August 5, 2018

Best Personal Loans for Debt Consolidation

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A personal loan can help with a specific financial goal or save you from high interest credit card debt. Read on to find the best lender for you, even with poor credit.

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Best Lenders for Personal Loans
  • Best Overall: Lending Tree
  • Best For Good Credit: SoFi
  • Best For Fair Credit: Upstart
  • Best For Poor Credit: Avant
  • Best For Loan Consolidation: Marcus by Goldman Sachs

What Is a Personal Loan?

Personal loans are short-term, unsecured loans. You'll get a fixed amount of money that you must pay back over a set period. Because they're unsecured, you don't have to worry about losing your car or your home if you fall behind on payments.

  • The terms range from 2 and 5 years.
  • Amounts can be anywhere from $5,000 - $100,000.

These factors depend on your creditworthiness and the lender you choose. Unlike with a credit card, the interest rate doesn't fluctuate with a personal loan, which means your payments won't either.

What to Look for in a Personal Loan

Each lender has their own requirements, interest rates, and fees. You can compare options to decide which one is right for you.

Keep reading to learn what to look for in a personal loan lender:

  • Interest rates
    Interest rates may range from 5% - 35%, depending on the lender and your credit score. Typically, the higher your credit score and the shorter the term of the loan, the lower your interest rates will be. And a smaller interest rate means less money to repay over the life of your loan.

  • Origination fees
    Lenders typically charge this fee as a percentage of the amount borrowed. It's also called an application fee, administrative fee or processing fee.

  • Repayment options
    Lenders may charge this fee to make up for the interest they'll lose if you pay back the loan early. Always check BEFORE taking out a personal loan, especially if you plan to use a bonus or tax refund to pay down your debt faster.

  • Accessible customer service
    Research the different ways the lender allows you to contact them, whether it's via phone, online chat, or email. Some also have physical branches you can walk into and ask your questions.

Shop Around: Get quotes from several lenders when you are in the market for a personal loan. Each has different requirements as well as rates and fees.

Many personal loan lenders only do a soft credit check when quoting interest rates. This means you can check what is available to you without an inquiry hitting your credit report.

Best Personal Loans

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The best personal loan lender is one that provides great customer service, affordable interest rates, short terms, and low fees. Keep reading to see how different personal loan lenders stack up.

Best Overall Personal Loan: Lending Tree

LendingTree doesn't fund personal loans. Rather, they offer an online marketplace that puts you in touch with lenders. You, the borrower, can be connected based on your qualifying criteria.

You complete one application to provide LendingTree with basic information like your:

  • Name
  • Address
  • Employment
  • Income
  • Rent or homeowner status

Finally, they'll ask how much money you need to borrow and your reason. LendingTree's goal is to help you secure the lowest rate and best terms possible on your personal loan.

Students and Personal Loans: Student loans only cover the actual cost of attending college, including tuition, room and board, and books. As a college student, you will have many other costs you have to cover.

A personal loan may be a better option than charging these expenses. However, students avoid using personal loans to consolidate student loan debt. If you refinance those loans, you could lose any federal protections offered, including.

Best Personal Loan for Good Credit: SoFi

If you have a strong credit history, SoFi is a great choice for a personal loan. They have:

  • No origination or late fees, and prepayment penalties
  • Loans $5,000 to $100,000
  • Terms from 2-7 years

You Should Know: If you lose your job, SoFi will pause the payments and offer support as you look for a new one.

Best Personal Loan for Fair Credit: Upstart

Unlike other lenders who decide your rate based on credit score and income, Upstart looks at your educational and job history. You might secure a lower rate because of the school that you attended or the grades you received.

The platform also considers applicants who don't have a long enough credit history to garner a credit score.

With Upstart, consumers with a 620 credit score or better can qualify for:

  • Loans from $1,000 to $50,000
  • 3-5 year terms
  • No prepayment penalty

Cosigners on Personal Loans: If your credit isn't high enough to qualify for a personal loan on your own, consider using a cosigner. A relative or someone else close to you with has excellent credit can improve your chances of approval.

They may even help you secure lower interest rates, lower fees, and a higher loan amount than you might be able to get on your own. But remember to be responsible in paying back the loan or you may damage their credit (and your own).

Best Personal Loan for Bad Credit: Avant

Consumers with credit scores lower than 580 may fall into the Bad credit category. However, Avant looks beyond the credit score when qualifying you for a personal loan.

They offer:

  • Loans from $2,000 - $35,000
  • Terms between 24 to 60 months.

Many borrowers are able to receive their funds the day after they apply and are approved for the loan.

Avant does charge an administrative fee of 1.5% to 4.75%, depending on your credit score and other qualifying factors.

Debt Consolidation: Marcus By Goldman Sachs

Marcus by Goldman Sachs understands that finding a personal loan with a lower APR can help you get out of credit card debt faster. Combining all of your cards into one loan also simplifies your payments.

They have:

  • Loans between $3,500 and $40,000
  • No fees
  • Fixed-rate loans, so your payment won't change

TIP: Don't go back to racking up credit cards bills after paying off your debt through consolidation. Focus on paying down your debt and strengthening your credit through regular, on-time payments.

Other Places to Consider for Personal Loans

If you can't find a loan with an online lender, check with your local banks and/or credit unions.

  • Banks
    Some (but not all) banks offer personal loans. You will likely need good credit to qualify and they don't offer the same concessions as online lenders do in order to bring in more customers.

    Start with a local community bank, rather than the larger, well-known ones. These banks try to offer a variety of products in order to compete with the bigger ones.

  • Credit Unions
    These typically have lower interest rates and fees than a traditional bank. And they don't have the same credit score guidelines.

    Credit unions often work with clients personally, finding out why they have a low credit score or high debt ratio. They then help them come up with a viable solution, which sometimes includes personal loans.

    Keep in mind: you'll need to be a member. Often credit unions have relationships with certain companies or certain groups. Inquire to see if you may qualify.

Bottom Line

Whether you use an online marketplace like LendingTree or choose to apply with individual lenders, always compare offers before taking out a loan. Pay special attention to the interest rates and any related fees.

You can check with the lender before applying to see if they do a "soft pull" of your credit. If so, you don't have to worry about harming your score while you comparison shop.

SoFi Disclaimer: Fixed rates from 5.99% APR to 16.99% APR (with AutoPay). Variable rates from 5.74% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of March 18, 2019, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.74% APR assumes current 1-month LIBOR rate of 2.49% plus 4.28% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction 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.

Disclaimer: Opinions expressed here are author's alone. Please support CreditDonkey on our mission to help you make savvy decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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