Best Low-Interest Consolidation Loans & Average Rates

Your financial situation, including how much you owe, your income, and your credit score play a big part in what debt consolidation loan you qualify for, but that’s not all that goes into determining which one is right for you. Consider fees, repayment terms, what you can afford and what impact each loan would have on your monthly and long-term finances before making a debt-relief decision.

How to Get the Lowest Consolidation Loan Rates

There’s a lot to think about before making the decision to apply for a debt consolidation loan. Getting a good interest rate is important in order for the loan to make financial sense. Average debt consolidation loan rates are between 11.99% and 24.99%, but the rate that’s best for you is one that’s lower than what you’re paying on your credit cards or other unsecured debt.

This seven-step process will help you determine how to obtain the best debt consolidation loan that works for your financial situation with the lowest rate possible:

Step 1: Evaluate your finances. How much do you need to borrow to pay off all credit card bills? How much can your budget afford to make monthly consolidation loan payments? Lenders will assess whether your income is sufficient to cover your payment obligation. Don’t borrow more than you need to pay off the debt, or you may find yourself in a worse financial situation than you started.

Step 2: Check your credit report and score. Are there mistakes on your credit report you could correct to improve your score? Is your score close enough to cut-off lines between fair and good, or good and excellent, that you can take a few months to work on improving? The better your credit score, the better the interest rates and term offers you’ll find.

Step 3: Consider other debt consolidation options. Do you have enough equity in your home to take out a home equity loan or line of credit (HELOC) that would pay off the credit card bills and leave you an affordable monthly payment? Is it worth putting your home at risk of foreclosure if you miss payments?

Step 4: Talk to a certified counselor from a nonprofit credit counseling agency. A discussion with a credit counselor is free of charge and they can evaluate your overall financial situation, help you create an affordable budget and advise you on the best way to eliminate debt.

Step 5: Look at several qualified lenders. Be sure you understand the terms and conditions of the loan before you sign. Interest rate is the most important factor, but so are fees and the repayment period.

Step 6: Gauge how strong a commitment you will make to the process. Does eliminating credit card debt mean enough to you that you can rein in your spending and make the payments on time every month? If you are not committed, you could end up with worse financial problems than you have now.

Step 7: Make an Informed choice. Once you take the first six steps, you should know how much money you need to borrow, what the interest rate and monthly payment will be and whether this is a comfortable financial move and if it will save enough money to be worth the effort.

Factors That Affect Debt Consolidation Loan Interest Rates

Many things can determine the kind of debt consolidation loan interest rates you’ll see offered when you look for a loan. Some you can’t control. Of the things you can, those that show you’re a responsible borrower who will be able to make on-time payments are the most important to keeping interest rate offers low.

1. The market: Interest rates rise and fall as the market is influenced by global events, the economy, and other outside factors. Do some online research about interest rates in general and what future predictions are to help make a decision on whether to look for a loan now, or work on your credit until you wait for things to change.
2. Your credit: Your credit score and credit report will be a major factor in the kind of interest rates you are offered. The better your score, the better the rates. If you’ve made on-time payments, have a good mix of credits and your cards aren’t maxed out (lenders like to see a 30% or less utilization rate), you’ll get better offers.
3. Your income and DTI: How much you earn, as well as your debt-to-income (DTI) ratio will have an impact on the interest rates you’re offered. Lenders want to be sure that you can pay them back. A DTI of 35% or less is generally considered ideal.
4. Loan amount: The more money you’re seeking to borrow, the higher the interest rate will be, since it’s more of a risk for lenders.
5. Collateral: If you are in a position to get a secured loan – one in which you guarantee property – you will likely get a better rate. This mostly applies to a home equity loan or line of credit. Some other secured loans, like auto title loans, can be sketchy, have high interest and are likely not a good fit for debt consolidation.

The Best Low-Interest Debt Consolidation Loans for Bad Credit

It’s not impossible to get a debt consolidation loan if you have bad credit.

Here are some of the best options for debt consolidation loans for bad credit, based on services, fees, reviews from the Better Business Bureau, and complaint history.

