15 of the best debt consolidation loans for fair credit

If you’re looking to compare debt consolidation loans for fair credit, consider these 15 options. (iStock)

If you’re digging out from under a stack of credit card bills, you might consider a debt consolidation loan. With these loans, you can take out one new loan to pay off all your other personal debt — potentially at a lower interest rate.

With fair credit, you’ll likely have multiple options when it comes to shopping for a debt consolidation loan. But depending on your specific credit score, the interest rate and loan terms you’re offered can vary. The better your score, the better deal you’re likely to get.

Each lender has different guidelines for its debt consolidation loans, so be sure to shop around and compare several options before settling on the best loan for your financial situation.

Credible makes it easy to compare rates from multiple lenders all in one place.

• What’s a debt consolidation loan?
• How do debt consolidation loans work?
• Where can you get a debt consolidation loan?
• What’s a fair credit score?
• Best debt consolidation loans for fair credit: 15 lenders to consider
• How to get a debt consolidation loan for fair credit
• What to consider with fair credit debt consolidation loans
• Pros and cons of debt consolidation loans for fair credit
• Alternatives to debt consolidation loans with fair credit
• What’s the difference between debt consolidation loans and debt settlement?
• Should you declare bankruptcy for debt?
• Do debt consolidation loans harm your credit?
• Ways to boost your credit

What’s a debt consolidation loan?

A debt consolidation loan is a type of personal loan that you can use to pay off your current debts and replace them with a new, single payment.

Personal loans have the advantage of fixed rates, meaning your monthly payment won’t change for the life of the loan. They’re also generally unsecured, so you don’t have to use your house or car as collateral for the loan. You won’t risk either if you fail to make your payments, unlike with a mortgage or auto loan.

Debt consolidation loans also typically have a specific payoff date. For example, if you take out a 24-month personal loan and make your scheduled payment each month, your balance will zero out in two years when you make your last payment. 

By contrast, if you only make the minimum payment on your credit card, it could take several more years to pay off your debt, depending on the amount of debt and interest rate. You might benefit from the structured repayment plan of a debt consolidation loan, rather than making minimum monthly payments with no clear end date on a credit card.

How do debt consolidation loans work?

You can use a debt consolidation loan to pay off many different kinds of debt, from medical bills to other personal loans. But they’re especially useful for consolidating credit card debt because they typically have lower interest rates than most credit cards. 

The average interest rate on a 24-month personal loan is 10.16%, considerably lower than the 18.43% average interest rate for credit cards, according to the most recent data from the Federal Reserve. 

With less interest to pay, using a debt consolidation loan to pay off your high-interest credit card balances may leave you with a lower monthly payment and a faster repayment schedule. Alternatively, you could choose to extend your repayment term to lower your payments and ease the burden on your budget. Just remember, a longer term means you’ll pay more interest over the course of the loan.

A debt consolidation loan for borrowers with fair credit can come with fees and other costs that you may not face if you have good credit. But you’ll have more (and better) options than borrowers with bad credit.

Personal loans typically range from $1,000 to $100,000, depending on the lender. With fair credit, your interest rate, repayment term and loan amount may be affected by your credit score. Generally, lenders offer their best interest rates to borrowers with high credit scores.

Consider enlisting the help of a friend or family member with good credit to act as a cosigner. Adding a cosigner to your loan may help you qualify for a lower interest rate or a higher loan amount, but your cosigner must understand they’ll be responsible for repaying the loan if you don’t make your payments.

Where can you get a debt consolidation loan?

It’s wise to shop around and compare loan offers from multiple lenders to find the best value for your needs. A few different types of lenders offer debt consolidation loans, each with its own eligibility criteria and terms: 

• Banks: If you like banking at a brick-and-mortar bank with in-person service, you might prefer getting a consolidation loan from a traditional bank. Your approval odds may be higher with a bank where you’re already an existing customer. Keep in mind, the process may take more time and involve more paperwork with a traditional bank. And you may find a better rate or repayment term with other financial institutions, so it pays to shop around.
• Credit unions: Credit unions are not-for-profit organizations, which can mean lower rates and fees than other lenders. Credit unions also tend to have less stringent credit score requirements. If you’re a member of a credit union with fair credit, it may look past your credit score and work with you to qualify for a loan.
• Online lenders: Online lenders offer a streamlined approach to lending, allowing you to complete the loan process from application to funding entirely online. If you like doing business digitally, you can usually apply and get a decision the same day, often within minutes. If approved, many online lenders can fund your loan the same day or within a few business days.

