Credit unions that offer debt consolidation loans
Consider comparing rates from credit unions. If you belong to a credit union, you might be able to get a low-rate debt consolidation loan and favorable terms. Some credit unions that offer online debt consolidation loans include:
- Freedom Federal Credit Union
- Connexus
- PenFed
- First Tech
Some credit unions have specific requirements to join, so research membership criteria before applying for a debt consolidation loan.
Credit cards that offer 0% APR on balance transfers
If you have a relatively small amount to consolidate and you qualify for a 0% APR balance transfer, it might make sense to open a new credit card.
Depending on the offer, you might be able to get 0% APR on your balance for up to 18 months or more. If you can pay off your debt in that amount of time, you can speed up the process and pay no interest on your debt consolidation. However, your APR increases at the end of the introductory period, so if you don’t pay off your balance, interest payments can hinder your efforts to pay down debt.
Balance transfers generally work well for those with good credit who can qualify for the offer. Additionally, you must receive approval for a credit line large enough to pay off your other loans.
Debt management plan
A debt management plan isn’t a loan. Often, debt management plans are administered by credit counseling organizations. Credit counselors help you create a budget and map out a plan to pay your debt. You make one payment to the credit counselor and they distribute the appropriate payments to your creditors.
Some credit counselors negotiate lower interest rates or payment amounts on your behalf. This can help you get out of debt sooner without needing another loan. Debt management plans might be appropriate for those with low credit scores who can’t qualify for a bad credit debt consolidation loan or get a competitive interest rate on a debt consolidation loan.
When looking for a credit counselor with a debt management plan, start by checking out the National Foundation for Credit Counseling or the Department of Justice’s approved list of credit counselors.
How to apply for a debt consolidation loan
While the process varies by lender, many follow a similar approach to applying for a debt consolidation loan.
Documents and requirements needed
When borrowing money, you generally need to provide the following identification and documentation:
- Social Security number
- Birthdate
- Address
- Driver’s license or other government-issued identification
- Income (connecting to your bank account or uploading bank statements)
Many lenders check your credit and use your credit history and credit score to determine whether to approve your loan. Additionally, your income and credit influence your interest rate and available terms.
How to improve approval chances
If you’re concerned about being approved for a debt consolidation loan, some strategies can help you improve your chances.
- Take steps to improve your credit: Review your credit report and identify errors. Challenge those mistakes to potentially improve your credit score. Paying down some of your debt and making on-time payments can also help you improve your credit. While there are debt consolidation loans for bad credit, they might come with a higher APR.
- Provide collateral: If you don’t qualify for an unsecured debt consolidation loan, a secured loan might improve your approval chances. You can provide something of value, such as a deposit account, vehicle or home equity. Not every debt consolidation lender allows secure loans, however.
- Find a cosigner: A cosigner who meets credit and income requirements can help you qualify for a debt consolidation loan. Your cosigner agrees to be responsible for the loan if you don’t make payments.
How long does the process take?
Some lenders offer same-day funding for borrowers who complete the paperwork by a certain time. Lenders that offer a soft credit pull often provide prequalification within a few seconds. A full application and approval can take several minutes to complete. If the lender requires additional documentation, you might need to wait a few days for approval.
Generally, though, the entire process can be completed, with funds deposited in your account, between one and three business days after approval.
Methodology
Buy Side evaluated the best loans for debt consolidation across more than 30 partner and non-partner lenders based on minimum and maximum interest rates, available loan amounts, funding times, repayment terms, fees, discounts, loan uses, minimum credit and income requirements and other factors. Our team of experts gathered information from each lender’s website, customer service department, directly from our partners, from third-party review platforms and via email support. A senior editor verified each data point to make sure it was accurate and up to date. Some lenders above are financial partners of Buy Side.
Please read our personal loans methodology page for more information on categories, criteria and weightings used to establish star ratings.
FAQ
What credit score do you need for a debt consolidation loan?
Every lender has its own credit requirements for debt consolidation loans. You generally need a credit score well above 700 to qualify for the best advertised rates. Some lenders approve borrowers with scores below 600, but you might need to pay a higher APR to get a debt consolidation loan for bad credit.
Are debt consolidation loans worth it?
Debt consolidation loans can be worthwhile if they meet your needs and help you simplify your debt repayment plan. You can potentially save money in interest and get out of debt faster. On the other hand, there’s a chance that you could end up in more debt.
How do debt consolidation loans impact your credit?
Applying for a loan can potentially lower your credit score by a small amount due to the hard inquiry when you apply. However, if you make on-time payments and reduce your debt over time, your credit score could potentially improve. On the other hand, if you miss payments, you could damage your credit score.
Can you consolidate credit card debt with a personal loan?
Yes, you can use a personal loan to consolidate credit card debt.
Are there alternatives to debt consolidation loans?
Instead of getting a debt consolidation loan, you could create a debt payoff plan using the debt snowball, debt avalanche or some other method. You can also consider signing up for credit counseling to get help managing your debt.