SoFi

Debt Consolidation Loan Features: Will pay creditors directly, which comes with a 0.25% rate discount

Repayment Terms: 2,3,5 or 7 years

Loan Amounts: $5,000 to $100,000

Eligibility and Requirements: Financial history, credit score (650-680), income

Fees. No origination, prepayment, or late fees

Best For: High-debt borrowers with fair, but not great, credit and a decent income.

*Check for current rates

Prosper

Debt Consolidation Loan Features: Full amount of loan is sent to borrower through direct deposit, who is responsible for using it for debt consolidation.

Repayment Terms: 2-5 years

Loan Amounts:  $2,000-$50,000

Eligibility and Requirements: 600 credit score; debt-to-income (DTI) below 50%

Fees: Origination fee 1%-9.99%. Late fee is 5% of monthly payment or $15. Failed payment is $15

Best For: A great debt consolidation loan for people with a low credit score and higher debt.

*Check for current rates

Avant

Debt Consolidation Loan Features: Full amount of loan is sent to borrower through direct deposit, who is responsible for using it for debt consolidation.

Repayment Terms: 2-5 years

Loan Amounts: $3,000-$100,000

Eligibility and Requirements: Wells Fargo banking customer; no minimum credit score specified but expect minimum 660-670.

Fees: Origination fee for secured loan is $75. Fee for late payment or insufficient funds is $39

Best For: Borrowers with bad credit (580 credit score will get you in the door), who still find the high interest rate a better choice than what they’re paying in credit card interest.

 *Check for current rates

» Learn more about: Best Debt Consolidation Companies for Bad Credit

You may also want to consider a loan marketplace, like Upstart, which puts your information out to a variety of lenders who provide you with offers, some of which place a heavier emphasis on an applicant’s education or earning potential, rather than credit score.

» Learn more about: Upstart Loan Review

Average Debt Consolidation Loan Rates by Credit Score

The average rate for a five-year personal loan in 2026 was 13.99% for borrowers with a credit score between 700 and 759. Credit score of 620 to 639? The average rate was 24.99%.

Your interest rate on a debt consolidation loan will largely depend on your credit score.

The best debt consolidation interest rate for you depends on what your credit card APRs are. Let’s say that your credit card APR is 24.99%, the same as the APR on a five-year debt consolidation loan that you qualify for. Unless you make the same monthly payment on the card that you’d make on the loan, and don’t use the card at all, the credit card will cost you more in the long run.

If you pay a minimum payment of less that what the loan payment would be, for instance $210 on a $10,000 credit card balance without adding anything more to the balance, it will take 19 years and five months to pay off the card, and you’ll end up paying $38,778 in interest.

If you take out a $10,000, five-year loan with 24.99% interest to pay that card off, with a monthly payment of $293.45, you’ll pay a $7,607 in interest, which is the same you’d pay if you made that same payment on the credit card.

Keep in mind, though, that a credit card interest rate can rise with a late payment or if you go over the credit limit. It’s easier, too, for many people to stick to a loan payment than to pay a fixed amount on a credit card for five years without using it.

Terms for a 5-year/$10,000 Debt Consolidation Loan

Credit Score	Interest Rate	Monthly Payment	Interest Paid Over Life of Loan
760-850	11.99%	$222.39	$3,343.64 [$13,43.64 total]
700-759	13.99%	$232.63	$3,957.84 [$13,957.84 total]
680-699	17.99%	$253.88	$5,232.79 [$15,232.79 total]
660-679	19.99%	$264.88	$5,892.99 [$15,892.99 total]
640-659	21.99%	$276.13	$6,567.94 [$16,67.94 total]
620-639*	24.99%	$283.45	$17,607.28 [$27,607.28]

*Often the lowest score lenders will consider for a loan

Will a Debt Consolidation Loan Affect My Credit Score?

If you make your monthly payments on time, your credit score should improve over time with a debt consolidation loan. You’ll be making on-time payments, reducing your balance, and adding a different type of credit to your mix, all of which count toward a positive credit rating.

It may decrease a little at first, because lenders will make a hard check on your credit report, but that’s like taking one step back in order to take three forward.

