Debt Consolidation Loan Rates for July 2022
Consolidating debt with a personal loan can make it easier to repay your debts. It can also help you save money if the interest rate is lower than your current debts.
The typical interest rate for debt consolidation loans is between 6% and 36%. To get the lowest rate, you will need to have a high credit score (720-850 FICO). Even a high credit score (600 to 719 FICO) could get you a better rate.
Borrowers with good credit (630-689 FICO) or bad credit (300-629 FICO) may not be eligible for a lower interest rate than their existing debts. Your chances of being approved in the future may increase if you improve your credit score.
Current Interest Rates on Debt Consolidation Loans
Your credit score and debt-to-income ratio may affect the terms and interest rates.
|28.7% (lower scores will not be accepted).|
Source: The average rates are calculated using aggregated and anonymized supply data from prequalified users in the NerdWallet Lender Market between January 1, 2020, and December 31, 2020. Rates are only estimates and not for use. These rates are not specific to any lender.
How does debt consolidation work?
You can consolidate multiple debts – such as credit card balances – and get a consolidation loan to all of them at once. Next, you will make a payment on the new loan.
How can it help you save money? It is important to choose a personal loan with a lower annual percentage rate than your existing debts.
Let’s assume you have $9,000 of total credit card debt. The combined 22% APR and $ 450 monthly payments mean that your monthly payments are $ 450. To be debt-free in two years, it will take $ 2,250 to pay interest.
Consolidating the cards into a loan at 14% APR with a two-year term will save you $ 879 in interest. You would pay $ 432 monthly, with the option to apply your monthly savings to the loan for faster repayment.
Our debt consolidation calculator will allow you to input your current balances, monthly payments, and interest rates. Compare the different options based upon your credit score to see how much you can save on a consolidation loan.
How to choose a lender
It is a good idea first to compare the offers from each lender. Online lenders make it easy to prequalify to find out what rates, repayment terms, and loan amounts may be available to you. You can compare rates and terms with multiple lenders by pre-qualifying. It won’t affect your credit score.
While it is best to select the lender with the lowest interest rate, you should also consider the term of your repayments. Even if your monthly payments are more affordable, longer terms will mean higher interest.
Some lenders specialize in debt consolidation. These lenders can offer you benefits like direct loan funding to your creditors and financial education to help manage your debts.
NerdWallet reviewed more than 30 lenders to help you find the best one. Higher credit scores are likely to receive lower rates. However, there are still options for those with bad credit.