. But unless the balance is paid off in full with a 0% introductory interest rate transfer card, they could pay more through transfer fees or take longer than they would otherwise pay the loan off.
Here are some of the best low-interest debt consolidation loans we’ve found.
In this article
Overview of the best low-interest debt consolidation loans
Lender | Best For |
SoFi | Fast online prequalification |
LightStream | Low rates |
Happy Money | Credit card debt only |
Upstart | Fair credit |
Rocket Loans | Same-day approval |
Discover | Borrowers with good credit |
Best Egg | High-income borrowers |
Avant | 2-year loans |
Lending Club | Peer-to-peer lending |
Prosper | Not using banks |
Best low-interest debt consolidation loans
SoFi
SoFi makes it fast and easy to check if its debt consolidation loans are right for you. Checking if you prequalify for a loan and your interest rate will take only one minute, the company says, and checking won’t affect your credit score. If you don’t like what you see, you can shop elsewhere.
SoFi’s lowest rates are for customers with excellent credit, high credit scores and income, and a low debt-to-income ratio in their credit profile. Credit utilization is also important because a low utilization percentage of 30% or less shows you’re not relying too much on credit. A 0.25% APR discount is given if you allow SoFi to pay your lenders upfront. Or, you can pay them yourself and get the loan funds by the next business day.
No minimum credit score is required to get a personal loan through SoFi, so creditworthiness shouldn’t be an issue. However lower scores could affect your eligibility, terms, or rate, depending on your lender. Borrowers with low credit scores or income may be able to qualify with a cosigner.
Along with quick loan pre-qualification, we like SoFi because it doesn’t charge application fees, origination fees, or a prepayment penalty that other online lenders may charge.
- Costs: $0 fees; APR of 8.99% to 25.81%
- Where to find: Sofi Loans
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
LightStream
LightStream has some of the lowest rates around for debt consolidation loans. Borrowers with excellent credit who use autopay can get an annual percentage discount of 0.50% for a starting APR of 7.49% as of November 28, 2023. Other companies also offer autopay discounts, but a 0.50% discount is the largest we’ve seen.
LightStream has a Rate Beat Program to match another lender’s price if you find the same loan terms. If you can find a lower rate elsewhere on an unsecured loan for the same loan terms offered by LightStream, it will offer a rate of 0.10% lower than the rate from the competing lender. Its personal loan rates are the lowest we found.
Like other debt consolidation loans, LightStream’s loans are at a fixed rate, meaning you’ll pay a fixed monthly payment amount that won’t change. Interest rates on credit card debt payments can often change, resulting in higher payments and high-interest debt.
If you have your financial house in order, LightStream can offer you good loan terms. Its loans are best suited for people with several years of credit history, good or excellent credit scores in a credit inquiry, and a stable and sufficient income and assets to repay any current debt obligations.
- Costs: $0 fees, APR of 7.49% to 25.49%.
- Where to find: LightStream Loans
Happy Money
Happy Money, formerly known as Payoff, focuses on providing debt consolidation loans, or personal loans, to pay off credit card debt.
Happy Money offers a Payoff Loan with a single, fixed payment and a set paid-off date to streamline paying off credit card debt. The loan can only roll high-interest credit card payments into one monthly payment at a lower interest rate.
Other companies sometimes let the loan amount be used for anything. LightStream, for example, provides debt consolidation loans but offers loans for other purposes. These include medical and dental care, buying a horse, or funding a wedding, adoption, timeshare, airplane, swimming pool, or used car.
After looking at your credit, income, and savings, Happy Money gives you options, including the lowest monthly payment, best rate, and quickest way to pay off your new personal loan. According to the company, paying off existing debt through one of these loan options can increase a FICO credit score by up to 40 points.
- Costs: 0%-5% origination fee, APR of 11.72% to 24.67%.
- Where to find: Happy Money Loan
Upstart
Upstart offers a debt consolidation loan that can be used to manage revolving lines of credit and high-cost loans that have high interest fees. These include credit cards, retail cards, gas cards, payday loans, and title loans.
For a slightly lower interest rate, starting at 6.4%, Upstart offers a credit card consolidation loan that can be used to pay off credit cards only. Upstart has some of the best minimum loan amounts, starting at $1,000.
Upstart says the rates for personal loans it finds through artificial intelligence are 43% lower than loans based on credit scores only. A minimum credit score of 600, considered fair credit, must be approved for a loan.
Its high origination fee of up to 8% and interest rate of up to 35.99% can make Upstart a costly place to get a loan if you don’t have the best credit. However, a loan through Upstart may save you money if you qualify for better loan terms through a credit check and can pay off the loan in a year or so.
- Costs: 0%-12% origination fee, APR of 6.40% to 35.99%.