What’s a fair credit score?

A credit score is a gauge of how likely you are to pay back your loan, expressed as a number calculated by one of the three main U.S. credit bureaus. FICO scores can range from 300 to 850, and the higher your score, the better.

A number of factors determine your score. The most important is your payment history on accounts you’ve opened, especially how often you make your payments on time. Other factors include:

• Your current amount of debt
• How many loans you have
• How long you’ve had your accounts
• How much of your credit you’re using
• When you’ve applied for new credit
• Any recent bankruptcies, foreclosures or debt collection actions

A fair credit score typically falls between 650 and 699. Below this range is bad credit, which can make it harder to qualify for a loan. Once you reach a score of 700, you’re considered to have good credit, and a score of 750 or higher is considered excellent.

Credible lets you compare personal loans to see what rates you may qualify for.

Best debt consolidation loans for fair credit: 15 lenders to consider

While qualification requirements can vary based on your credit score, here are 15 lenders you might consider for a debt consolidation loan with fair credit. The first 13 lenders are Credible partners.

Avant

Avant has a relatively low minimum credit score requirement, so you may still qualify with a score on the lower end of the "fair" range.

Minimum credit score: 550
Loan terms: Two to five years
Loan amounts: $2,000 to $35,000
Fees: Administration fee of up to 4.75%
Good for: People with lower credit scores

Best Egg

Best Egg says that roughly half of its borrowers receive their loan funds by the next business day.

Minimum credit score: 600
Loan terms: Two to five years
Loan amounts: $5,000 to $50,000
Fees: Origination fee of 0.99% to 5.99%; $15 late payment fee
Good for: People who want to get their money quickly

Discover

Discover offers you the chance to return the money you borrow within 30 days with no interest charged, so if you change your mind, you’re in luck.

Minimum credit score: 660
Loan terms: Three to seven years
Loan amounts: $2,500 to $35,000
Fees: None, though a late payment fee of $39 may apply
Good for: People who aren’t sure if they’ll need a loan

LendingClub

Even with fair credit, you might still get multiple offers from LendingClub investors who want to fund your loan.

Minimum credit score: 600
Loan terms: Three or five years
Loan amounts: $1,000 to $40,000
Fees: Origination fee of 3% to 6%; late payment fee of $15 or 5% of the overdue monthly payment
Good for: People who want to evaluate multiple lenders in one place

LendingPoint

LendingPoint says it can decide whether to approve you for a loan within just a few seconds.

Minimum credit score: 580
Loan terms: Two to five years
Loan amounts: $2,000 to $25,000
Fees: Origination fees from 3% to 6%
Good for: People who want to know quickly if they qualify

LightStream

LightStream could be a good option if you need a large loan and a long time to repay it.

Minimum credit score: 660
Loan terms: Two to 12 years for home improvement loans; two to seven years for all other loans
Loan amounts: $5,000 to $100,000
Fees: None
Good for: People who need to borrow a large amount of money

Marcus by Goldman Sachs

Marcus allows you to defer a monthly payment after a year’s worth of on-time payments. While you’ll still pay interest during this month, this feature can give you some breathing room when you need it.

Minimum credit score: 660
Loan terms: Three to six years
Loan amounts: $3,500 to $40,000
Fees: None
Good for: People who want to defer a payment 

Happy Money, formerly known as Payoff

Happy Money, formerly known as Payoff, specializes in debt consolidation, and even offers in-house experts to talk you through paying off your debt.

Minimum credit score: 640
Loan terms: Two to five years
Loan amounts: $5,000 to $40,000
Fees: Origination fee of 0% to 5%
Good for: People who want help paying off their debt

OneMain Financial

If you’re just starting out and don’t have a long credit history, OneMain’s offer to lend to people without a minimum credit score can help you qualify.

