August 5, 2018

Best Personal Loans for Debt Consolidation

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Are you tired of the high interest rates charged by your credit cards? Do you find yourself in a bind for cash too? You may want to consider a personal loan. Getting a loan from the right company can give you the cash you need at prices you can afford.

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A personal loan should help you meet a specific financial goal. Whether it's making home improvements, fixing your car, or consolidating your debt, you need a goal for the money. Once you have that goal, you can figure out which personal loan will suit you the best.

You may have heard horror stories of astronomical interest rates, numerous fees, and prepayment penalties regarding personal loans before. Luckily, there are several "good" options out there. Keep reading to see which personal loan might suit you and your needs the best.

What Is a Personal Loan?

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Personal loans are short-term, unsecured loans. You'll find terms between 2 and 5 years from most lenders.

Personal loans are different than credit cards. You get a fixed amount of money that you must pay back over a predetermined period. The interest rate doesn't fluctuate, but neither does the credit line. You don't get to reuse the funds once you've paid the balance back.

You'll find personal loans as low as $1,000 and as high as $100,000. The amount you may receive depends on your credit worthiness and the lender you choose.

With personal loans, you don't have to worry about losing your car or your home if you fall behind on payments. The loan is unsecured, which means you don't have any personal assets tied to it that the lender can take.

What to Look for in a Personal Loan

As you shop around for a personal loan lender, you'll find that each lender has their own requirements. They'll also have their own interest rates and fees. Once you know everything about a few lenders, you can compare your options to decide which one is right for you.

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

  • Interest rates: You shouldn't base your entire decision on the interest rate, but it should play a role. You'll find interest rates as low as 5% and as high as 35%, depending on the lender and your credit score. The lower the interest rate you can get, the less the loan will cost you in the end. Typically, the higher your credit score and the lower the term of the loan, the lower your interest rates will be.

  • Origination fees: Ask about origination fees charged on the personal loan. You may see it called origination fee, application fee, administrative fee or processing fee. Lenders typically charge this fee as a percentage of the amount borrowed.

  • Repayment options: Ask the lender about any penalties for paying the loan off early. Lenders tend to charge this fee to make up for the interest they lose when you pay the balance in full earlier than its maturity date. If you know you will have extra money from a bonus or tax refund that you want to put towards your loan, you'll need to know if that's an option.

  • Accessible customer service: You want to be able to reach out to your lender and get answers right away. Research the different ways the lender allows you to contact them, whether it's via phone, online chat, or email. Some lenders also have physical branches you can walk into and ask your questions.

Shop Around: Try getting quotes from several lenders when you are in the market for a personal loan. Each lender has different requirements as well as rates and fees. Many personal loan lenders only do a soft credit check when quoting you interest rates. This gives you the opportunity to check what is available to you without an inquiry hitting your credit report.

Best Personal Loans

The best personal loan lender is the 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 against one another.

Best Overall Personal Loan

Finding a personal loan can be overwhelming when you have to shop with various lenders. LendingTree helps ease the stress of this task by offering an online marketplace for personal loans. You, the borrower, can be connected with many lenders based on your qualifying criteria. LendingTree doesn't fund the loans, but puts you in touch with the lenders that have something to offer you.

LendingTree's lenders offer loans between $1,000 and $35,000. Their terms range between 1 and 5 years. With LendingTree, you complete one application and can be contacted by numerous lenders offering you a loan. You must provide LendingTree with basic information, such as your name, address, employment status, and amount of income. They'll also ask if you rent or own your home. Finally, they'll ask how much money you need to borrow and the reason that you need the money.

LendingTree's goal is to help you secure the lowest rate and best terms possible on your personal loan. They take the headache out of comparison shopping by giving you access to hundreds of lenders all at one time.

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, which may make you turn to a personal loan. While this may be a viable option to credit cards, students should try to avoid using personal loans to consolidate student loan debt. If you refinance your student loans, you could lose any federal protections offered, such as the income-based repayment plan.

Best Personal Loan for Fair Credit

If you have a credit score between 580 and 689, you have what lenders consider fair credit. You may still have several lenders to choose from, but you may not get the "best" interest rates that consumers with good credit get. The best personal loan for fair credit comes from Upstart.