- Where to find: Upstart Loans
Rocket Loans
If you like to enjoy a same-day approval, Rocket Loans may be the right option for you. It does not offer loans in Nevada, Iowa or West Virginia. It is ideal for those with a fair to good credit and who need funds right away.
The sister company of Rocket Homes, Rocket Auto and Rocket Mortgage, it provides personal loans ranging between $1,000 to $50,000. There is an online, transparent application process which will not take a lot of your time.
The loan can be repaid in three or five years and the rates can range from 9.11% to 29.99%. Rocket Loans offer a rate discount to those who enrol in autopay.
There is no application fee and no prepayment penalty fees. But there is an origination fee ranging from 1% to 6% and a late payment fee of $15. Your financial profile will determine your interest rate.
- Costs: No application fees, APR of 9.11% to 29.99%.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Discover
Discover offers unsecured personal loans that don’t require paying loan origination fees or any kind as long as you pay on time. The late fee is $39. Unsecured debt means you can’t use your car or other collateral to get the loan.
One service Discover offers that we like is paying off your creditors directly. It can send your loan proceeds directly to the credit card companies you want to pay off, saving you some time and leaving you less headache as you deal with your finances.
Its lowest interest rates are for people with the best credit score and credit history. A minimum credit score 660 is required, which is considered a fair credit score.
Checking to see if you qualify is fast and easy through the application process and doesn’t impact your credit score. Just provide your contact and employment information, how much you want to borrow and for how long, and what the loan is for, and you’ll quickly see if you qualify for a loan. A soft check of your credit report will likely be made.
- Costs: No fees except for $39 late fees, APR of 7.99% to 24.99%.
- Where to find: Discover Loans
Best Egg
Best Egg offers many personal loans, including home improvement, moving, vacation, adoption, cars, weddings, and credit card refinancing. And, of course, for debt consolidation.
A minimum credit score 640 is required, which is considered fair credit. With that minimum score, borrowers may be charged some of the highest interest rates among lenders we reviewed, as high as 35.99%, depending on your credit history. You may qualify under other criteria, such as income.
This is why it’s smart to shop around for the best interest rate. Most sites make it very easy to check what your rate may be within a few minutes. Best Egg does, too, though it starts with requiring your email address before entering more information.
Best Egg may be best for people with high incomes of $100,000 or more and good credit, which is 670 to 739 on the FICO credit score range. They’re likely to get the best interest rates, as low as 8.99%, through Best Egg.
- Costs: Origination fee of 0.99% to 8.99%, APR of 8.99% to 35.99%.
- Where to find: Best Egg Loans
Avant
Avant offers personal loans that can be used for many reasons, such as emergencies, car repairs, and consolidating debt. Its loans can be as short as two years, which may be enough time if you don’t have too much credit card debt.
A downside of Avant is that its starting interest rate is 9.95%, the highest among the lenders we reviewed for borrowers with the best credit history. That’s a high rate for someone with good to excellent credit.
It also charges an origination fee of up to 4.75%, which is about what other lenders that charge such fees charge. However, we found a few lenders don’t charge such fees.
Still, a loan of two years may be worthwhile through Avant if you can’t find a better loan elsewhere. Do the math and ensure the origination fee and interest rate add up to being less than what you’re paying on your credit cards or other high-interest debt.
- Costs: Origination fee of 4.75%, APR of 9.95% to 35.99%.
- Where to find: Avant Loans
LendingClub
LendingClub connects borrowers with investors as a peer-to-peer lender of personal and other types of loans. Qualifying might be easier than at a traditional bank or credit union if you have fair credit.
LendingClub points out on its website that depending on your credit profile, a debt consolidation loan could help improve your credit by diversifying your credit mix, showing that you can make on-time monthly payments, and reducing your total debt. One caveat is that you’re not adding any new debt while paying off the new loan.
An average loan through LendingClub has an APR of 15.95%, an origination fee of 5%, and a principal loan of $15,800 for three years. Compared to the average credit card APR of 20.29%, paying off the same balance over three years on a credit card will cost the borrower $1,177 more in finance charges than it would through its debt consolidation loan.
This is the math you should do to check if a debt consolidation loan will save you money. Don’t just compare interest rates. The origination charge is important too. Under the above scenario, the fee is $790, which adds to the finance charges after the interest rate is factored into the monthly payments. All lenders should be able to tell you upfront what your monthly payments will be and how much they charge in fees.
- Costs: Origination fee of 3% to 8%, APR of 9.57% to 35.99%.
- Where to find: LendingClub Loans
Prosper
Prosper is another place to run much of your financial life. It offers credit cards, savings and investment accounts, home equity loans, and personal loans for many things, including debt consolidation, with affordable repayment terms.
Prosper is a peer-to-peer personal loan lending platform that provides loans through investors who choose to invest in you. Factors considered include your credit score, loan amount, loan term, employment and income details, credit usage, and credit history.