Minimum credit score: None
Loan terms: Two to five years
Loan amounts: $1,500 to $20,000
Fees: Origination fees apply. These can be flat fees between $25 and $500 or a fee of 1% to 10% of the loan amount.
Good for: People with a limited credit history

PenFed Credit Union

PenFed’s minimum loan amount of $600 might be the smallest you’ll find.

Minimum credit score: 670
Loan terms: One to five years
Loan amounts: $600 to $35,000
Fees: None
Good for: People who need a small loan

Prosper

Prosper matches you with investors who are interested in funding your loan. If you have a special circumstance, you might have a better chance of qualifying.

Minimum credit score: 640
Loan terms: Three or five years
Loan amounts: $2,000 to $40,000
Fees: Origination fee of 2.4% to 5%; late payment fee of $15 or 5% of the unpaid monthly paymentGood for: People who have a unique financial situation 

Upgrade

Upgrade considers people with lower credit scores, and loan funds may be available in as little as one business day.

Minimum credit score: 580
Loan terms: Three or five years
Loan amounts: $1,000 to $50,000
Fees: Origination fee of 2.9% to 8%
Good for: People who are building credit 

Upstart

Upstart doesn’t just look at your credit score — the lender also takes your education and job history into account. With a fair score and a solid history at work and school, you might get a better deal.

Minimum credit score: 580
Loan terms: Three to five years
Loan amounts: $1,000 to $50,000
Fees: Origination fee of 0% to 8%; late fee of $15 or 5% of the past due balance (whichever is greater); ACH return or check refund fee of $15
Good for: People who have a stellar job or education history

Other lenders to consider

The following lenders are not Credible partners, so you won’t be able to easily compare your rates with them on the Credible platform. But they may also be worth considering if you’re looking for a debt consolidation loan with fair credit. 

Earnest

Earnest is an online platform that matches you with different lenders. But take note that its loans aren’t available in AL, DE, KY, NV or RI.

Minimum credit score: 680
Loan terms: Three to five years
Loan amounts: $5,000 to $75,000
Fees: Does not disclose
Good for: People who want to comparison shop before applying for a loan

Laurel Road

Laurel Road doesn’t charge any fees on its personal loans and offers an autopay discount.

Minimum credit score: 660
Loan terms: Three to five years
Loan amounts: $5,000 to $45,000 (depending on loan type)
Fees: None
Good for: People who want to borrow money without paying fees

Methodology: How Credible evaluated lenders

Credible evaluated debt consolidation lenders based on a variety of categories, including the minimum fixed rate, customer experience, time to fund, maximum loan amount, term length and fees. Credible’s team of experts gathered information from each lender’s website, customer service department and via email support. Each data point was verified to make sure it was up to date.

How to get a debt consolidation loan for fair credit

If you’re interested in getting a debt consolidation loan for fair credit, here are the steps you should take.

• Check your credit score. Your score dictates what loans you qualify for, and what interest rates and loan terms you’re offered. You should know your score going into the process. Checking your credit report also gives you the chance to correct any errors on your report that might be holding your score down. Each credit bureau is required by law to give you a free copy of your report once per year. Use a site like AnnualCreditReport.com to get your copies, and scour them for mistaken account balances or any other errors
• Shop around. Lenders often post information on their websites about the interest rates and loan terms they offer. You can look at the interest rate ranges and terms and see if the lender might be a good fit.
• Prequalify. When you’ve found a few lenders that might fit the bill, you can use each company’s online form to request a rate quote or prequalify for a loan. Most of the time, this will only use a "soft credit inquiry" on your credit, so your score won’t be affected. To get a rate quote, you’ll typically need to give the lender your Social Security number and a little information about your finances and the type of loan you’re looking for. These rate quotes will give you a good indication of what rates and terms you’d be able to receive, so you can use this information to compare loans and find the best one for you.
• Apply. Once you’ve found the quote that works best for you, it’s time to formally apply for the loan. You’ll need to submit more information to the lender, which they’ll use to make a final decision on your loan. The lender may also run a hard credit check, which can temporarily lower your score by a few points.
• Accept your loan. If you’re approved for the loan, your lender will tell you what you need to do to receive your loan funds. This could take a day or two, and the money can usually be deposited directly into your bank account.