Debt Consolidation Loan Alternatives

A debt consolidation loan may not be the best solution for your financial situation. If you have equity in your home, for instance, but don’t have a high credit score. Or you don’t want to take on debt to solve a debt problem, or don’t want to have a five-year payment commitment, but want to eliminate that debt. Worse-case scenario, you may simply not be able to afford payments on a loan or your credit cards.

There are options besides debt consolidation that may be a better fit for your situation.

Tapping Home Equity

If you have equity in your home, you will likely get a much better interest rate on a home equity loan or line of credit [HELOC] than on a personal loan, even if your credit score isn’t prime. Equity is the difference between what the market value of your home is and what you owe on your mortgage. You can get a loan or line of credit for up to 80% of your equity if you qualify. The rates are generally the same as mortgage rates, with some lenders offering deals, like a three-year lower rate. You can use the money for whatever you’d like to.

The process is similar to getting a mortgage. The lender will give you an idea of how much you qualify for, and your home will be appraised for its market value. It usually takes four to six weeks to complete a home equity line of credit. You are putting your home up as collateral, so be sure you can make the payments before diving in.

Credit Card Balance Transfers

A balance transfer card is a credit card with a promotional no or low interest rate that allows you to move debt to it from your high-interest cards. The special interest rate only last for short time, usually 12-18 months, so be sure you pay it off before it ends. You also may need a credit score of 670 or higher to qualify.

Credit Counseling

Financial professionals at nonprofit credit counseling agencies can help you create a strategy for eliminating unsecured debt. One way is through a debt management plan that reduces the amount of interest you pay to around 8%.

If you opt for debt management, the nonprofit agency works with your creditors to create an affordable monthly payment that eliminates the debt in 3-5 years. However, you must agree to stop using credit cards while in the program. The agency usually charges a monthly fee for the service.

Debt Settlement

Debt settlement companies, which are often for-profit businesses, will settle your credit card debts for less than you owe. They claim to reduce what you owe by as much as 50%, but when you factor in fees, late payment penalties and interest charges, it’s likely to be closer to 25%.

Not all creditors will accept a debt settlement proposal. If yours does accept a settlement, you face tax consequences. The IRS treats forgiven debt over $600 as income.

In other words, debt settlement is pretty much a last resort.

Nonprofit Debt Settlement

This is a new program that’s similar to traditional debt settlement, but by a nonprofit credit counseling agency. You will pay about 50% of what you owe, but unlike for-profit debt settlement, there is no negotiating involved in nonprofit debt settlement. Credit card companies agree from the outset on how much your should repay. You make 36 fixed monthly payments to eliminate your debt. Miss any of those payments and the program is canceled.

A downside is that the program is so new that only a few nonprofit credit counseling agencies offer it and only a few banks and card companies has signed on to participate.

Go to a search engine and type in “Nonprofit Debt Settlement” to find an agency that offers this service.

Bankruptcy

If your debts exceed your ability to pay, you can file for bankruptcy. But first you’ll need to consult with a court-approved credit counselor to review your options.

Chapter 7 is the most common personal bankruptcy option. It eliminates most of your debts, but there are some non-exempt debts like second homes, paintings, valuable cars, property, jewelry and investment accounts, that will be sold and the money used to pay off creditors. Other non-exempt debts like taxes, alimony, child support, and student loans can’t be discharged.

Chapter 13 is the other popular form of bankruptcy. It creates a repayment plan that eliminates some of your debts and allows you to keep certain personal property as long as you stay current on your repayment plan.

Bankruptcy severely damages your credit score and can limit your ability to borrow for at least 7-10 years after your case is discharged.

Is a Debt Consolidation Loan Worth It?

Debt consolidation is definitely a worthwhile choice – if you hold up your end of the bargain.

Debt consolidation loans are easier to manage than credit card debt, especially if you have multiple credit cards. You make one payment to one source, once a month. This will save you money and your credit score should improve.

All good!

It only works, though if you don’t run up new bills while you’re paying off the old bills. If you really mean to succeed, you need to give your credit cards some time off while you pay off the debt.

If you became overwhelmed with debt because you simply overused credit cards, the time off from them will help you form new financial habits. Keep those new habits in mind if you start acquiring credit cards again. If your debt was because of unforeseen circumstances, like a health issue, drop in income, or divorce, you also gained some new financial strategies that have built a strong foundation for the future.