Specifically, Prosper requires a 50% or better debt-to-income ratio, no bankruptcies in the last year, less than five credit inquiries in the last six months, and three open credit lines. Its loans are for two to five years.
Prosper does charge a few fees, starting with an origination fee of 1% to 7.99% of the loan amount. The fee is subtracted from the amount borrowed. For example, a $10,000 loan with a 5% origination fee means you’d get $9,500, and the lender keeps $5,000.
Prosper also charges a $15 late fee or 5% of the unpaid amount, whichever is greater, if a payment is 15 or more days late. $15 for insufficient funds and a check processing fee of 5% or $5, whichever is less.
- Costs: Origination fee of 1% to 7.99%, APR of 6.99% to 35.99%.
- Where to find: Prosper Loans
Read a full review on Prosper.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
Summary of the best low-interest debt consolidation loans
Lender | APR range | Loan amount | Loan term | Origination fee |
SoFi | 8.99%-25.81% | $5,000-$100,000 | 2-7 years | None |
LightStream | 7.49%-25.49% | $5,000-$100,000 | 2-12 years | None |
Happy Money | 11.62%-24.67% | $5,000-$40,000 | 2-5 years | 0%-5% |
Upstart | 6.40%-35.99% | $1,000-$50,000 | 3-5 years | 0%-12% |
Rocket Loans | 9.11%-29.99% | $1,000-$50,000 | 3-6 years | 1%-6% |
Discover | 7.99%-24.99% | $2,500-$40,000 | 3-7 years | None |
Best Egg | 8.99%-35.99% | $2,000-$50,000 | 3-5 years | 0.99%-8.99% |
Avant | 9.95%-35.99% | $2,000-$35,000 | 2-5 years | 4.75% |
Lending Club | 9.57%-35.99% | $1,000-$40,000 | 2 & 5 years | 3%-8% |
Prosper | 6.99%-35.99% | $2,000-$50,000 | 2-5 years | 1.00%-7.99% |
FAQs
What credit score do I need?
Not every site we reviewed listed the minimum credit score to qualify for a loan. A credit score is just one factor to qualify, and having a low score can mean getting a cosigner or having a high income or meeting other criteria to qualify. Of the sites that did list a minimum credit score, the lowest minimum we found was 600 at Payoff, and the highest minimum was 660 at Discover and Marcus. FICO credit scores range from 300 to 850. A “fair” score is 580-669. The higher your credit score, the more likely you will be offered the lowest APR. Best Egg requires at least a 700 FICO score and a minimum individual annual income of $100,000 to qualify for its lowest rate.
Will my income and job be checked?
Procedures vary by company, but generally, you should expect a lender to confirm your income and employment status. This doesn’t necessarily mean that your boss or employer will know you’re applying for a debt consolidation loan. Discover verifies income through documents such as recent pay stubs or bank statements, and it may use third-party vendors to confirm the information. Discover may use your work email address to verify your employment or contact the employer you listed on the loan application. Verification, if it isn’t obvious, is to ensure you can afford the loan.
What’s an origination fee?
It’s a fee charged by some lenders for processing and originating the loan. It’s deducted from the loan amount, so keep that in mind when requesting a total loan amount.
Why should you use debt consolidation loans?
Debt consolidation loans can be used for many reasons, such as emergencies, weddings, car repairs, and home remodeling. But where they can make the most sense is to pay off high-interest debt such as credit cards.
If a personal loan’s APR is lower than the interest rates on your credit cards, you should be able to save money by paying the credit card balances off with a new loan. However, be sure to calculate the origination fee, if any, when calculating the total cost of the loan.
Use Quicken Loans to Get a Personal Loan
- If you're tight on cash right now, you may want to consider getting a personal loan. A personal loan is a loan that you can use for just about any purpose like: paying off other debt, renovating your home, or family needs like a wedding or adoption.
- TrustPilot Rating 4.6 out of 5
- Connect with lenders for $0
- 100% online experience.
The bottom line
If you already have a low-interest credit card to transfer debts from higher-interest cards, a balance transfer may be the easiest way to lower your debts. Or you may find a credit card with a 0% rate for six months or so, and you can pay the transfer amount off before the free-interest period expires.
The annual percentage rate, or APR, can fluctuate on many credit cards, and a personal loan can be a cheaper way to pay off credit card debt through fixed rates, lower APRs, and fixed loan terms for the life of the loan. If the interest rate of a debt consolidation loan is less than any of the credit cards you already have, you can probably save by moving the debt to the new loan and paying it off by a fixed date, such as two years. It can be a debt management plan worth following.
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Writer
Aaron Crowe is a freelance journalist who specializes in personal finance writing and editing. He has worked at newspapers, where he won a Pulitzer Prize, and has written for numerous online publications. These include AOL, US News & World Report, WiseBread, Bankrate, AARP, and many websites focusing on housing, credit and insurance. He lives in California with his wife and daughter.
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