What to consider with fair credit debt consolidation loans

Every personal loan you evaluate will look a little different, but there are a few variables it always pays to look at. Here are the most important elements to compare when shopping for a debt consolidation loan for fair credit.

• APR: This is the annual percentage rate, or the total cost of the loan each year as a percentage of the loan amount. The APR on a loan includes the interest rate and all fees charged. Using the APR to compare loans instead of just the interest rate gives you a better apples-to-apples comparison, as it includes all the costs of borrowing money.
• Fees: Fees can vary widely from lender to lender. Some debt consolidation lenders don’t charge any, while others may charge application fees, origination fees or late fees. Few lenders charge an application fee, and you’re bound to find one that doesn’t. But be sure to check the origination fee, if one applies. Some lenders don’t charge them, while others charge a percentage of the loan that’s typically deducted from the amount you receive.
• Repayment terms: This generally refers to the length of time you have to pay back the loan. The longer the term, the lower your monthly payment — but the more you’ll pay in interest. Lenders typically offer terms that can be as short as one year or as long as 12.
• Loan amounts: Loan amounts vary on personal loans, depending on your lender, credit score and other factors. Once again, it pays to shop around to improve your odds of finding a loan that provides the amount you need with the lowest interest rate available.
• Secured vs. unsecured loans: Most personal loans are unsecured, meaning you don’t have to secure the loan with collateral like you do with auto and home loans. You might receive a lower interest rate with a secured loan. Still, it’s a good idea to stick to unsecured options if you’re not comfortable risking your assets.

If you’re ready to start comparing personal loan rates, Credible makes the process easy.

Pros and cons of debt consolidation loans for fair credit

All financial products have advantages and disadvantages. It’s important to weigh the benefits against the costs when deciding if a debt consolidation loan is right for your situation.

Pros of debt consolidation loans for fair credit

• Single, fixed monthly payment — When you take out a debt consolidation loan, you pay off all of your credit card and other personal debt and replace it with a single new loan. Some lenders will even pay creditors directly with a debt consolidation loan. Debt consolidation loans typically have fixed interest rates, so the amount you pay each month won’t change for the life of your loan.
• Lower interest rates — A personal loan used for debt consolidation generally has a lower interest rate than credit cards, so you may save money by consolidating your debt.
• Lower risk — Debt consolidation loans are typically unsecured, meaning you don’t have to stake your home or other property as collateral for the loan. Other options, like home equity loans, do require collateral, meaning you may risk foreclosure if you’re not able to keep up with your payments.

Cons of debt consolidation loans for fair credit

• Harder to qualify for good terms — With fair credit, you may have fewer choices for a debt consolidation loan, depending on your specific credit score. You may not be offered the interest rate and loan terms you’re hoping for.
• Higher interest costs — Debt consolidation loans are cheaper than credit cards, but they do often have higher rates than secured loans, like a home equity loan or HELOC. You may have debts at lower interest rates that wouldn’t make sense to consolidate.
• High fees — Debt consolidation loans for fair credit may come with fees that reduce the amount of money you receive after taking out the loan. You might be able to avoid these fees if you can improve your credit.

Alternatives to debt consolidation loans with fair credit

If you want to consolidate debt, a debt consolidation loan isn’t your only option. Here are a few others to consider.

