Horse Race to the Best Debt Consolidation Loan: Comparison of 28 Debt Consolidation Lenders – Who is BEST for debt consolidation loans?
We’ve spent years in the lending industry and we track dozens of lenders. I want to pull all that information together and give you a horse race on which lenders would be best for consolidating your debt.
Debt consolidation can be a really effective tool to help you pay off debt and get on top of your finances. But not if you do it wrong or go with the wrong lender for debt consolidation. If you are being harassed by several lenders, you might be tempted by the idea of just having a single payment every month. Better to deal with just one lender than five, right? It might simplify your life in the short term, but it shouldn’t be the primary reason to consolidate your debt. The first reason to consolidate your debt is to decrease the amount of interest you pay so you can put more of your payment towards principal. Putting more money to principal should allow you to get out of debt faster. If you can’t do that when you consolidate your debt, you would be better off with the snowball or avalanche methods of debt payoff.
Debt consolidation is big business, as you can imagine. Companies would love to have you pay them all the interest you are currently paying to multiple lenders. Of the lenders we track here at The Yukon Project, all of these mention on their websites that you should consolidate your debt with them. But–spoiler alert–not all of them are good for debt consolidation. In fact, some of them would be quite bad for debt consolidation. I am going to judge these companies on more than twenty different metrics which include things like APR ranges, loan ranges, fees, flexibility, features, reputation, discounts, transparency, availability, and business type.
Let the race begin to find the best lender for debt consolidation!
The point of consolidating credit card debt–or any debt, really–is to get a lower interest rate. So, right off the bat, I am going to eliminate 60MonthLoans, NetCredit, and Rise because they don’t appear to have APRs low enough to make consolidation worthwhile. It just doesn’t matter what other benefits that they provide. They are just too expensive to consider for debt consolidation.
I am also going to remove Mariner Finance, OneMain Financial, and Regional Finance because they aren’t transparent about their policies before you apply. They want you to come into their stores and formally apply before the details are put before you. I don’t play that game. If they won’t allow potential customers to research their options before they are subjected to the pressure of a sales force, I am going to assume the worst.
How much a company will lend you is important. Obviously. If you can’t get the amount you need, you’re left with a sub-optimal solution. So let’s advance all the brands that will lend more than $40,000, in case you have a lot of debt. US Bank only lends that much to current customers who already have accounts with them. We’ll also advance the brands that will lend less than $5,000. After all, the average credit card debt in the United States is $8,000, so there are a lot of people out there who just need to consolidate a few thousand dollars. Offering a good range to customers is really important.
A big issue is the cost of the loan. Of course, this isn’t an easy thing to evaluate. The rate you get will depend on your personal financial and credit situation. But, we will advance all the brands whose top rate is below 25%, because with that cutoff it is much more likely you would be offered a rate that would be low enough to make consolidating a good idea. But, the brands that didn’t advance still have rates low enough, so it will depend on what they offer you.
We’re going to advance the brands that have an origination fee below 5%. An origination fee is a percentage of the borrowed amount and comes out of the proceeds of the loan. It’s important to note that the origination fee is accounted for in the APR, so a high origination fee on a loan with a low APR isn’t particularly bad. But, if you plan on paying your loan off early, you don’t get a reimbursement on your origination fee. So, it’s always a good idea to have a loan with a lower origination fee so you can save money as you pay off the loan early. I’m advancing Avant even though they have a higher origination fee because they actually do offer a prorated reimbursement.
I am now going to advance all the companies that don’t charge late fees. We all hope to never have to pay late fees, of course, but I especially appreciate the companies that don’t charge them. It gives people a little more grace as they pay off their loans.
Along with that, I am going to further advance any lender that doesn’t charge any other fees, like failed payment fees, bounced check fees, account maintenance fees, or NSF fees.
We are starting to get separation with the best debt consolidation lenders.
This next one is a big deal. I am going to advance any lender that is willing to pay off your other loans directly when you use them to consolidate. It’s really convenient, but I think it’s more important than that because it shows that they understand that the loan is meant to replace your other debts and not stack on top of them. This should make it easier to get approved and lighten your debt load. And, I think, it shows they are serious about debt consolidation; it’s not just a talking point on their website.
I am also going to advance any lender that will allow you to add a co-applicant or cosigner to your loan. If you can get approved for a loan without a cosigner, AND get the amount you want for the lowest possible interest rate, then there is little reason to entangle a loved one in the loan. Remember, the cosigner agrees to be responsible for the loan if you fail to repay it. So, being a cosigner isn’t without risk. But, if you struggle to get the deal you need to make consolidating worthwhile, a cosigner can really help.
Now I am going advance the brands that are widely available. Some lenders are only available in certain parts of the country. Others require you to be a member before you can apply. Some require you to be an existing customer for a certain period of time to be eligible. These brands don’t have any of these restrictions.
So, this is how things stand. You can see that the top lenders for debt consolidation are Citibank, Discover, Lightstream, Penfed, Truist, and Wells Fargo. Now for the photo finish. Wells Fargo fades considerably because not only do you need to have a Wells Fargo account to apply, you need to have had the account for at least 12 months. Discover falls off a bit because you can’t use them to consolidate Discover Card balances. Citibank, Lightstream, and Wells Fargo get a little bump for having a couple of discounts that you can qualify for. Citibank just beats out Lightstream because Lightstream does not offer direct payoff of other debts and I feel strongly that having that feature shows that a lender is focused on people who are trying to consolidate their debt.
So, that’s how the horse race ends up. There’s a pretty good spread in the results. But before we end I will say that one of the most important things about debt consolidation is getting the lowest APR that you can get. If a lender lower down on this list will give you a better rate, that might be the better long-term option for you. That’s why we always recommend that you shop around to make sure you get the best rate that you can qualify for. At The Yukon Project, we try and make shopping around easy. If you visit our marketplace page, you can apply to any one of our featured lenders. Behind the scenes, we will check your rate with up to 40 other lenders. Our partners use a soft credit check, so applying will not hurt your credit. We will show you all the lenders who are willing to make you an offer so you can pick the one that’s best for you.
If you have any experience with any of these brands, add a comment below. We’d love to know what went well and what didn’t go as well as it should have. If you found this video helpful, please like it and consider subscribing to our channel so we can continue to make videos like these. Thanks for watching.
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