6 best debt consolidation loans of 2021

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In a Nutshell

Getting a debt consolidation loan may help you simplify your finances and save money on interest charges. We’ve made our picks for the best debt consolidation loans that offer features like low interest rates, direct debt payments to pay off high-interest accounts, flexible repayment terms, and reasonable fees for people with good credit — and people with less-than-stellar credit.
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If you’ve got high-interest debt from credit cards, medical bills or payday loans, a debt consolidation loan may help you lower your monthly payments and create a plan to eliminate debt.

Finding the best debt consolidation loan for your situation can help you make that goal a reality. We’ve rounded up our picks for the best debt consolidation loans, so keep reading to see which loan might be the best option for you.

Best for no fees and direct payments: Marcus

Why Marcus stands out: A loan from Marcus is backed by its parent company, investment bank Goldman Sachs, and it comes with no application, origination, prepayment or late fees. Plus, Marcus will send direct payments to up to 10 of your creditors, making it easier to pay off multiple debts at once and avoid the temptation of using your loan funds for something other than paying off debt.

  • Good credit required — You’ll need good credit to qualify for a Marcus loan — 85% of people who borrow money from Marcus have FICO® scores of 660 or higher, according to the Goldman Sachs 2020 annual report.
  • Prequalification available — When evaluating you for prequalification, Marcus uses a soft credit inquiry. So prequalifying with Marcus lets you see estimated loan amounts and terms you might qualify for without affecting your credit scores. Just remember that prequalification isn’t a guarantee of loan approval — and if you’re approved for a loan, it may be for different rates and terms than the terms you saw on your prequalification.
  • Competitive interest rates — Marcus offers competitive interest rates, but you’ll typically need excellent credit to qualify for the lowest rates. And interest rates are typically higher for longer-term loans.
  • On-time payment rewards — After you make 12 consecutive monthly payments in full and on time, Marcus offers an on-time payment reward that allows you to defer a payment without paying additional interest on the deferred amount.

Read our Marcus personal loan review to learn more.

Best for multiple repayment terms: Discover

Why Discover stands out: With loan terms ranging from 36 months to 84 months, Discover can help you consolidate and pay down debt within a time frame that fits your lifestyle and budget.

  • Direct payments for debt consolidation — Discover provides direct payments to your creditors.
  • Competitive interest rates — Discover offers competitive interest rates on its personal loans, making it a good choice to consider for consolidating high-interest debt if you can get a lower interest rate than what you’re paying on your current debts.
  • Minimum income requirement — The lender notes that you’ll likely need a minimum household income of $25,000 to qualify for a Discover loan.
  • Money-back guarantee — Discover offers a 30-day money-back guarantee. If you decide you no longer want or need the loan, you can return the funds for any reason within 30 days and you won’t be charged interest. But Discover warns that it can’t recover money that’s been paid directly to creditors, so you’d need to reimburse Discover for any money it already distributed to pay off your debts.
  • Late fee — Discover doesn’t charge origination or prepayment fees, but it may charge a late payment fee.

Read our Discover personal loan review loan to learn more.

Best for credit card debt consolidation: Payoff

Why Payoff stands out: Payoff’s personal loan is designed specifically for people who want to eliminate or reduce high-interest credit card balances. The company provides one-on-one support, including welcome calls and first-year quarterly check-ins, to help members as they work to get their finances back on track.

  • Potentially lower rates than average credit card — Interest rates for Payoff loans start well below the February 2021 average credit card APR of 14.75%, as reported by the Federal Reserve. Paying a lower rate may help minimize interest charges while you pay off debt. But Payoff APRs can be higher, so there’s no guarantee that you’ll get a lower rate than what you were paying on your credit cards.
  • Origination fee — Payoff may charge an origination fee, which is deducted from your loan amount when it’s issued. But it doesn’t charge any application, late, prepayment, returned-check or check-processing fees.
  • No direct debt payments — Payoff doesn’t offer direct payments to creditors. So if you get a loan from the company, you’ll need to pay off each of your creditors on your own.
  • Credit score provided — Payoff provides your FICO® score for free each month, so you can see the impact paying down your debt has on your credit.
  • Minimum qualifications — The lender notes on its website that you’ll need to have a minimum FICO® score of 640 and no current delinquent credit accounts to qualify for a Payoff loan.