• Balance transfer credit card: With a balance transfer credit card, you can transfer the amounts you owe on several different cards, leaving you with a single payment. Many of these cards have a low introductory interest rate — sometimes even 0% — for a short period of time. But watch out for fees — balance transfer cards typically come with a fee of 3% to 5% of the amount you transfer. And if you aren’t able to pay off your full balance by the time the introductory period expires, you’ll start accruing interest at the card’s regular rate.
• Home equity loan or home equity line of credit (HELOC): If you own a home, you might be able to borrow against the equity in your property in order to pay off debt. Your equity is the difference between what you owe on your mortgage and what your home is worth. Interest rates on these loans tend to be lower, but they’re secured loans — and your home is the collateral. So if you fall behind on your payments, you could risk losing your home.
• 401(k) loan: Your employer-sponsored retirement plan may allow you to borrow from the amount you’ve socked away. These loans tend to have low interest rates, and you won’t need a certain credit score to qualify. But you lose out on investment gains, and you might have to pay all the money back quickly if you lose your job.
• Cash-out refinance: If you have equity in your home, a cash-out refinance may be a worthwhile option. With a cash-out refinance, you apply for a new mortgage with a loan amount higher than your current mortgage balance. If approved, you use the new loan to pay off your existing mortgage and pocket the rest as cash. In this case, you could use the leftover funds to pay off other debts, including credit cards, student loans and personal loans.

What’s the difference between debt consolidation loans and debt settlement?

Debt consolidation and debt settlement are both methods of debt relief that can help you manage your debt, but they operate differently. Debt consolidation is a method to combine multiple debts and pay them off with a single monthly payment, ideally with more favorable terms. By contrast, debt settlement is when a company negotiates with creditors on your behalf to lower the amount of debt you owe, typically for a fee.

Keep in mind, you can work with your creditors on your own to negotiate lower balances on your debts.  While debt settlement is a strategy that can make your debt easier to manage, it’s not without risk, including fees, tax consequences for your debt "forgiveness" and potential harm to your credit.

Should you declare bankruptcy for debt?

Although bankruptcy offers a path out of debt, it should only be considered as a last resort, when all other options have been exhausted. The long-term harm on your credit is significant, since it stays on your credit reports for seven to 10 years. Having a bankruptcy on your credit report, along with the resulting substantial hit to your credit score, can make it challenging to qualify for a car, credit card, or home.

If you qualify for a debt consolidation loan and can manage the payments, debt consolidation may be a better option. If you’re struggling to pay your monthly debt, consider talking to a nonprofit credit counseling agency to determine if a repayment plan could work for you.

Do debt consolidation loans harm your credit?

When you apply for a debt consolidation loan, the lender will perform a hard inquiry on your credit to see how well you manage your credit. The hard check on your credit could cause your credit scores to dip temporarily. However, the drop is typically five points or fewer, and your scores should recover within a few months.

Debt consolidation may positively impact your credit if you make consistent on-time payments. A debt consolidation loan may also help you achieve a better credit mix, a credit scoring factor that makes up 10% of your FICO Score.

Ways to boost your credit

You can likely save a lot of money in interest if you’re able to boost your credit from the "fair" range up to "good" — or even "excellent." Here are a few ways you can do that:

Review your credit report and dispute any errors

If you want to improve your credit, start by obtaining a copy of your credit report to see where your credit stands. You can get a free copy of your credit report at AnnualCreditReport.com once per week through the end of 2023.

Carefully review your report to ensure all the information is accurate. If you see an account you don’t recognize or erroneous data, file a dispute with the credit bureaus. If their investigation confirms your claim, the information must be modified or removed, which will positively affect your credit score.

Pay your bills on time

Perhaps the best action you can take to positively affect your credit score is to make your bill payments on time every month. Payment history is the most important factor and accounts for 35% of your FICO cScore. Missing even one payment by 30 days or more could lower your credit score.

Pay down credit card balances

Your debt amount is another important factor in your credit score, with your credit utilization ratio making up 30% of your FICO Score. The credit utilization ratio is the amount of your available credit on credit cards and other revolving credit you use compared to your credit limits. Simply put, the lower your debt balances, the better.

Consider following a debt repayment strategy to help you pay off your debt faster. Two popular strategies are the debt avalanche method and the debt snowball method. The debt avalanche method involves paying off the highest-interest debt first to save money on interest charges. The debt snowball method focuses on paying off the smallest debt first to create small victories early and build momentum.

Avoid applying for new credit

As mentioned, when you apply for new credit, a hard inquiry will likely appear on your credit report, potentially resulting in a brief dip in your credit score. Generally, it’s best to apply for credit only as needed. Before applying for new credit, research to learn a creditor’s minimum credit score qualifications and only apply for credit where you’re more likely to qualify.