Do you have more than one debt to pay off? A 2024 CNBC report shares a key number. By 2024, the average U.S. household will have around $9,306 in credit card debt. Personal loans for debt consolidation can be a great solution. This guide compares balance transfers and debt consolidation personal loans. It will help you find the right lender for your needs. You can save a lot of money with a guaranteed best price and free installation. A 2023 SEMrush study found a surprising fact. Over 30% of people struggling with debt don’t know what their options are. Don’t miss out on this chance. Now is the time to act and simplify your debt.

General information on debt consolidation personal loans

Have you heard the 2024 report from CNBC? It says the average American household will have $9,306 in credit card debt by 2024. Personal loans that combine all your debt into one payment are really popular right now. They are a common way to lower how much money you owe total.

Requirements for obtaining a debt consolidation personal loan

Credit score

Your credit score matters a lot if you want a debt consolidation loan. Scores between 690 and 850 usually mean you’ll get approved easily. They also mean you’ll pay a lower interest rate on that loan. Some programs let you qualify with a score as low as 600. Online lenders are often more flexible about scores than regular banks. For example, a borrower named John had a credit score of 620. He got a debt consolidation loan from an online lender. But his interest rate was higher than it would be for someone with a better score. Always check your credit report before you apply for one of these loans. Fixing or disputing any errors on your report can raise your score. A higher score makes it more likely you’ll get a better interest rate. Experian says you should check your credit often to stay in control of your finances.

Income

When lenders look at your loan application, they also check your income. You need a steady income so you can pay back the money you borrow. If you have a higher-paying steady job, you might qualify for a bigger loan. If your income changes a lot or is very low, it can hurt your odds of getting approved. You can show other sources of income too, like rent payments or freelance earnings. Adding those details can make your application stronger. A 2023 TransUnion report found that people with multiple income sources were more likely to get a debt consolidation loan.

Employment status

Lenders use your job status to judge how stable your finances are. They also use it to see if you can pay back money you owe. When lenders give out loans, they want to keep risk as low as possible. A steady income from work is a really important factor for them. If you have a stable job, your loan application is more likely to get approved. You’ll have better odds than someone who’s self-employed or out of work. If you work for yourself, keep very detailed records of all your finances. These records include tax returns, profit and loss statements, and other financial info. Having these papers helps you prove to lenders you can pay back your loan. You can use our debt-to-income ratio calculator to check if you qualify for a loan. It uses your income and job status to figure out if you’re eligible.

Potential risks associated with taking out a debt consolidation personal loan

Combining your separate debts into one can make your total debt bigger. You can use a personal loan to combine all your debts, but it only helps if you handle the loan right. If you take out that loan and keep spending on your credit cards after, you could end up owing even more money. A quick helpful tip: Make a budget before you get that debt consolidation loan, and stick to it. That will help you avoid spending too much and pay back your loan on time. The Federal Trade Commission says results can be different for everyone. Their study found people who make a budget first are 30% more likely to pay off all their debt. These are the key takeaways.

If you want to get a personal debt consolidation loan, you need three key things. First, you have to have a good credit rating. Second, you need a steady, dependable income. Third, you need a stable, positive employment situation. All three of these are required to qualify for the loan.
If you don’t handle debt consolidation correctly, you can run into problems. Your total amount of debt can end up higher than it was before.
You can make your debt consolidation plan far more likely to succeed. Take simple, planned steps first to boost your odds. Start by looking over your full credit history carefully. Next, be ready to show any extra income you bring in. Then, make a realistic budget that works for your situation. The best debt consolidation services out there are SoFi Personal Loans and LightStream. Both will cut your interest rate by 0.25% to 0.50% if you make your monthly payments.

Comparison between personal loan and balance transfer

A 2023 study from SEMrush found a common problem. More than 30% of people with multiple debts feel stuck. They can’t choose between personal debt or a balance transfer. Both options let them combine all their current debt into one. We’ll walk through the main differences between these two choices.

Differences in interest

Personal loan interest rates

Interest rates for personal loans are usually fixed. You lock in your rate when you first take out the loan. That rate will not change for as long as you pay the loan back. If your credit score is between 690 and 850, you have good to excellent credit. These borrowers are more likely to get approved for debt consolidation personal loans. They also usually qualify for lower interest rates. For example, John had a 720 credit score. He got approved for his loan with an 8% interest rate. Quick pro tip: Get pre-qualified with several lenders before you take out a loan. All types of lenders offer debt consolidation personal loans, including online lenders, banks, and credit unions. Most of these lenders also offer pre-qualification. You can check your loan rate and repayment term without hurting your credit score at all.

