Credit card debt can hurt your credit score — even if you're dutiful about making on-time minimum payments every month. And if you have outstanding debt on more than one credit card, it may seem like there's no end in sight.
If you feel like you'll never be able to pay off your high-interest credit cards, a debt consolidation loan may help you get on track with a more straightforward and affordable payoff plan. And you get the added bonus of improving your credit score, too.
Ahead, Select explains why lowering your credit card balances with a debt consolidation loan can have a positive impact on your credit while also helping you take steps toward financial freedom.
How your credit card balance impacts your credit score
Your credit utilization rate (CUR) is the second biggest factor (after payment history) that makes up your credit score. FICO and VantageScore, the two most common credit scoring models, look at the size of your credit card balances in comparison to how much available credit you have left.
Both major scoring models rank "amounts owed" and/or "percent of credit limit used" just below the number-one most important factor, on-time payment history.
Experts recommend keeping your total CUR well below 30% — so if you have a $10,000 credit limit, you should aim not to spend more than $3,000 each billing cycle. Some experts even suggest staying below 10%, which might not always be realistic depending on your budget and how much credit you have available.
What to do if your debt is ruining your credit score
If your high credit card balance is impacting your score, you'll want to take steps to pay it off as soon as possible.
The fastest option is to make higher-than-minimum payments until you've completely paid off your full balance. You'll continue to pay interest, but depending on how much you can afford to pay each month, you could tackle it before the interest charges get too out of control. But not everyone can afford to go this route.
If the balance is so high that you can't make a considerable dent, and you're spending a lot of money on high interest charges, you might want to consider transferring that debt to a personal loan with a lower APR. While applying for a debt consolidation loan will result in a small ding to your credit score (as with every hard inquiry), drastically lowering your CUR will more than likely result in a noticeable boost to your credit score.
After applying and getting approved for a debt consolidation loan, many lenders will pay off your creditors directly. Then you repay the loan in monthly installments, usually with a lower, fixed interest rate than you were paying on your credit cards. Once a personal loan is paid off, the credit line is closed and you have no more access to it.
Before you make any decisions, use a free credit score simulator such as the one provided by CreditWise® from Capital One® to see that happens if you were to take out a new loan and pay off your credit card balance.
Using this free tool, you can enter hypothetical scenarios, such as taking out a $10,000 loan and/or paying off $10,000 of your current credit card debt, then watch as your score recalculates to estimate how it may improve with every financial decision. (You can also see what could happen in other hypothetical situations, like applying for a mortgage, taking out a car loan, letting your payments default, etc.)
Every consumer's credit score depends on multiple variables. There are no guarantees, but you may find that reducing your CUR will help you raise your credit score in under 30 days.
Select offers a widget where you can put in your personal information and get matched with personal loan offers without damaging your credit score.
When narrowing down and ranking the best debt consolidation loans, we focused on recommending loans with fixed-rate APR (meaning it doesn't go up and down), flexible loan amounts and terms, no early payoff penalties and no origination fees when possible. (Read more about our methodology below.)
Top personal loans for debt consolidation
Best for paying creditors directly
Happy Money's Payoff Loan is a solid option if you're looking to consolidate credit card bills. It offers borrowers with fair credit flexible repayment terms and the option to have the lender pay your creditors directly. The $5,000 minimum may be high for your needs, though, and the origination fee can run from 2% to 12%, which is deducted from your loan proceeds.
- Accepts fair credit.
- Lending marketplace makes it easy to check multiple offers.
- Direct pay option with debt consolidation loans.
- High $5,000 loan minimum.
- Origination fee runs 2% to 12%.
- Can only use funds for credit card debt.
- No joint or co-signed applications.
Best for student loan consolidation
We like that SoFi has high loan caps and doesn't charge any origination fee, so borrowers get the full amount funded. The credit requirements can be stringent, however, and interest rates for weaker applicants are on the higher side.
- Loans approved for up to $100,000
- No origination fee or late fee
- Next-day funding available
- Accepts co-borrowers
- Minimum loan amount is $5,000
- High APR for fair/low credit
Fixed rates from 8.74% APR to 35.49% APR. APR reflect the 0.25% autopay interest rate discount and a 0.25% SoFi Plus interest rate discount. SoFi Platform personal loans are made either by SoFi Bank, N.A. or, Cross River Bank, a New Jersey State Chartered Commercial Bank, operating from its Delaware branch, Member FDIC, Equal Housing Lender. SoFi may receive compensation if you take out a loan originated by Cross River Bank. These rate ranges are current as of 02/23/26 and are subject to change without notice. Not all rates and amounts available in all states. See SoFi Personal Loan eligibility details at https://www.sofi.com/eligibility-criteria/#eligibility-personal. Not all applicants qualify for the lowest rate. Lowest rates reserved for the most creditworthy borrowers. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, income, and other factors.
