Best Debt Consolidation Loans of July 2026
The goal of debt consolidation is usually to get a lower interest rate, which can help you get out of debt faster, reduce your monthly payments and save money over time.
Take this example: A borrower has three credit cards with annual percentage rates of 23%, 25% and 29%. Assuming the borrower owes $5,000 between their cards, their initial minimum monthly payment for all their accounts might be about $170. If they continue paying $170 a month, it would take around five years to pay off their debt, and they would pay about $3,360 in interest.
There’s not a set rule for exactly what terms you should aim to qualify for when consolidating debt. It depends on factors like how the balances are spread out between the cards, the current monthly payments and the length of the debt consolidation loan (like three or five years).
Let’s say the borrower above consolidates their debt into a three-year personal loan at an APR of 15%. Their monthly payments would stay about the same, but they’d save more than $2,100 in interest and get out of debt two years faster. Another option would be to consolidate into a longer-term debt consolidation loan with a repayment period of five years. This could result in lower monthly payments ($124, assuming a 17% interest rate), but less interest savings over time.
Depending on your financial goals and monthly budget, you might weigh out several options for consolidating your debt into a personal loan. But generally, if you can afford the higher monthly payments, a shorter-term loan will grant you the most substantial savings. You should aim to get the lowest rate possible for your financial situation, which you can do by shopping around with multiple lenders.
One of the primary reasons to take out a debt consolidation loan is to pay off higher-interest debt at a lower rate. Since fixed-rate personal loans usually offer better interest rates than variable-APR credit cards, they’re commonly used for consolidating credit card debt.
The average rate on a 24-month personal loan is 11.86%, compared with 22.15% on credit card plans that charge interest, according to the Federal Reserve. Debt consolidation rates can vary widely based on credit score, typically ranging anywhere from 6% to 36%.
Applicants with higher credit scores will see lower interest rates, and vice versa. If you have fair or bad credit, you might want to consider working on improving your credit score before applying to ensure you’ll get approved on competitive terms. Here’s how personal loan rates vary by credit score:
| Credit Score | Median Personal Loan APR |
| Poor (300-579) | 25.82% |
| Fair (580-669) | 25.51% |
| Good (670-739) | 19% |
| Very Good (740-799) | 14.4% |
| Exceptional (800-850) | 12.87% |
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Source: Experian, May 2026 |
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Pros
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Interest savings. If you have high-interest debt, a debt consolidation loan can help you save with a lower interest rate.
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Predictable debt repayment. Personal loan interest rates are usually fixed, which means that you’ll make the same monthly payment over a set period of time.
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Reduced monthly payment. A debt consolidation loan could help you pay on time by spreading out your debt repayments over several years.
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Improved credit score. Taking out a loan and leaving consolidated accounts open but unused will increase your total available credit and decrease your credit utilization ratio, which can boost your credit score. Borrowing a personal loan can also improve your credit mix, which is a small factor of your credit score.
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No collateral needed. Personal loans for debt consolidation are typically unsecured, so you don’t risk losing an asset if you end up defaulting on the loan. On the other hand, using a home equity loan for debt consolidation puts the roof over your head at risk.
Cons
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Potentially higher costs. You’re not guaranteed to have a lower interest rate on your debt consolidation loan than on your credit cards or other bills. And if you extend the repayment term, you might pay more interest in the long run.
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Added debt burden. Consolidating credit card debt leaves your cards free to use again and your debt to grow. It’s important not to rack up your credit card balances again while you repay a debt consolidation loan, or else you can end up owing more money than when you started.
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Cheaper alternatives may be available. A balance transfer credit card with a 0% APR period or a home equity loan could offer a lower interest rate option.
The best debt consolidation lender for you is one that will approve your loan at a low interest rate, with terms and services that meet your needs. Evaluate debt consolidation loan companies based on these features to find the best fit:
- Interest rates. Compare lenders based on interest rate as a primary factor. Most lenders offer fixed-rate personal loans, while others offer fixed and variable rates. Use prequalification or rate-check tools from debt consolidation loan companies to compare rates and terms to expect based on your creditworthiness. Because prequalification should trigger just a soft credit check, you can shop around for consolidation loans without hurting your credit score.
- Loan terms. Loan terms can include the loan amount, repayment period, monthly payment, payment due date and fees. Lenders may place restrictions on how you can use the loan.
- Fees and penalties. Fees and penalties can increase the cost of your loan. You may pay origination, prepayment and late payment fees. Some lenders charge origination fees for loan processing. Sometimes, lenders allow grace periods before they charge late or returned payment fees, if they charge them at all.
- Repayment options. Look for a lender that offers flexible payment options that work for you, whether that’s payment by phone, mail, wire transfer, app or online. Some lenders have flexible repayment options that allow you to change your due date or offer discounts if you sign up for automatic payments each month from your bank account.
