1. Debt consolidation loans
Debt consolidation loans are personal loans used to pay off multiple debt accounts at once. By using a new loan to clear existing balances, you can potentially secure a lower interest rate and a more manageable monthly payment.
These loans are typically unsecured, meaning you don’t have to provide collateral like your car or home to qualify. Interest rates generally range from around 7% to 35% APR, largely determined by your credit score. Typical repayment terms range anywhere from 12 months to seven years.
Pros
- Unsecured loans require no collateral
- Fast online application process
- Funding is usually available quickly
Cons
- Higher interest rates if your credit score is low
- Some lenders limit maximum loan amounts
- Repayment terms may be limited by the lender
How to qualify: You’ll usually need a fair to good credit score and a stable income. Some lenders allow co-signers or co-applicants to help you qualify for the loan. This lets you leverage the credit history and score of a trusted person to potentially secure better loan rates.
Plenty of online lenders offer competitive rates and flexible loan terms for debt consolidation. You can apply online, and many lenders let you preview the terms and rates without hurting your credit score. Loans are typically issued within a few days and deposited directly into your bank account.
2. Balance transfer credit cards
A balance transfer credit card allows you to move multiple high-interest credit card balances onto a single new card. These cards are popular because they often feature a promotional 0% APR for a set period, typically 12 to 18 months. While interest savings can be significant, most issuers charge a balance transfer fee of 3% to 5% of the total amount transferred.
Balance transfer cards usually come with no annual fee and 0% rates for at least a year, and some also offer credit card rewards. Cards like Chase Freedom Unlimited offer cash back on purchases and bonus points for spending in certain categories, such as dining and travel.
Because terms vary, always compare several balance transfer credit cards to find one that works best for your situation.
Pros
- Can quickly lower your credit card interest rates
- Consolidate multiple cards into one payment
- May save hundreds or even thousands in interest charges
Cons
- Promotional 0% rate only lasts about a year
- Comes with a 3% to 5% balance transfer fee
- Missing a payment can void your promotional rate
How to qualify: You usually need a good credit score and credit history. Most balance transfer card issuers don’t allow co-signers, so you’ll need to qualify on your own financial standing. You can apply for a balance transfer credit card online within minutes and usually receive an instant decision.
Always read the fine print
Read through the terms and conditions of your balance transfer card. You can lose your promotional rate if you miss a payment or don’t pay off the full balance in time. This can cost you hundreds of dollars in interest if you don’t follow the card rules.
3. Home equity line of credit (HELOC)
A home equity line of credit (HELOC) is a revolving line of credit that uses the equity you have in your home as collateral. You can usually borrow up to a certain percentage of your home equity (such as 85%) and have a low variable interest rate on the amount you borrow.
Pros
- Offers lower rates than most other consolidation options
- Allows you to pay off multiple debts at one time
Cons
- Comes with variable rates that can increase at any time
- Diminishes your overall home equity
How to qualify: You can apply for a HELOC at your local bank or credit union. Approval will depend on how much home equity you have, your credit score and your income level. Once approved, you can draw as much — or as little — as you want from the credit line, and your payment will rise or fall depending on how much you use.
4. Debt management plans
A debt management plan is usually set up through a third party that promises to repay your outstanding debts for a single monthly payment. A debt relief company or nonprofit credit counseling agency can set up a payment plan that works within your monthly budget while taking control of your credit accounts to pay off your debts over time.
This is not a loan; it's a payment plan to a third party in return for its debt relief services.
Pros
- Not a loan, so no new debt is incurred
- Typically don’t need a high credit score to start a plan
- May negotiate debt payoff to lower interest rates or payoff amounts
Cons
- May need to close your credit lines and cards
- May end up paying high fees for the services
- Not all creditors participate in these plans
How to qualify: You can contact a debt relief company or a nonprofit credit counseling agency for plan information. Some debt management plans help you negotiate your debts lower, offering debt relief and lower repayment amounts. It’s important to keep an eye on your loans and credit balances to ensure the debt relief company is making timely payments to help get rid of your debt.
5. Peer-to-peer (P2P) loans
Peer-to-peer (P2P) loans connect individual investors with borrowers through online lending platforms. Some P2P loan platforms allow borrowers with lower credit scores to apply, making them a viable option for those with an imperfect credit history.
Pros
- May qualify with a lower credit score
- Access to direct lending from individual investors
- Fast online approval and funding
Cons
- Often includes origination or loan fees
- Interest rates may be higher than personal loans
- Can impact your credit score if you miss payments or default
How to qualify: You can apply for a P2P loan through online lenders like Prosper or Funding Circle. Since these are unsecured loans, your credit score, income and credit history are important and can impact your interest rate and loan terms.
FAQ
How much does debt consolidation cost?
Costs vary significantly by method. If you use a debt management plan, you’ll usually pay a modest setup fee and an ongoing monthly fee (often in the $25 to $75 range), depending on your state and the agency. Consolidation loans may have origination fees and interest charges, while balance transfer credit cards usually charge a 3% to 5% balance transfer fee and possibly interest.
» MORE: Debt consolidation pros and cons
What is the best way to consolidate debt?
For many, a debt consolidation loan is the simplest method. These are unsecured loans you can apply for online, and they often offer competitive interest rates to qualified borrowers. Some lenders even offer these loans without fees and with flexible repayment terms.
Are there risks associated with debt consolidation?
Yes. Consolidating your debt doesn't eliminate risk. You’re still responsible for the debt balance. If you don’t change the behaviors that led to the debt in the first place, you may end up with more debt over time. Plus, defaulting on the new loan or line of credit can severely hurt your credit score.
» MORE: How to consolidate credit card debt without hurting your credit
Why choose debt consolidation over debt settlement?
Debt consolidation is paying off multiple debts with a single loan or line of credit. This simplifies the repayment process and can save money on interest over the life of your debt. Debt settlement negotiates lower payoff amounts, but the balance is usually due upfront. The forgiven debt amount is also taxable, which can cost you money you don’t currently have.
Bottom line
The right debt consolidation option for you depends on your credit health and financial goals. If you have strong credit, a balance transfer card or a debt consolidation loan can significantly lower your interest rates. For homeowners, a HELOC offers some of the lowest rates available, though it requires using your home as collateral.
Those with lower credit scores may find relief through peer-to-peer loans or debt management plans, which focus on structure rather than strictly high credit scores.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Consumer Financial Protection Bureau, “What is a debt relief program and how do I know if I should use one?” Accessed Feb. 22, 2026.
- Consumer Financial Protection Bureau, “What do I need to know about consolidating my credit card debt?” Accessed Feb. 22, 2026.
- Consumer Financial Protection Bureau, “What is the difference between credit counseling and debt settlement, debt consolidation, or credit repair?” Accessed Feb. 22, 2026.
