Navigate Your Debt: Best Credit Card Consolidation Loans for Financial Freedom

Credit card consolidation loans can help you manage overwhelming credit card debt by combining multiple credit card balances into a manageable loan. You can expect lower interest rates, a predictable repayment schedule, and a clear path to becoming debt-free with a credit card consolidation loan.

A credit card consolidation loan can reduce financial stress and the overall repayment cost, but key details can influence how successful your credit card consolidation loan is. Choosing the best credit card consolidation loan requires comparing costs and terms, and you should confirm that the loan amount, terms, and monthly payment align with your budget. That way, you can stay on track with payments, pay off debt, and reap the benefits of credit score improvement and debt relief.

Read our guide to credit card consolidation loans to understand more about these loans, alternatives for consolidating credit card debt, and lenders with the best credit card consolidation loans.

Best Credit Card Consolidation Loans

Which credit card consolidation loan you choose can significantly affect how much you save as you pay off debt. Lenders with no fees and low interest rates can offer the most savings.

Let’s explore some of the best credit card consolidation loan providers, including their terms and benefits:

Achieve

Achieve specializes in personal loans for credit card consolidation, offering low interest rates for borrowers with good credit, high income, or co-borrowers. Loans range from $1,000 to $100,000 or more and have terms of 2 to 5 years.

Various discounts are available from Achieve, including a co-borrower, retirement asset, and direct pay discount. For example, you can get a discount if you show proof of sufficient retirement funds or use your loan to pay creditors directly.

Best Egg

Best Egg offers personal loans for debt consolidation with loan amounts from $2,000 to $50,000 and loan terms from 3 to 5 years. It’s known for fast approval and funding, usually within 1 to 3 days. 

With competitive interest rates, Best Egg is most useful for borrowers with good to excellent credit. However, you should expect an origination fee of up to 8.99%.

Citi

Citi’s personal loans have competitive rates and no origination or application fees. Loan amounts between $2,000 and $30,000 are available with terms from 1 to 5 years. There’s no origination fee, prepayment penalty, or late fee.

There’s a 0.5% rate reduction if you enroll in automatic payments. You can’t prequalify for a Citi loan, and these loans are only available to existing customers. You need to apply to find out whether you’re approved.

Discover

With a Discover personal loan, you can borrow $2,500 to $40,000, with repayment terms from 3 to 7 years. Discover offers fast applications and funding, sending funds the next business day after approval.

You can use a Discover personal loan to pay creditors directly if you provide account numbers, amounts, and payment address information during the application process. Discover requires a minimum of $25,000 in annual income to qualify for a personal loan, and you need to verify your income.

Happy Money

Happy Money, formerly known as Payoff, focuses exclusively on loans for consolidating credit card debt. You can borrow between $5,000 and $50,000 with terms of 2 to 5 years. The application is quick — 2 minutes or less. Borrowers get access to free FICO score monitoring and financial wellness tools.

Although Happy Money doesn’t have late fees, there are up to 5% origination fees. Borrowers with low credit scores should expect to pay higher interest rates than good credit borrowers.

LightStream

A division of Truist, Lightstream has competitive rates and fast funding. It’s a good option for borrowers with excellent credit who need a large debt consolidation loan. Terms range from 2 to 7 years, and amounts range from $5,000 to $100,000.

LightStream offers a Rate Beat program, which offers a rate that’s 0.10 percentage points lower than rates offered by a competing lender. Same-day funding is available. However, LightStream doesn’t offer prequalification, so you must apply to see available terms.

PenFed Credit Union

PenFed credit card consolidation loans offer flexible terms of up to 5 years for loan amounts up to $50,000. You can check your rate online with no effect on your credit score.

Once you e-sign your loan documents, you can get funding as soon as the next day. PenFed Credit Union debt consolidation loans do not have prepayment penalties or origination fees.

SoFi Personal Loans

SoFi offers personal loans with no fees and generally competitive interest rates. Loan amounts range from $5,000 to $100,000, and terms range from 2 to 7 years. SoFi offers Direct Pay, a feature that gives you a lower rate if you have SoFi pay your lenders directly. 

You don’t pay origination fees, late fees, or prepayment penalties, and SoFi offers access to financial planning tools and free career coaching. However, you need good to excellent credit to get the best rates. SoFi offers online prequalification, so you can check your rate and compare terms before you apply.

