It has become increasingly popular for many people to take up an unsecured loan for debt consolidation. A huge percentage of this rise is due to the availability of competitive loans from numerous lenders. The best loans that you can get for this purpose bring together all your debt clearing it easily and even at a rate that is much lower than initially expected. There are many lenders out there who are ready to give you a personal loan to consolidate your debt. Therefore, take time to explore who has the best terms before making a choice.
An unsecured loan is easy to process if you meet the requirements of the lender. With a high credit score, you can get the loan processed fast and start paying off the consolidated debt. However, there also companies that take care of those you have low credit score. Take your time to shop for the best terms of the loan. Get a lender who gives you the amount you want at a low-interest rate and a longer repayment period. Most lenders charge origination fees but not all.
When searching for an unsecured loan, look for more than just the loan amount you want. Inquire whether the lender is flexible enough to accommodate you in case of unemployment or another reason that makes repayment on time impossible. Some lenders give you a grace period of three months to get your affairs in order. This leniency in terms should be among the criteria you use to search for the best lender of the unsecured loan. Consider whether or not they charge you late fees as well.
How Debt Consolidation Works
When you have numerous debts, for example, two or three credit cards, you can have them rolled together into one payment. This works for minimal amounts of debts that don’t require a large amount of money to clear. With a good credit score, most lenders will be happy to lend you the money you require to pay off your outstanding loans. With this, you bring all your debt together and clear it with the loan amount. After that, you only require to pay one lender a monthly installment instead of paying numerous installments.
The best way to use this concept is to bring together all debt that is charged high-interest and get a low-interest loan to pay off. Ensure you have low and manageable debt that can be covered completely by the amount of unsecured loan you receive from the lender. When it comes to consolidating all the debt you have, you can opt to get one card where you transfer all your existing debt and pay off the balance in totality. This card comes with 0% interest charged on it.
Another way you can consolidate your debt is by acquiring a consolidation loan with a fixed interest rate like an unsecured loan. Use this money to pay off all your existing debt then pay back the loan only. Once you consolidate your debt, it becomes easier to pay off the monthly installments for the personal loan. This is because the payments don’t take up a large part of your monthly income. If you maintain low debt, then you stand a chance of clearing all that you owe and living debt-free.
Unsecured Loans for Debt Consolidation
| Lender | Interest Rate % | Payment Duration | Credit Score | Maximum Loan Amount |
| SoFI | 5.99-18.82 | 3-7 years | 680 | $100000 |
| Best Egg | 5.99 | 3-5 years | 640 | $35000 |
| Discover | 6.99-24.99 | 3-7 years | 660 | $35000 |
| Marcus by Goldman Sachs | 6.99 | 3-6 years | 660 | $40000 |
| LightStream | 5.95-16.79 | 3-7 years | 660 | $100000 |
| Payoff | 5.99-24.99 | 2-5 years | 640 | $35000 |
| Avant | 9.95-35.99 | 2-5 years | 580 | $35000 |
1. SoFI Unsecured Loan
When your consolidated debt exceeds the average amount offered by most lenders in terms of the unsecured loan, SoFI is the best lender to turn to. Because unsecured loans require only a good credit score and no collateral, most lenders limit the amount between $35000 and $50000. While this amount is helpful if the consolidated debt is within that range, it proves not useful with larger debt.
At SoFI, you can secure a personal loan of $100000 to cover your larger consolidated debt as long as it doesn’t exceed that amount. This is the best unsecured loan for large debt that you can find among many lenders in the market today.
With a loan of $100000, you get an interest rate that lies between 5.99%-18.82%. This is in both fixed and variable interest rates and the loan can be paid up to 7 years. The catch for this loan is you need a good credit score to secure it. The good thing about this lender is you get unemployment protection covering the loan in case you lose your job or can’t work for a legitimate reason. You get a grace period of 3 months before you start repaying the loan again. The interest still accumulates but you have time to seek a new source of income.
Pros
- Has a larger borrowing limit of $100000
- Good for consolidating larger debt
- Long repayment period
- Unemployment protection of up to 3 months
Cons
- Requires high credit score
2. Best Egg
Debt consolidation works if you don’t have a large amount of debt to clear. When the debt you have doesn’t exceed $35000 then this is the best lender for you. With a loan limit of $35000, you get to use this amount to clear out the debt you owe as soon as the loan is processed. This company is run mainly online.
The interest rate is fixed and starts from as low as 5.99% making it easier to make monthly payments for this loan rather than for multiple high-interest debts. This lender has some of the best ratings in the market. Best Egg is the lender of choice for many people seeking to consolidate their debts. The credit score required is not too high and is set at 640 to qualify for this unsecured loan.