- Customer satisfaction ratings. Read personal loan reviews to find out what other consumers think of a lender you’re considering. Check the Better Business Bureau, Trustpilot and the Consumer Financial Protection Bureau’s Consumer Complaint Database for lender ratings, reviews and complaints.
“Debt consolidation can be a tremendous relief if you’re working to clean up your finances, but avoid the temptation to take on new high-interest debt once your finances are back on track. This could quickly derail the progress you’ve made.”
Tracy Stewart, Senior Editor, U.S. News
Before you shop around for a debt consolidation loan, consider your chances of approval. Most lenders look at:
- Your credit score. Debt consolidation loan companies typically require at least fair or good credit – typically a credit score in the mid-600s or higher. You might not meet a lender’s minimum credit score to qualify, but there are options for bad credit borrowers.
- Your income. Lenders may require a minimum annual income and will consider your debt-to-income ratio. A lower ratio is better because it shows lenders that you have a good balance between income and debt and can repay what you owe. Some debt consolidation loan companies allow DTI ratios as high as 50%.
- Your credit history. Most lenders don’t want to see bankruptcies, tax liens, repossessions or foreclosures. Some lenders allow a cosigner or joint applicant, which can reduce their risk and help you get approved for a loan.
See if you pre-qualify!
Take a moment to answer a few questions and discover what personalized loan offers may be available to you.
Take a moment to answer a few questions and discover what personalized loan offers may be available to you.
Debt consolidation loans are a good option for many people with debt, but they aren’t the only option. If you can’t qualify for the best personal loan with good repayment terms, alternatives include:
Home Equity Loans
Home equity loans and lines of credit, or HELOCs, generally have better interest rates than unsecured personal loans because using your home as collateral makes these loans less risky for lenders. And you can get lower monthly payments, as loan repayment terms can be 10 years or longer. However, using your home as collateral means you could potentially lose the roof over your head if you fail to make payments.
Balance Transfer Credit Cards
You can move credit card debt to a balance transfer credit card with a 0% introductory APR period and make interest-free payments on the new balance for up to 21 months. But you’ll likely pay a fee of 3% to 5% of the balance you transfer, and you’ll need very good to excellent credit to qualify. Plus, any balance remaining after the zero-interest period will be subject to the regular purchase APR. By comparison, personal loans for debt consolidation could offer term lengths of about 60 months, though you’ll have to pay interest.
Debt Relief Services
Certified nonprofit credit counselors can help you strategize how to pay off your debt and negotiate with creditors to lower your interest rates and fees. A counselor may recommend a debt management plan to pay your creditors. The plan may require fees, such as a setup fee and a monthly fee, but it is a good option for paying off debt – especially for borrowers with bad or fair credit who couldn’t otherwise qualify for a debt consolidation loan or balance transfer card.
Debt Settlement
Usually, for-profit debt settlement companies negotiate with creditors to settle your debt. But debt settlement companies charge high fees, and you can damage your credit history if you stop paying your bills. On top of that, you may have to pay taxes on forgiven debt. Consider debt settlement an alternative to bankruptcy because the damaging effects to your credit report can be long-lasting.
Bankruptcy
Declaring bankruptcy is a last resort if you can’t pay your debts. If you have serious debt and are being sued by creditors or have a pending foreclosure or repossession, bankruptcy can be a lifeline. Bankruptcy will hurt your credit and may remain on your credit report for up to 10 years.
A debt consolidation loan is a type of personal loan that combines high-interest debts and allows for one fixed-interest monthly payment. Debt consolidation loans can be used to pay unsecured debts, which may include credit card bills, medical bills, other personal loans and payday loans.
Unlike with credit cards, the interest on debt consolidation loans isn’t compounded. The interest rate is typically fixed, which means it stays the same for the life of the loan, although variable-rate personal loans are available.
Personal loans for debt consolidation are widely available through banks, credit unions and online lenders. Some debt consolidation companies offer instant prequalification and approval online.
Debt consolidation loans generally offer a boost to your credit score as long as you make your payments on time. But that’s only if you use your loan as intended: to pay off debt and not to add to it. Keep in mind that applying for a debt consolidation loan will trigger a hard credit inquiry, which will have a temporary negative impact on your credit score. In other words, your score might drop by a few points at first, but it should improve over time.
You may struggle to obtain a debt consolidation loan if you have a long history of late payments and charge-offs. If you do qualify, lenders will likely charge you higher interest rates to compensate for the risk that they won’t be repaid. Generally, you need a credit score in the mid-600s or higher to qualify for a personal loan to consolidate debt.
A debt consolidation loan can streamline your payments and help you save money if you are struggling to pay off debt. However, make sure the consolidation loan will actually save you money, and be certain you can pay it off without accumulating additional debt.