Upgrade

Upgrade offers credit card consolidation loans from $1,000 to $50,000 and fast funding. Loan terms range from 2 to 7 years. You can check your rate online, review your loan options, and access your loan proceeds within a day of clearing verifications.  

You can check for multiple discounts with Upgrade, including setting up autopay or using your car for collateral on a secured loan. Upgrade accepts joint applications, which may help you qualify for a larger loan or a better rate.

Upstart

Upstart offers personal loans, including credit card consolidation loans. There are options for good credit borrowers and those with limited credit history or low credit scores. Upstart uses AI and nontraditional factors, such as your education, to approve loans and determine interest rates. Loans range from $1,000 to $50,000, with terms from 3 to 5 years.

You can get funding from Upstart as quickly as the next business day. Borrowers with less than prime credit should expect higher interest rates than prime borrowers, and Upstart has potentially high origination fees of up to 12%.

What Is a Credit Card Consolidation Loan?

Credit card consolidation loans are a type of personal loan used to combine multiple credit card debts into a single loan. These loans typically have a fixed interest rate with a structured repayment plan, which can offer a clear path to getting out of debt.

With a credit card consolidation loan, you can repay the loan in monthly installments rather than managing multiple credit cards with balances that accrue more interest every month. You can use a credit card consolidation loan to simplify your financial obligations and reduce the overall interest you pay as you become debt-free.

You can expect a credit card consolidation loan to have a set loan amount, term length, and interest rate. These are determined by your creditworthiness. A typical credit card consolidation loan has terms from 2 to 7 years. Interest rates depend on your credit score, financial history, and what the lender offers.

Credit Card Consolidation Loans vs. Balance Transfers

Credit card consolidation loans and balance transfers can help you manage and pay off credit card debt but have some differences. 

A balance transfer credit card allows you to transfer existing credit card balances to a new card. Usually, you can take advantage of an introductory 0% interest rate, which usually lasts 6 to 18 months — though some cards offer 0% introductory APRs on balance transfers as long as 21 months. For example, the Wells Fargo Reflect^® Card has a 0% intro APR for 21 months from account opening on balance transfers, then a variable APR of 17.49%, 23.99% or 29.24% (rates & fees), and the Citi^® Diamond Preferred^® Card has a 0% Intro APR for 21 months on balance transfers from date of first transfer, then a variable APR of 17.49% to 28.24%.

After the promotional period ends, the interest rate can increase significantly, so it’s best to pay off your balance before the introductory rate expires. Otherwise, you’ll likely pay high interest charges on the remaining balance.

Balance transfers are usually good if you can pay off your credit card debt within 18 months. Calculate your credit card debt (plus the 3% to 5% balance transfer fee) and divide it by 18 to get your monthly payment. If that’s a manageable amount for your budget, try to get approved for a balance transfer card with a credit limit large enough to transfer your credit card debt.

If you need more than 18 months to pay off your credit card debt or you can’t get approved for a credit limit large enough to transfer your credit card debt, a credit card consolidation loan is usually a better choice. It can give you more time to pay off debt, and you may be able to get a larger loan amount than you could with a balance transfer card credit limit.

Eligibility for Credit Card Consolidation Loans

Qualifying for a debt consolidation loan depends on your ability to pay. Lenders consider factors such as your credit score, debt-to-income ratio, employment and income stability, and the loan amount and purpose. 

Usually, lenders look for a good to excellent credit score of 660 or higher for the best rates. Credit card consolidation loans may be available to borrowers with lower credit scores, though they pay a higher interest rate.

Your debt-to-income ratio measures your monthly debt payments relative to your income. Lenders look for a low DTI ratio, under 40%, to indicate that you can handle additional debt. They’ll also look for proof of stable employment and consistent income, demonstrating your ability to repay the loan. 

Finally, the amount of debt you want to consolidate matters. Some lenders have minimum or maximum loan amounts, so your loan should fit within the lender’s loan amounts.

Credit Card Consolidation Loans for Bad Credit

Getting a credit card consolidation loan can be challenging if you have a poor or fair credit score. However, it’s worth finding options to help you get out of debt — even if you have to pay a higher interest rate or fees than borrowers with good credit. Some lenders specialize in lending to borrowers with low credit scores.

Take advantage of prequalification options with lenders, which allow you to check for rate offers before you apply. Prequalifying can quickly tell you whether you’d likely be approved, so you can identify which lenders can give you a debt consolidation loan. With prequalified offers, you can compare the rates and terms to find the credit card consolidation loan that works best for you.

