Best Debt Consolidation Loans of December 2024

The overall best debt consolidation loan is offered by First Tech, with a MoneyGeek score of 98 out of 100. It features competitive rates, excellent customer service and a strong lender reputation. Other good lender options are Alliant Credit Union, Happy Money and Truist.

Updated: December 11, 2024

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Based on MoneyGeek’s analysis, First Tech stands out as the best overall lender for debt consolidation. Alliant Credit Union is excellent for borrowers with good credit, whereas Happy Money is the best option for those with bad credit. Truist is preferable for same-day funding.

According to Experian, American consumers had a total debt of $17.1 trillion in the third quarter of 2023, with mortgage debt comprising nearly two-thirds of all consumer debt, followed by auto loans, student loans and credit cards. Consolidating multiple debts can streamline your finances by combining them into a single loan, often with a lower interest rate.

We compared lenders based on factors like interest rates, loan terms, application process, customer service, minimum credit score requirements and overall reputation to gather recommendations for your specific financial needs.

MoneyGeek analyzed debt consolidation loan lenders differently at the national level versus the state level. We used a unique scoring system that looked into each lender’s performance in areas that are important to borrowers. We assigned scores based on whether certain features are present or absent in various key categories.

Our analysis was completed in December 2024 and considered banks, credit unions, online lenders, and financial companies who partner with federally insured institutions to offer personal loans for debt consolidation.

34Lenders Analyzed

Best Overall Debt Consolidation Loan

First Tech

98MG Score
8.94% to 18.00%APR Range
UndisclosedMinimum Credit Score
$500 to $50,000Loan Amount Range
6 to 84 monthsRepayment Terms

First Tech Federal Credit Union earns the spot as the best overall choice for a debt consolidation loan, with a MoneyGeek score of 98 out of 100. This institution is federally insured by the National Credit Union Administration (NCUA). It offers personal loans from $500 to $50,000, with six to 84 months repayment terms and interest rates varying from 8.94% to 18.00% APR, making it a good option for consolidating debt. There are also no origination, application or prepayment fees. However, First Tech charges a $29 late fee and doesn’t specify whether it provides direct payment to creditors.

Pros

Low starting APR at 9.29%
No origination or prepayment fees
Performs soft credit checks
Option to defer first loan payment

Cons

Membership is required to apply
No direct payment to creditors
Charges a $29 late fee

Runner-Up Best Debt Consolidation Loan

PenFed

97MG Score
7.99% to 17.99%APR Range
UndisclosedMinimum Credit Score
Up to $50,000Loan Amount Range
Up to 60 monthsRepayment Terms

As the runner-up lender for debt consolidation, PenFed earned a MoneyGeek score of 97 out of 100. This lender is federally insured by the NCUA, providing personal loans up to $50,000, with terms extending up to 60 months and interest rates between 7.99% and 17.99% APR. While it doesn’t charge origination fees or prepayment penalties, it applies fees for late payments ($29) and returned loan payments, checks or ACH transactions ($30). You don’t need to be a member to apply for a loan, but PenFed will create a membership if you move forward with your application.

Pros

Minimum APR of 7.99%
Conducts soft credit pulls
Allows joint applications
No origination or prepayment fees

Cons

Has a $29 late fee
Doesn’t pay creditors directly
Loans subject to minimum $50 monthly payment

Best Debt Consolidation Loan for Good Credit

Alliant Credit Union

96MG Score
10.99% to 13.99%APR Range
UndisclosedMinimum Credit Score
$1,000 to $100,000Loan Amount Range
12 to 60 monthsRepayment Terms

With a MoneyGeek score of 96 out of 100, Alliant Credit Union is the best lender for those with good credit-seeking debt consolidation loans. It’s an online-only credit union that’s federally insured by the NCUA. It provides loans up to $100,000, featuring repayment terms from 12 to 60 months and APR from 10.99% to 13.99%. There are no prepayment penalties, but you must be a member for at least 90 days to qualify for a personal loan.

Pros

Borrow up to $100,000
No prepayment penalties
Has autopay discount

Cons

Need to be a member for 90 days
No physical branches

How does MoneyGeek analyze lenders for good credit?

For this analysis, we excluded lenders whose minimum credit score requirements are below 670. In case the winner for this category won Best Overall or Runner-Up, we prioritized diversity by choosing the next best winner.

Best Debt Consolidation Loan for Bad Credit

Happy Money

93MG Score
11.72% to 17.99%APR Range
640Minimum Credit Score
$5,000 to $40,000Loan Amount Range
24 to 60 monthsRepayment Terms

Borrowers with bad credit may find Happy Money to be the best lender for debt consolidation, which received a MoneyGeek score of 93 out of 100. As a fintech company, Happy Money works with federally insured lending partners to originate personal loans exclusively to consolidate debt. It also offers direct payment to creditors, streamlining the process for borrowers. Its loan amounts range from $5,000 to $40,000, with repayment periods from 24 to 60 months and APRs from 11.72% to 17.99%. Happy Money doesn’t impose late fees, application fees, or prepayment penalties, but it charges an origination fee between 1.5% and 5.5%.

Pros

Accepts borrowers with 640 credit score
No application, late or prepayment fees
Pays creditors directly

Cons

Charges an origination fee
Maximum loan amount of $40,000

How does MoneyGeek analyze lenders for bad credit?

Our analysis only considered lenders who disclosed their minimum credit score requirements between 580 and 640. If the category winner is also the Best Overall or Runner-Up, we selected the next best winner for diversity.

