Do you sometimes feel like you’re not making progress on your debt? There’s probably a reason for that: A good chunk of each monthly payment goes toward interest.
If you want to get off the debt treadmill, one strategy is to consolidate your credit cards into a single payment. Personal loan companies can help you lower your interest rate, ensuring more of your monthly payment goes toward reducing your principal. You get out of debt faster and save money doing it.
Best personal loan companies to help you pay off debt
As you research debt consolidation companies, it’s important to look at the terms and determine what will work best for you.
“You’ll have more choices for favorable loan terms when you have good credit and income,” said Tom Drake, a financial analyst and the founder of MapleMoney. “You’ll have a better chance at the lowest interest rate when you prove that you aren’t a default risk.”
Here are seven personal loan companies that offer favorable rates for well-qualified borrowers.
1. LendingTree – Start Shopping Here
LendingTree helps you compare personal loans from multiple lenders at once, including the lenders below. With LendingTree’s online form, you can receive offers from up to 5 different lenders and there will only be a soft pull on your credit, meaning that your score won’t be negatively impacted. We recommend that you start here and comparison shop between lenders in order to get the best rates on your loan. (Note: Student Loan Hero is owned by LendingTree)
2. Citizens Bank
Citizens Bank can be a great choice because it offers competitive rates and charges no fees for debt consolidation. You also can choose from a variety of loan terms and rates. However, this personal lender has the highest minimum credit score requirement on our list.
- Minimum FICO score: 680
- Minimum annual income: $24,000
- Loan amounts: $5,000 to $50,000
- Loan terms: three, four, five, six, and seven years
- Interest rates: fixed plus a 0.25% discount for existing Citizens Bank customers and an additional 0.25% discount for autopay
- Credit check: soft pull for rate estimates
- Fees: no origination, application, or prepayment fees for debt consolidation loans
3. SoFi
The main advantage of SoFi is the fact that it’s the only personal loan company on this list that allows you to borrow up to $100,000 for debt consolidation. Additionally, SoFi doesn’t have a minimum FICO requirement, which makes it the best way to consolidate debt with bad credit. The minimum annual income is on the high side to make up for it, however.
- Minimum FICO score: Good or excellent
- Minimum annual income: $50,000
- Loan amounts: $5,000 to $100,000
- Loan terms: three, five, and seven years
- Interest rates: fixed and variable plus a 0.25% discount for setting up autopay
- Credit check: soft pull for instant rate quotes
- Fees: no origination or prepayment fees for debt consolidation loans
- Hardship program: unemployment program to pause payments temporarily after job loss
4. Earnest
Earnest has a minimum credit score requirement, but it also has a flexible underwriting program that can take into account special circumstances. There’s no income requirement, so Earnest loans can be useful for entrepreneurs.
- Minimum FICO score: 660
- Minimum annual income: N/A
- Loan amounts: $2,000 to $50,000
- Loan terms: one, two and three years
- Interest rates: fixed
- Credit check: soft pull for rate estimates
- Fees: no origination, application, or prepayment fees on personal loans
5. Payoff
Payoff is a personal loan company that offers loans specifically aimed at consolidating or refinancing your credit card balances. However, the maximum loan amount is on the low end for our list. If you have a smaller amount of debt to consolidate, Payoff might work for you.
- Minimum FICO score: 640
- Minimum annual income: N/A
- Loan amounts: $5,000 to $35,000
- Loan terms: two, three, four, and five years
- Interest rates: fixed rate for debt consolidation loans
- Credit check: soft pull for personal loan rate estimates
- Fees: origination fee of 2% to 5%, depending on the term
6. Upstart
With a low annual income requirement and a low credit score minimum, Upstart is one of the easiest personal loan companies to qualify for. Plus, Upstart uses alternative items — including work history, education, and earning potential — to supplement your credit profile.
- Minimum FICO score: 620
- Minimum annual income: $12,000
- Loan amounts: $1,000 to $50,000
- Loan terms: three and five years
- Interest rates: fixed
- Credit check: soft pull for rate estimates
- Fees: origination fee of 1% to 8%
7. LendingClub
LendingClub offers you the chance to use its peer-to-peer lending platform. LendingClub’s eligibility requirements are flexible, and you might be able to get a personal loan when more traditional lenders aren’t willing to look at your situation.
- Minimum FICO score: 600
- Minimum annual income: N/A
- Loan amounts: $1,000 to $40,000
- Loan terms: three and five years
- Interest rates: fixed
- Credit check: soft pull to get a rate estimate
- Fees: origination fee of 1% to 6%
Pros and cons of debt consolidation programs
Before you decide to get a loan with one of these debt consolidation companies, it’s important to know what you’re getting into. Debt consolidation can be an effective tool — but only if you’re careful.
Advantages of debt consolidation
The biggest advantage of using a personal loan to pay off your high-interest debt is the fact that you can save money in the long run.
“Credit cards are known for having high interest rates,” said Harlan Landes, a consumer finance expert. “If you can get a lower rate with a personal loan, it could mean a savings of thousands of dollars.”
Using our credit card consolidation calculator, you can see how it’s possible to save more than $7,000 by consolidating to a five-year loan with an interest rate of 8.99%.
Not only are you saving a good chunk of change, but your monthly payment is also lower, resulting in better monthly cash flow. A four-year consolidation loan would keep your monthly payment roughly the same but save you $8,000 in interest and get you out of debt sooner.
Debt consolidation also streamlines your debt management approach. Instead of making several payments each month, you have to make only one.
“If you’re having trouble keeping track of your payments and things are falling through the cracks, a debt consolidation loan can simplify your finances,” said Landes. “Plus, the potential for improved monthly cash flow frees your budget a bit, giving you breathing room and more confidence.”
The risk of debt consolidation loans
“The biggest downside with a consolidation loan is the fact that you could wind up in even more debt if you aren’t careful,” said Drake. “Once you get that personal loan and pay off your credit cards, suddenly you have all this new credit available. It can be tempting.”
It’s not always easy to avoid this temptation, but it’s possible. Start by tracking your spending to see where you can cut back on unnecessary expenses. Then, make sure you have the money in hand before you spend on other items. Shift your mindset to one of saving for what you want to buy. Begin putting a small amount of money aside each week to get used to the idea.
Landes agreed. “Before you consolidate your debt with a personal loan, make sure you change your approach to money,” he said. “Make sure you stop debt spending. Put your credit cards on ice or cut them up if you think you’ll turn around and rack up more debt.”
Change your financial habits before consolidating debt
Landes pointed out that even though it can be disheartening to be in debt, it’s more of a symptom than the actual problem. When you find the underlying cause of your debt, you can focus on fixing that issue. Eventually, the debt will disappear as you take steps to change your financial habits.
Make it a point to cut out some of your expenses or earn more money — or both. Look for ways to ensure that you aren’t spending money on things that don’t matter to you. Once you have your budget under control, you can feel more confident about getting a personal loan to consolidate your debt.
7 Personal Loan Companies That Help You Pay Off Debt Quickly
![7 Personal Loan Companies That Help You Pay Off Debt Quickly]()
Reviewed by Naijabase
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February 15, 2019
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