Read our Payoff personal loan review to learn more.

Best peer-to-peer lender for debt consolidation: LendingClub

Why LendingClub stands out: LendingClub allows co-borrowers on its loan applications, which may improve your chances of qualifying for a debt consolidation loan if you’re having difficulty qualifying on your own. As a peer-to-peer lender, LendingClub is a platform that connects people who want to lend with other individuals who want to borrow money.

  • Range of interest rates — The upper range of interest rates for LendingClub personal loans runs high. If you only qualify for LendingClub’s highest rates, compare the interest rate you were offered to the interest rate you’re paying on your existing debts to decide whether getting the loan will save you money on interest payments.
  • No prepayment penalty — LendingClub offers loan amounts ranging from $1,000 to $40,000 with repayment terms of 36 months or 60 months — but you can pay off your loan early without incurring a prepayment penalty.
  • Fees — LendingClub charges a one-time origination fee of 3% to 6% of your loan amount when you receive your loan. The lender may also charge late payment fees.
  • Prequalification available — When you apply for prequalification, LendingClub uses a soft credit inquiry to pull your credit reports. It allows you to check your estimated rate without affecting your credit scores. Keep in mind that prequalification isn’t a guarantee that you’ll be approved for a loan — and if you are, your loan may not have the same terms you prequalified for.

Read our LendingClub personal loans review to learn more.

Best for low interest rate: LightStream

Why LightStream stands out: LightStream, the online-lending division of Truist, offers competitive interest rates for debt consolidation loans when you enroll in autopay. Plus, LightStream says it will beat competitor interest rates under certain circumstances.

  • Good credit required — LightStream notes on its website that you’ll need good or excellent credit to qualify for a loan.
  • Large loan amounts available — LightStream offers loan amounts ranging from $5,000 to $100,000 and repayment terms of 24 months to 84 months.
  • Potentially fast funding — With LightStream’s quick funding process, you may receive your loan funds in your bank account on the same business day you apply.

Read our LightStream personal loan review to learn more.

Best for those building credit: Avant

Why Avant stands out: Avant is an online lender that considers people who don’t have perfect credit. In fact, Avant says on its website that most of its customers have credit scores between 600 and 700.

  • Check your potential rate — Avant lets you check your estimated rate and loan term with no effect on your credit scores, so you can compare its offer to loan offers you receive from other debt consolidation lenders.
  • Online application process — The loan application can be completed online, and the lender says you may receive your loan funds as soon as the next business day.
  • Higher interest rates — Although Avant considers people with imperfect credit histories, interest rates on Avant loans can be high compared to other lenders.
  • Fees that can add up — Avant charges fees for late payments and insufficient funds as well as an administration fee of up to 4.75% on its loans.

Read our Avant personal loan review to learn more.

What you should know about debt consolidation loans

A debt consolidation loan can provide debt relief by simplifying your finances and combining multiple high-interest debts into a single payment each month — ideally with a lower interest rate. The funds from the new loan are used to pay off your existing debts, and then you repay the loan according to its terms.

Lower rates

Depending on your credit, you may be able to qualify for a lower interest rate than what you’re paying on your current debts. If you can’t qualify for a lower rate, you may want to consider another way to pay down your debt, such as a balance transfer credit card.

To decide whether a debt consolidation loan makes financial sense for you, take advantage of online calculators that allow you to compare the amount of interest and fees you’d pay on a new loan versus what you’re paying on your accounts today.

Lower monthly payments

Some debt consolidation loans provide lower monthly payments by extending your loan term, but you’ll likely pay more in interest with a longer term. You may decide that taking out a loan to lower your monthly debt payments is worth it even if it means paying more in interest over the life of the loan. Just be sure to weigh the pros and cons before you decide.

Remember, consolidating your debt into a single loan probably won’t improve your financial health if you continue to rack up additional debt. Before taking out a loan, it’s a good idea to look at how your expenses stack up against your income. You may discover you need to make some changes to your spending habits so that you can keep your finances on track.

How we picked these loans

We reviewed more than a dozen debt consolidation loans from a variety of lenders to come up with our top picks. The criteria we used to make our choices included interest rates, fee structures, loan amounts, repayment options, a prequalification option and direct payments to creditors, as well as other perks like rate-beat programs and financial education resources.