Pros
- Ideal for debt consolidation not exceeding $35000
- Requires a fair credit score of 640
- Good fixed interest starting at 5.99%
Cons
- Has an origination fee charged to the loan amount
- Low loan limit of $35000
3. Discover
This is yet another ideal lender for an unsecured loan that you can use to clear your consolidated debt. Once you do that, the strain on your monthly income is limited to only one payment per month on an agreed amount with the lender. The interest rate charged is fixed between 6.99% and 24.99%. This personal loan gives you a limited amount of $35000. Therefore, best suited for low consolidated debt. If the debt you owe is more, it’s best to shop around for a lender with a larger loan limit.
The repayment period for this loan is 3 to 7 years as agreed upon with the lender. This makes it easier for you to clear the loan without much strain on your monthly income. You require a credit score of 660 for this type of unsecured loan.
Pros
- Can be used to clear low amounts of consolidated debt
- Has a longer repayment period of up to 7 years
- Good interest rate starting from as low as 6.99%
Cons
- Requires a credit score of 660 which is high
4. Marcus by Goldman Sachs
The good thing about this type of unsecured loan is that it has a larger limit of up to $40000. This means you can cover slightly more consolidated debt as compared to the amount offered by other lenders. One advantage offered by this lender to consider is the fact that there are no additional fees charged on the loan amount. This means even with late payment, you won’t pay any late fees. No origination fees are charged on the loan received as well.
The interest rate charged starts from as low as 6.99% and the repayment period for this loan is from 3 to 6 years. You require a high credit score set as 660 to receive this loan from the lender.
Pros
- Larger loan limit of $40000
- No origination or late fees charged on the loan
Cons
- Requires a high credit score of 660
5. LightStream
When seeking a lender with low-interest rates then this is the best option for you. You get to enjoy rates starting from as low as 5.95% to 16.79% which are some of the lowest in the market. When you have a good credit score that meets the requirements of this lender and accepts to sign up for automatic repayment, then you have some negotiating power. You can get a loan that charges a lower interest rate by 0.1% from what a competing lender is offering. This further reduces the interest rate you’re charged for this loan.
You can use this loan for larger loans as the limit is set at $100000. One advantage with this lender is you can get $100 sent to in case you find any issue with the application process. The credit score required is significantly high set at 660. You can pay back the loan up to 7 years and no origination fees are charged on the processed loan amount.
Pros
- No origination fees charged
- Low-interest rates
- Can get $100 if unsatisfied with the loan process
- Long repayment period of up to 7 years
Cons
- Requires high credit score
6. Payoff
Payoff is a platform that helps you pinpoint the best unsecured loan to consolidate all your debt easing your burden in the process. This is ideal for all your credit card debt which helps you to reduce the overall interest rate that is charged on all the debt you have. The interest rate charged by this lender is relatively low as compared to that of many other lenders in the market. It’s set at 5.99% to 24.99%. The maximum amount of loan you can receive is $35000 meaning you must use it only if the debt you owe is within this amount.
You require a credit score of 640 and above for the lender to even consider offering you this unsecured loan. The repayment period is set at 2 to 5 years.
Pros
- Low-interest rate charged
- Good for clearing small debts of not more than $35000
- Lower credit score of 640
Cons
- Reduced repayment period of 2 to 5 years
- Low loan limit of $35000
7. Avant
The lender is one of the most sought-after when it comes to unsecured loans making it one of the top lenders in the market. If you have a poor credit score then this is the ideal loan for you when you want to consolidate your debt and perhaps improve the score. It requires a score of only 580 to secure this loan from the lender. One disadvantage is the fact that the interest rate charged is higher than many other lenders. It’s set at 9.95% to 35.99% which is the highest of any other lender in the market.
This lender only gives you $35000 meaning it’s best to use if you have a low amount of debt to consolidate. There is an origination fee charged which is 4.75% of the loan amount. You should pay back the loan between 2 to 5 years.
Pros
- Low credit score of 580
- Good for low consolidated debt amount
Cons
- High-interest rate starting at 9.95%
- Origination fee of 4.75%
- Low loan limit set at $35000
Conclusion
Most unsecured loans can be used for debt consolidation but keep in mind the total amount of debt you have. If you have a large debt then it’s best to find another solution since most lenders can only lend you up to $100000. Calculate how much debt you have in total then shop for the best loan to take. The lower the interest rate, the better even though that requires you to have a good credit score. Debt consolidation can be one way to pay off what you owe and take the burden off your monthly income.