Best Debt Consolidation Loan for Same-Day Funding

Truist

96MG Score
8.74% to 17.39%APR Range
UndisclosedMinimum Credit Score
From $3,500Loan Amount Range
24 to 60 monthsRepayment Terms

Truist is our preferred lender for borrowers seeking debt consolidation loans with same-day funding, earning a MoneyGeek score of 96 out of 100. It offers personal loans starting at $3,500, flexible repayment terms from 24 to 60 months and interest rates between 8.74% and 17.39% APR. It also doesn’t impose origination fees. However, detailed information on its loan products is limited on its website, and there’s no option available to prequalify for loans.

Pros

No origination fees
Same-day funding available
8.74% starting APR

Cons

Little information on website
No soft credit inquiries

How does MoneyGeek analyze lenders for same-day funding?

When evaluating lenders for same-day funding, we only considered those that explicitly state they disburse funds on the same day of loan approval. If the winning lender also earned the title of Best Overall or Runner-Up, we selected the next best option for diversity.

How Debt Consolidation Loans Work

Debt consolidation loans allow you to combine multiple existing debts like credit cards, personal loans or medical bills into one new loan. You then make fixed monthly payments on the new loan, typically lasting two to seven years. The key benefit is simplifying multiple debt payments into one, potentially lowering your overall interest costs and giving you a clear payoff schedule.

The process begins with choosing the debts to pay off and then qualifying based on the lender's requirements, which typically include a high credit score. After the loan is funded, payments will be made based on the chosen terms. It’s important to qualify for an effective interest rate lower than your current debts, as well as to avoid accumulating new debt during repayment.

BEST RATES FOR APPLICANTS WITH HIGH CREDIT SCORES

Individuals with high credit scores are more likely to get the most competitive rates and terms. Applicants with low credit scores may be eligible for reduced consolidation limits, or may only have access to secured loans.

— Alvin Yam, CFP

Benefits and Drawbacks of Debt Consolidation Loans

Debt consolidation loans can be a strategic move for managing multiple high-interest debts. However, these loans can sometimes lead to a longer repayment period.

Pros	Cons
Simplified Payments: Consolidating multiple debts into one loan means you only have one monthly payment to manage.	Qualification Challenges: Those with lower credit scores may struggle to qualify for lower interest rates, making it less beneficial.
Lower Interest Rates: Often, these loans come with lower interest rates than credit cards, potentially saving you money over time.	Longer Repayment Terms: While monthly payments might be lower, longer repayment terms can result in paying more interest over the life of the loan.
Fixed Repayment Schedule: Debt consolidation loans typically come with a fixed repayment term, providing a clear end date for when you will be debt-free.	Upfront Costs: Some debt consolidation loans come with origination fees or other upfront costs, which could reduce the financial benefits.
Improved Credit Score: By consolidating debt and making regular, on-time payments, you can gradually improve your credit score.	Risk of Debt Cycle: Without a change in spending habits, there's a risk of accruing additional debt, putting you in a worse financial position.

How to Choose the Best Debt Consolidation Loan for You

With various offers, terms and lenders available in the market, finding the best debt consolidation loan for your needs involves looking into the following metrics:

Interest Rates: The interest rate on a debt consolidation loan affects the overall cost you will pay. Look for competitive rates that can help reduce your monthly payments and shorten the debt payoff period.
Repayment Terms: Evaluating loan terms is critical because they determine your repayment schedule. Choosing the right balance between term length and monthly payments can significantly affect your budget and how quickly you become debt-free.
Fees: Analyzing fees is essential for a clear understanding of the true cost of a debt consolidation loan. Look out for origination fees, late fees or prepayment penalties, which can erode savings from a lower interest rate.
Additional Features: Some debt consolidation loans come with benefits that can assist in managing debt, like direct payment to creditors. This can help prevent mismanagement of the loan amount and keep your repayment plan on track.

MORE ABOUT LOANS

FAQ About Debt Consolidation Loans

We compiled answers to some frequently asked questions about debt consolidation loans to help you make informed decisions.

How can a debt consolidation loan lower my monthly payments?

By consolidating debt under a lower interest rate and extending the repayment term, your monthly payments can be reduced. However, a longer term might increase the total interest paid over the life of the loan.

Will applying for a debt consolidation loan affect my credit score?

Initially, applying for a debt consolidation loan may result in a slight dip in your credit score due to a hard inquiry. However, over time, making consistent, on-time payments can improve your credit score.

Can I consolidate credit card debt with a consolidation loan?

Yes, credit card debt is commonly consolidated through a debt consolidation loan. This can lower your interest payments since personal loan rates are often lower than credit card rates.

Are there any fees associated with debt consolidation loans?

Some loans may have origination fees, prepayment penalties, or late payment fees. Make sure to understand all associated costs, as they can impact the overall cost of your loan.

How do I qualify for a debt consolidation loan?

Qualification criteria can include your credit score, income, debt-to-income ratio and employment status. Lenders use these factors to assess your ability to repay the loan.

Can I consolidate debt with bad credit?

While it's more challenging, it's not impossible. Some lenders specialize in loans for those with lower credit scores, but these may come with higher interest rates.

What's the maximum debt amount that can typically be consolidated?

It depends on the specific lender, but most cap out around $100,000.

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About Zachary Romeo, CBCA

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.

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sources

Experian. "Experian Study: Average U.S. Consumer Debt and Statistics." Accessed December 11, 2024.

The content on this page is accurate as of the posting/last updated date; however, some of the rates mentioned may have changed. We recommend visiting the lender's website for the most up-to-date information available.

Editorial Disclosure: Opinions, reviews, analyses and recommendations are the author’s alone and have not been reviewed, endorsed or approved by any bank, lender or other entity. Learn more about our editorial policies and expert editorial team.