Adding a co-signer can help you increase your chances of approval and offer a better interest rate. A co-signer or co-borrower lowers the risk for the lender. Similarly, opting for a secured loan that depends on collateral, such as a savings account or vehicle, could lower the risk and increase your chances of approval with a lower rate — though you could lose the collateral if you default on the loan.

Also, consider starting with a smaller loan amount. Lenders may not be willing to extend loans that cover all of your debt consolidation needs, but you can start with a smaller loan, pay it off, and then consolidate more debt once you’re ready for a new loan. 

How Credit Card Consolidation Loans Impact Your Credit

Credit card consolidation can affect your credit in the short and long term, though the extent to which it affects your credit depends on how you manage the loan.

When you first get a credit card consolidation loan, you may see your credit score dip slightly after the lender makes a hard credit inquiry to approve your application. You should only need to do this once, as you can prequalify with lenders with no impact on your credit score. Then you can choose the best credit card debt consolidation loan and do a single application rather than multiple applications that can affect your credit more. 

The effect from a hard inquiry is usually small and short-lived as long as you don’t make multiple applications within a short period. You shouldn’t expect to see long-term effects.

A debt consolidation loan can reduce your credit utilization, which is the percentage of your available credit you’re using. When you pay off credit card balances with a consolidation loan, you can free up your credit limit. That lowers your credit utilization, which should ideally be below 30%.

Making on-time payments with a credit card consolidation loan can improve your credit with long-term effects. Consistently paying your debt consolidation loan on time gives you a positive payment history, the most important factor for your credit score. Those on-time payments can positively affect your credit score for years, but understand that the opposite is also true. If you miss payments on your credit card consolidation loan, those missed payments will drag down your credit score in the long term.

Adding an installment loan to your credit history can help improve your credit, especially if you lack this type of account. Lenders like to see a good credit mix that indicates you can manage multiple types of credit.

Pros and Cons of Credit Card Consolidation Loans

The positives of a credit card consolidation loan include:

• Simplified Payments: Rather than making multiple credit card payments each month, you can combine them into a single payment that may be easier to manage.
• Lower Interest: A credit card consolidation loan should offer lower interest rates than credit cards, helping you reduce the total cost of repayment and pay off your debt faster.
• Fixed Payment Plan: Debt consolidation loans offer a fixed repayment schedule, which is much more reliable than credit cards with revolving balances and variable interest rates. A fixed monthly payment can help you budget for your payment and stay on track with paying off your debt.
• Credit Score Improvement: Debt consolidation can improve your credit rating with on-time payment history and credit utilization. As you make payments on an installment loan, you should see a positive effect on your credit score. Consolidating credit card debt can also lower your credit utilization ratio, freeing up available credit on your credit card accounts. 

The negatives of a credit card consolidation loan include:

• Higher Interest Rates for Bad Credit: Although a debt consolidation loan should save you on interest, that’s not guaranteed, especially if you have a low credit rating. An interest rate higher than what you’re paying on credit cards could make a debt consolidation loan less beneficial.
• Fees: Most lenders charge fees, including origination or late fees, which can increase the cost of your loan.
• Risk of More Debt: As you move debt from your credit cards to a personal loan, you free up available credit on your credit cards. That could lead to running up balances on your credit cards again — and then you’d have a loan and credit cards to pay off.

Bottom Line:

Using a credit card consolidation loan can simplify your payments and lower your interest rates, but staying disciplined and avoiding new debt is crucial to becoming debt-free.

How Does Credit Card Debt Consolidation Work?

Here’s a step-by-step breakdown of the credit card debt consolidation loan process. 

1. Calculate the Debt You Need To Pay Off

Before you apply for a loan, take an inventory of your credit card debt. Add all your credit card balances together to get the total amount of debt you need to pay off. If you can’t consolidate all of it, prioritize high-interest debt. You can save on interest by moving high-interest credit card balances to a credit card consolidation loan with a lower interest rate.

2. Shop Credit Card Debt Consolidation Loans

As with any financial product, it pays to compare your debt consolidation loan options before you apply. Look for debt consolidation loans you’ll likely be approved for and offer the loan amount you need. Compare interest rates, loan origination fees, and other costs of taking on the loan as you choose which loan works best for you. Some lenders offer prequalification, which you can use to see potential loan terms and find out if you’d likely be approved without affecting your credit score with a hard inquiry. 

