Credit card debt has become a common problem for many individuals, often leaving them overwhelmed and struggling to make ends meet.
According to Experian data, the average credit card debt was $6,501 in 2023, and even smaller amounts can accrue significant interest when only minimum payments are made.
For those who find themselves trapped in this cycle, a personal loan for debt consolidation could be the solution. Debt consolidation allows borrowers to combine multiple debts, such as credit card balances or student loans, into a single loan with potentially lower interest rates.
CNBC Select has compiled a list of the best debt consolidation loans, taking into account fees, interest rates, and repayment flexibility.
The Top Contenders:
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SoFi: Best for student loan consolidation.
SoFi offers personal loans with annual percentage rates (APRs) ranging from 8.99% to 29.49% when enrolled in autopay. They provide flexible terms, ranging from 24 to 84 months, making it easier for borrowers to manage their repayment plans.
SoFi's loans have no origination fees, early payoff penalties, or late fees. Moreover, they offer unemployment protection, unique perks, and the option to have more than one loan with them.
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Upstart: Best for individuals without a credit history.
Upstart considers factors beyond credit scores when reviewing applications. With a minimum credit score of 300 on at least one credit report, Upstart is open to borrowers with limited or no credit history.
Loan amounts range from $1,000 to $50,000, and repayment terms are between 36 and 60 months. Upstart offers quick funding, minimal fees, and the freedom to pay off the loan early without penalties.
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Achieve: Best for low credit scores.
Achieve Personal Loans provide an excellent option for borrowers with a credit score of 620 or higher. With loan amounts ranging from $5,000 to $50,000 and flexible term lengths, Achieve allows those with imperfect credit histories to consolidate their debts.
Achieve offers rate discounts and does not charge prepayment penalties. However, their loans may not be available in all states, so it's essential to check eligibility.
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Upgrade: Best for flexible repayment terms.
Upgrade Personal Loans offer borrowers the flexibility to customize their debt consolidation loan. With loan amounts ranging from $1,000 to $50,000 and repayment terms from 24 to 84 months, Upgrade ensures that borrowers can find a solution that fits their budget.
The platform charges no early payoff fees, and funds can be received within one business day. However, an origination fee of up to 8% applies.
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Happy Money: Best for staying motivated.
Happy Money's peer-to-peer lending platform helps borrowers track their progress and maintain motivation throughout their debt repayment journey.
With loan amounts ranging from $5,000 to $40,000 and terms from 24 to 60 months, Happy Money provides access to customer support, no early payoff fees, and no late fees.
They also offer helpful tools, such as personality tests and cash flow trackers, to assist borrowers in managing their money and improving their financial habits.
Conclusion
When searching for the best debt consolidation loan, finding the right interest rate and repayment plan can make a significant difference in achieving financial freedom. By consolidating debts, borrowers can streamline their payments, simplify their finances, potentially reduce their interest rates, and make progress towards becoming debt-free.
Before choosing a loan, it's essential to carefully consider individual circumstances and select the option that best aligns with personal financial goals.
