Debt consolidation rates for July 2022

Debt consolidation with a personal loan can streamline your debt payments, and you can also save money by receiving an interest rate that is lower than the interest rates on your existing debt.

Typical interest rates for debt consolidation loans range from about 6% to 36%. To get an interest rate at the lower end of this range, you need excellent credit (720 to 850 FICO). But even a good credit score (690 to 719 FICO) could help you get a better rate than you have now.

Borrowers with fair credit (630 to 689 FICO) and poor credit (300 to 629 FICO) may not qualify for a lower interest rate than their current debt. Build your credit can improve your chances of future qualification.

Current Debt Consolidation Loan Interest Rates

Interest rates and terms may vary depending on creditworthiness, debt-to-income ratio and other factors.

Source: Average prices are based on aggregated, anonymized quote data from users who pre-qualified on NerdWallet’s lending marketplace from October 27, 2021 to April 27, 2022. Prices are estimates only and are not specific to any lender. The lowest credit scores—usually below 500 FICO—are unlikely to qualify. The information in this table applies only to lenders with APRs below 36%.

How Does Debt Consolidation Work?

If you have multiple debts – for example, if you have balances on a few different credit cards – you can do this get a debt consolidation loan pay them all off at once. Then you make a payment on the new loan.

But how do you save money with it? The key is to choose a personal loan with one annual percentage rate that is lower than your existing debt.

Let’s say you have a total of $9,000 in credit card debt with a combined APR of 22% and a combined monthly payment of $450. It will take a little over two years to get out of debt and cost $2,250 in interest.

But if you consolidate the cards into a loan with an APR of 14% and a two-year repayment period, you’d save $879 in interest. Your new monthly payment would be $432, and you could use the additional monthly savings on the loan to pay off the debt even faster.

Use our Debt Consolidation Calculator to enter your current balances, interest rates and monthly payments. Then see how much you could save with a debt consolidation loan and compare the options based on your credit history.

How to choose a lender

A good first step is to compare what each lender can offer you. Online lenders let you classify beforehand to see what interest rates, repayment terms and loan amounts you may qualify for. Pre-qualifying with multiple lenders can help you compare interest rates and terms, and it won’t hurt your credit score.

Check if you pre-qualify for a personal loan – without affecting your credit score

It’s a good rule of thumb to go with the lender that offers the lowest rate, but you should also pay attention to the repayment period. Longer terms mean more interest, even though your monthly payment is cheaper.

You can also look for lenders that specialize in debt consolidation. These lenders offer perks like sending loan funds directly to your creditors and offering free financial education to help you with debt management.

NerdWallet has reviewed more than 30 lenders to help you choose the lender that’s right for you. Although borrowers with higher credit scores are likely to get the lowest interest rates, there are still Credit options for bad credit.

5.0

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Excellent credit rating and free financial advice.

5.0

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Excellent credit rating and flexible payment options.

5.0

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

5.0

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Good credit and low interest rates.

4.5

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Fair credit and paying off credit card debt.

5.0

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Fair credit and direct payment to creditors.

4.5

NerdWallet Review

NerdWallet ratings are set by our editorial team. The scoring formula takes into account factors we believe to be consumer-friendly, including impact on creditworthiness, interest rates and fees, customer experience, and responsible lending practices.

Bad credit and borrowers with no credit history.

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