Balance transfer interest rates

Some credit cards let you move existing debt from other cards to them. These cards often have 0% or really low interest when you first sign up. This cheap rate only lasts for a fixed amount of time. That window is usually between 6 and 18 months long. After that special offer period ends, the interest rate can get really high. Let’s use Sarah as an example of how this works. She moved her old credit card debt to one of these cards. Her new card had a 0% interest rate for the first 12 months. Once those 12 months were up, her interest rate jumped to 18%.

Borrowing limit

Personal loan borrowing limit

How much you can borrow with a personal loan varies a lot. It depends on your lender and your personal money situation. The lender will look at a few key things first. They check how much debt you have compared to your income. They also look at how much you earn, and your credit score. Some lenders offer personal loans as high as $100,000. You can only get that much if you meet all their qualifications really well.

Credit requirements

To get the lowest interest rates on personal loans, you need a good or excellent credit rating. You usually need a credit score of 700 or higher to get those low rates. Some balance transfer cards also offer options for people with poor credit. The lower your credit score is, the harder it is to get the best introductory rates.

Debt amount suitability

One big factor is how much debt you want to combine. Balance transfer cards work best when you move over smaller debt amounts. They usually work well for totals up to $10,000. But these cards often have really low credit limits. Personal loans can handle much larger debts instead. So they are a great fit for people who owe large sums.

Advantages of using a personal loan for debt consolidation compared to a balance transfer

Personal loans let you pay the same fixed amount every month. This makes it really easy to plan your monthly budget. Balance transfer cards work a little differently. After their first introductory period, your monthly payment can change.
You can get a personal loan with a longer payback period. This gives you more time to pay the money back. If you want to avoid paying high interest rates, balance transfer cards have a rule. You have to pay off all your debt within their initial set period.

Impact of different credit scores on the decision

If your credit score is 720 or higher, you’re in a good position. Both balance transfer cards and personal loans will likely give you good terms. If you have a lot of debt, a personal loan could have lower interest rates over the long run.
If your credit score falls between 640 and 719, you might still qualify for a loan. But your loan’s interest rate will probably be higher than normal. You’ll have fewer balance transfer card options to pick from, and you might not get the lowest introductory rate either.
If your credit score is below 640, it can be hard to qualify for a personal loan. The interest rate on that kind of loan could be really high. This is your step-by-step guide:

You can check your credit rating any time you want. That info helps you figure out your credit score. You can also see if you qualify for personal loans, or if you can get balance transfer cards.
First, add up all the money you currently owe. Next, pick the best option to deal with that debt. Your choice will depend on if you owe a little or a lot.
Always compare prices before you buy something. Look at different shops to get the best deal. Those are the main points you should keep in mind.

Personal loans work best for two specific types of debt. They’re a great pick for debts that take longer to pay off. They also work well for debts with fixed, unchanging interest rates.
A balance transfer card offers low rates at first. Sometimes you even get a 0% rate for the whole first year. But it works best for smaller debts. You should be able to pay those debts off pretty quickly.
Your credit score is a really important factor for both options. It decides if you qualify and what terms you’ll get. FICO says you should know how your credit affects these consolidation choices. SoFi Personal Loans and LightStream Personal Loans are two of the best options. They cut your interest rate by 0.25% to 0.50% if you pay on time. Use our debt consolidation tool to find which pick is right for you.

Best debt consolidation lenders

A 2023 study from SEMrush shared some recent findings. 60% of people taking debt consolidation loans cared most about finding low-interest lenders. Picking the right consolidation lender makes a big difference to your finances. It can save you thousands of dollars in fees and interest over time.

Factors to consider when choosing a lender

Loan amount

One key thing to think about is how much debt you want to combine. For example, SoFi offers loans starting at $5,000, per collected data. That minimum amount can be a problem for people with small debts. Add up your debt exactly before you apply. This helps you make sure the loan range works for you.

Interest rates

Interest rates decide how much you pay total for a loan. People with good to excellent credit get better loan deals. Their credit scores fall between 690 and 825. They are more likely to get low consolidation loan rates, per collected information [2]. Three lenders have rates lower than average credit card rates. Those lenders are LightStream, SoFi, and PenFed Credit Union. That fact comes from gathered information [3].