Upstart offers loans from $1,000 to $50,000 for consumers with a credit score of at least 620. Upstart offers terms of either 3 or 5 years. Upstart does not charge a prepayment penalty.

An area where Upstart is unique is in how they determine your interest rate. Many personal loan lenders look at your credit score and income to determine how much they will lend you and at what rate. Upstart, on the other hand, looks at your educational and job history to determine your rates. You might find that you can secure a lower rate because of the school that you attended or the grades you received.

Upstart will also consider applicants who don't have a long enough credit history to garner a credit score. Again, they will look at your employment and educational history to determine your ability to secure a loan. As long as you have a steady job or a job offer letter in hand, you may be eligible for an Upstart loan.

Best Personal Loan for Good Credit

Good credit score consumers have many more options when choosing a personal loan lender. They are also the consumers who have access to some of the lowest rates, lowest fees, and best loan terms.

One thing is certain with SoFi, you need great credit. They also like to see that borrowers have stable employment and a decent income.

If you qualify for their loan, you are rewarded with their no origination fee loan. SoFi does not charge any fees, including origination, late fees, and prepayment penalties. This can be a savings of up to 6% with some lenders.

SoFi offers loans between $5,000 and $100,000 on terms of 2 - 7 years. If you lose your job while you have a loan with SoFi, they will pause the payments and offer support in helping you look for a new job.

Best Personal Loan for Bad Credit

Consumers with credit scores lower than 580 may fall into the "bad credit" category. While your choices of lenders might be smaller, there are lenders that look beyond the credit score when qualifying you for a personal loan.

Avant offers personal loans for $2,000 - $35,000, with loan terms between 24 to 60 months. Avant does charge an administrative fee of 1.5% to 4.75% depending on your credit score and other qualifying factors.

Besides the fact that Avant works with low credit score borrowers, they also fund quickly. Many borrowers are able to receive their funds the day after they apply and are approved for the loan.

Best Personal Loan for Debt Consolidation

Marcus by Goldman Sachs:
If you are in over your head in credit card debt and can't find your way out, a personal loan may help. Finding a personal loan with an APR lower than what your credit card company charges can help you get out of debt faster. Combining all of your credit cards into one loan also helps keep your payments organized and simplified.

They offer loan amounts between $3,500 and $40,000 and they don't charge any fees on their loans. Marcus only offers fixed rate loans, which means you'll always know the payment amount from month to month.

Keep in mind that when you consolidate your debt, it doesn't pay the debt off - you still owe the money. Now you just have it all in one loan, making it easier to start making a dent in your debt. Make sure you don't get yourself right back into debt by racking up your credit cards that you just paid off, though.

Cosigners on Personal Loans: If your credit score isn't high enough to qualify for a personal loan on your own, you may consider using a cosigner. If you have a relative or someone else close to you who has excellent credit and high income, they can help your chances of approval. In fact, they can even help you secure lower interest rates, lower fees, and a higher loan amount than you might be able to get on your own.

Other Places to Consider for Personal Loans

If you don't find what you need with any of the online lenders, you also have the option of checking with your local banks and/or credit unions.

  • Banks
    Some banks (not all) offer personal loans. Because these loans don't make them much of a profit, they often focus on credit cards than personal loans. If you do find a bank that offers personal loans, though, you will likely need good credit to qualify. They don't offer concessions as the online lenders do in order to bring in more clientele.

    Your best bet is to try your local community bank rather than the large branches that are in many cities. Small local banks often try to offer a variety of products in order to compete with the bigger banks, with personal loans being one of their offerings.

  • Credit Unions
    Credit unions are increasing in popularity around the country. While you do have to belong to a credit union, they are becoming available to people in certain counties who work for certain employers, or even those that are affiliated with certain groups.

    You may find that credit unions offer lower interest rates and fees than a traditional bank. They also don't have the strict credit score guidelines that big banks require. Credit unions often work with clients personally, finding out why they have a low credit score or high debt ratio, and they then help them come up with a viable solution, which sometimes includes personal loans.

Bottom Line

As is the case with any loan, make sure you take the time to shop around. Whether you use an online marketplace like LendingTree or you apply with individual lenders, compare the offers provided. Check with the lender before you apply to determine if they only do a soft credit pull. This way you don't have to worry about harming your credit and can find the lender with the best interest rate, fees, and loan amount.

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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