3. Apply for a Credit Card Debt Consolidation Loan

Once you’ve chosen a debt consolidation loan, apply. You provide information, including contact information, your credit score, income, and the total amount of debt you want to consolidate. The lender uses this information to determine your eligibility and loan terms, including the amount, interest rate, and loan length. Borrowers with a good credit score and low debt-to-income ratio are likely to qualify for the lowest interest rates. 

4. Use the Loan To Pay Off Credit Card Debt

You can pay off your credit card balances once you receive funds from your debt consolidation loan. Some lenders offer the option to pay your creditors directly. Either way, pay off your credit card balances immediately to avoid further interest charges.

5. Repay the Loan in Monthly Installments

Begin paying off the loan, which should have fixed monthly payments over a set term. With a fixed interest rate, you have a consistent monthly payment that stays the same through the life of the loan. That makes it easier to budget than credit card payments, which fluctuate with interest rates and spending.

With a consistent monthly payment, you can determine when the debt will be paid off — as long as you keep making monthly payments.

How To Choose the Best Credit Card Consolidation Loan

Consider these factors as you compare credit card consolidation loans:

• Approval: The best debt consolidation loan is one you can get approved for. Prequalifying with multiple lenders doesn’t affect your credit score, and it gives you information you can use to choose the best offer, including the loan amount, interest rate, terms, and fees.
• Interest Rates: Interest rates directly affect the cost of your loan, so it pays to find the lowest rate available to you. A debt consolidation loan should be lower than the interest rate you pay on credit cards. Compare APRs, including the interest rate and fees, and look for fixed rates that can offer predictability and make it easy to budget for your debt consolidation loan payment.
• Loan Amount: It’s best to get a credit card debt consolidation loan large enough to pay off your high-interest credit card balances. However, that doesn’t mean you’ll be approved for that amount with every lender. Get prequalified to determine how much a lender will let you borrow and compare that to how much you need to pay off your debt.
• Loan Terms: Along with interest, the loan’s term greatly influences your debt consolidation loan’s monthly payment amount. With a shorter term, you pay less in overall interest but have a higher monthly payment. A longer term can make monthly payments more manageable, but you pay more interest over the life of the loan.
• Fees: Fees vary widely among personal loan lenders. Many charge origination fees, though there are debt consolidation loans with no origination fees. Also, consider fees for late payments and confirm that the lender doesn’t have prepayment penalties. Most lenders don’t charge prepayment penalties, but it’s still worth checking if you anticipate paying off your loan early.
• Customer Service: Look for a reputable lender with strong customer service ratings. Consider how easy it is to reach support, find out whether borrowers have had positive experiences, and whether the lender seems reliable and easy to work with.

Hot Tip:

Before you apply for a credit card consolidation loan, prequalify with multiple lenders. You can use these rate offers to compare interest rates and terms without impacting your credit score, and they help you find the best loan tailored to your finances.

Alternatives to Credit Card Consolidation Loans

Balance transfer cards, debt management plans, and home equity loans are alternatives to personal loans for credit card consolidation. 

Balance transfer credit cards offer 0% introductory rates for a limited period, usually 6 to 18 months. You can use a balance transfer card to pay down or pay off your balance interest-free during the promotional period. You typically pay a balance transfer fee of 3% to 5%, which can be lower than the interest rate and origination fee charged on a credit card consolidation loan. However, rates outside of promotions can be costly, so paying off the transferred balance before the promotional period expires is best.

Debt management plans from nonprofit credit counseling agencies can help you consolidate and pay off your credit card debt. The counselor negotiates lower interest rates on your debts, so you pay less interest. Your debts are combined into a single monthly payment made to the counseling agency, which distributes payments to your creditors. You typically can’t use your credit cards or apply for new accounts when you’re enrolled in a debt management plan, and there’s usually a small monthly fee for managing the plan.

With a home equity loan or line of credit, you can borrow against your home’s equity to pay off credit card debt. Home equity loans generally have lower interest rates than personal loans because the loan is secured by your home. These loans usually have longer terms than personal loans. A home equity loan can be risky if you’re not sure you can make the payments, as your home is the collateral, and you could face foreclosure if you default on your home equity loan.

Final Thoughts

A credit card consolidation loan can simplify your debt while lowering interest costs and alleviating financial stress. As you consider a credit card consolidation loan, compare lenders and carefully evaluate interest rates, terms, fees, and customer service for a loan that aligns with your financial goals. When used responsibly — particularly making consistent on-time payments — a credit card consolidation loan can positively impact your credit while alleviating debt.