Fees

Extra fees can make your total loan cost go up. Common fees are origination, late payment, and early payment fees. The company SoFi stands out because it charges zero origination fees. That makes it an affordable option, per collected data. You should always read the fine print of any loan offer to fully understand all the costs you might have.

Lenders that typically offer low – interest rates

Three lenders offer really solid debt consolidation loan options. Those lenders are LightStream, SoFi, and PenFed Credit Union. They’re known for low, competitive interest rates. Those good rates can save you a lot of money over your loan’s full term. Financial advisers regularly recommend these three lenders. They’re a top pick if you want to cut down your interest costs. You can use our credit card interest rate calculator too. It will show you how much money you can save by consolidating your debt.

Potential drawbacks of well – known lenders

Lenders like SoFi and Alliant Credit Union have lots of good perks, but they can have downsides too. SoFi requires you to borrow at least $5,000. That’s more than some customers want to take out, per collected information. Alliant Credit Union offers debt protection services that seem really nice. But if you use some of these services, you might get sent to a different website. That site has its own separate privacy and security rules, per collected data. Those are the key takeaways.

When you pick a lender for debt consolidation, keep a few key things in mind. First, check how much money they will loan you. Next, look at their interest rates. Don’t forget to ask about any extra fees they charge.
LightStream, SoFi, and PenFed Credit Union are three companies. They have lots of different low-interest rates available.
You should know possible downsides of well-known lenders. Some require a really high minimum loan amount. They may also send you to third-party websites. The results of any tests can vary.

Personal loan consolidation guide

A 2023 study from SEMrush has an interesting finding. More than 40 percent of Americans with multiple debts think about debt consolidation. They do this to handle their money more effectively. If you’re part of that group, you have an option. A personal loan to consolidate debt could work for you.

Pre – qualification process

Getting pre-qualified is a key step to get a debt consolidation loan. It’s the easiest way to check loan offers without hurting your credit score. People with good to great credit (scores 690 to 850) are more likely to get approved for these loans. They also usually get lower interest rates too. To start the pre-qualification process, fill out an online form with your lender. After you send in your application, you’ll see your possible rate and loan terms. Let’s use John as an example. John had multiple credit cards and wanted to combine all his debts into one loan. He used pre-qualification to compare offers from several lenders online. One lender offered him a 12% interest rate, and another offered 10%. Pre-qualification let John pick the best lender for his needs. All lenders offer personal loans to help you combine your debt. But online lenders are usually the ones that offer pre-qualification. Experts recommend you shop around to compare offers from different lenders. You can use an online tool to compare different loan offers easily.

How to sort by credit score range to find loan providers

Your credit score matters a lot when you apply for a consolidation loan. It affects if your loan application gets approved in the first place. It also decides what interest rate you’ll pay for that loan.

A credit score between 720 and 850 means you’re in really good shape. You’re more likely to get great deals from lenders like SoFi and LightStream Personal Loans. These lenders might cut your interest rate by 0.25% to 0.50%. You get this discount if you set up automatic payments.
A good credit score is between 690 and 719. If you have that good credit, you still have tons of options. Banks and lenders will offer you competitive interest rates.
A fair credit score is between 630 and 689. You might have a harder time finding the lowest loan rates. But you can still find lenders willing to help you out. Credit unions usually have more flexible approval rules.
Some lenders work with people who have bad credit. Just know their interest rates are usually higher than normal. Check your credit report before you apply for any loan. Fixing small errors on it can boost your credit score. That will give you way better loan options to choose from. Think about other things when you pick a lender too. These include extra fees and different payment options you can use. Compare these factors for lenders that work with your credit score range. Doing that helps you make a smart, informed choice that fits your needs.
If you’re comparing different loan options, using pre-qualification is totally safe. You won’t run into any risks at all when you do this.
Your credit score matters a lot when you apply for a loan. It is one of the biggest things that decides the terms of your loan. You can think of loan terms as the basic rules for that loan.
You can find the best lenders really easily. All you need to do is sort them by their credit scores.

Loan consolidation strategies

Do you have any personal debts you need to pay off? Loan consolidation is a useful method that helps lots of people handle their money better.