Best for fair/average credit
We like that Upstart considers factors besides credit score, including education, income and employment history. However, co-signers aren't accepted.
- Accept applicants with bad or no credit
- Minimum APR is lower than many competitors'
- Approves personal loans up to $75,000
- Most loans are funded the next business day
- Origination fee of 0% to 10%
- Doesn't allow co-signers or co-borrowers
Best for consolidating debt while improving financial literacy
We like that Upgrade considers borrowers with fair credit and allows you to apply with a co-borrower, which can improve your odds of approval and receiving favorable rates. The maximum interest rate is on the high side, however.
- Accepts applicants with fair credit
- Approves loans of up to $75,000
- Discount for having creditors paid directly
- Funding in as little as one day
- Accepts co-borrowers
- High maximum interest rate
- Origination fee of up to 9.99%
- No physical branches
Why Upgrade is the best for financial literacy:
- Free credit score simulator to help you visualize how different scenarios and actions may impact your credit
- Charts that track your trends and credit health over time, helping you understand how certain financial choices affect your credit score
- Ability to sign up for free credit monitoring and weekly VantageScore updates
Best for good to excellent credit
We like that LightStream offers competitive APRs, no late or origination fees and long loan term options. But you can't prequalify and the loan minimum may be too high if you only need to borrow a small amount.
- Same-day funding available.
- Loan amounts up to $100,000.
- No origination fee or late fee.
- The minimum loan amount is $5,000.
- Prequalification not available.
- No option to pay your creditors directly.
Best for joint applicants
You can sign with collateral or a co-borrower to better your approval odds and secure a lower rate. Funding can be quick.
- Approves loans of up to $50,000
- Repeat borrowers may qualify for an APR discount
- Borrowers can choose their payment date
- Co-borrowers permitted
- Higher maximum APR than other lenders
- Funding may take several days
- No direct payment to creditors
- Numerous fees
Read more
Our methodology
To determine which personal loans are the best for consolidating debt, Select analyzed dozens of U.S. personal loans offered by both online and brick-and-mortar banks, including large credit unions. When possible we chose loans with no origination or sign-up fees, but we also included options for borrowers with lower credit scores on this list. Some of those options have origination fees.
When narrowing down and ranking the best personal loans, we focused on the following features:
- Fixed-rate APR: Variable rates can go up and down over the lifetime of your loan. With a fixed rate APR, you lock in an interest rate for the duration of the loan's term, which means your monthly payment won't vary, making your budget easier to plan.
- Flexible minimum and maximum loan amounts/terms: Each lender provides more than one financing option that you can customize based on your monthly budget and how long you need to pay back your loan.
- No early payoff penalties: The lenders on our list do not charge borrowers for paying off loans early.
- Streamlined application process: We considered whether lenders offered same-day approval decisions and a fast online application process.
- Customer support: Every loan on our list provides customer service available via telephone, email or secure online messaging. We also opted for lenders with an online resource hub or advice center to help you educate yourself about the personal loan process and your finances.
- Fund disbursement: The loans on our list deliver funds promptly through either electronic wire transfer to your checking account or in the form of a paper check. Some lenders (which we noted) offer the ability to pay your creditors directly.
- Autopay discounts: We noted the lenders that reward you for enrolling in autopay by lowering your APR by 0.25% to 0.5%.
- Creditor payment limits and loan sizes: The above lenders provide loans in an array of sizes, from $1,000 to $100,000. Each lender advertises its respective payment limits and loan sizes, and completing a preapproval process can give you an idea of what your interest rate and monthly payment would be for such an amount.
Note that the rates and fee structures advertised for personal loans are subject to fluctuate in accordance with the Fed rate. However, once you accept your loan agreement, a fixed-rate APR will guarantee your interest rate and monthly payment will remain consistent throughout the entire term of the loan. Your APR, monthly payment and loan amount depend on your credit history and creditworthiness. To take out a loan, lenders will conduct a hard credit inquiry and request a full application, which could require proof of income, identity verification, proof of address and more.
*Your LightStream loan terms, including APR, may differ based on loan purpose, amount, term length, and your credit profile. Excellent credit is required to qualify for lowest rates. Rate is quoted with AutoPay discount. AutoPay discount is only available prior to loan funding. Rates without AutoPay are 0.50% points higher. Subject to credit approval. Conditions and limitations apply. Advertised rates and terms are subject to change without notice. Payment example: Monthly payments for a $10,000 loan at 7.99% APR with a term of 3 years would result in 36 monthly payments of $313.32.