How to determine the amount of debt to consolidate

Before you start combining your debts, figure out how many to merge. We can use a simple example to show how this works. Let’s say John has three separate debts. He owes $5,000 on a credit card with 20% interest. He has a $3,000 loan with 12% interest. He also has a $2,000 medical bill with 15% interest. First, he calculates which debts will cost the most to pay off. You should list out all of your own debts first. Write down how much you still owe, their interest rates, and any minimum required payments. High-interest credit card debts are great to combine. Their interest builds up really fast over time. A 2023 SEMrush study found people who combine these high-interest cards save 20 to 30% on interest costs. Credit Karma says you should also think about your long-term money goals. You might not want to combine all your debts at once. That’s true if you plan to buy something big soon, like a house. Combining all your debts could affect your debt-to-income ratio. Step-by-Step Guide:

Compile a list of all your debts.
Identify high – interest debts.
Take a minute to think about combining all the money you owe to other people. This choice can affect your overall money situation in different ways. You should look closely at exactly what those effects might be.
When you make choices about your money, keep your goals in mind. You have short-term money goals you want to reach soon. You also have long-term money goals that take a lot more time to hit. Base your final decision on both of these types of goals.

Comparing loan options

You have several choices if you want to combine your loans. These options include personal loans and balance transfer credit cards.

Loan Option	Interest Rates	Fees	Repayment Terms	Credit Score Requirement
Personal Loans	The rate can land anywhere between 5% and 36%. What you end up with depends on how good your credit is.	Origination fees, late payment fees	Usually 1 – 7 years	A credit score can be as low as 600. That exact lowest number depends on the program.
Balance Transfer Credit Cards	The card’s special starting interest rate is 0% for a short time. That period usually lasts between 6 and 18 months total. Once that time runs out, the card’s regular interest rate kicks in.	A balance transfer fee is what you pay to move a credit card balance. This fee is usually 3 to 5 percent of the total amount you move.	Variable, based on credit card terms	Most of the time, you need a credit score of 670 or higher. That’s the general requirement most places ask for.

Comparing loan options is really important. Sarah owed $7,000 on high-interest credit cards. She looked at a personal loan and a balance-transfer card. She weighed both options carefully to find the best fit. The balance-transfer card ended up being her top choice. It had a 0% introductory interest rate for new users. She could pay off all her debt without extra interest costs. Here’s a quick useful tip to keep in mind. Always compare loan offers and look for nice incentives. Some offers give perks like interest rate reductions, for example. LightStream and SoFi personal loans have this kind of perk. They cut interest rates by 0.25% to 0.5% if you pay on time each month. Two strategies work best when you’re shopping for loans. Use online comparison tools and research multiple lenders. You can use our loan calculator to find your best option. These are the key takeaways to remember.

First, write down every debt you owe. Note which of these charge high interest fees. Also, think about what you want to achieve with your money.
You can compare personal loans, balance transfer cards, and other loan types. Look at a few key factors when you make these comparisons. These factors include interest rates, fees, and how long you have to pay the money back.
Compare your different options and look for discounts first. This helps you get all the info you need to make a smart choice.

FAQ

What is a debt consolidation personal loan?

Debt consolidation personal loans are a simple money tool. They let you combine all your separate debts into one single loan. Money experts say this shortens how long you have to make payments for. The interest rate on these loans usually stays the same the whole time. Your monthly payment amount also doesn’t change from month to month. Our detailed analysis of these loans explains every part of this option clearly.

How to choose between a personal loan and a balance transfer for debt consolidation?

First, check your credit score. High credit scores help you get better loan terms. Add up all the money you owe total. Balance transfers work better for bigger amounts of debt. Personal loans are best for smaller amounts of debt. Unlike balance transfers, personal loans have longer pay timelines and fixed payment amounts. For more information, visit our Compare personal loan with balance transfer section.

Steps for finding the best debt consolidation lenders

Figure out how much total money you owe. Make sure that amount fits the allowed range for the loan you want.
If you want to save more money, try this easy step. Look at the interest rates for your different options. Compare those rates carefully side by side. Doing this will help you keep more of your cash.
You might get charged review fees like origination fees and late payment fees. Financial advisors often suggest three lenders as solid options. Those lenders are LightStream, SoFi, and PenFed. Their rates hold up really well against what other lenders offer. You can find more details about this in the “Best debt consolidating lenders” analysis.

How to determine the right amount of debt to consolidate?

First, list every debt you have right now. Write down the total owed, interest rates, and minimum monthly payments. Pick the highest interest rate debts as your top picks. A 2023 study from SEMrush found a helpful fact. Combining high-interest credit card debt can cut how much interest you pay. Don’t forget to think about your long-term goals too. Check our loan consolidation strategies page for more details.