Personal loan applications for rising debt consolidation, report finds


In these unpredictable times, flexibility is key, especially when it comes to borrowing money for the things we need most. In a pinch, personal loans can be used to cover a number of things, from wedding expenses, surprise medical bills, to major home repairs or funeral expenses.

Debt Consolidation can also be a particularly strategic way to use them, as the process allows borrowers to better organize their debts and typically involves a lender sending funds to creditors on your behalf. Consolidating debt through a personal loan also allows borrowers to benefit from a lower interest rate while they repay the loan, which saves a lot of money over the life of the loan. .

A recent study by LendingTree reported that between the third quarter of 2021 and the third quarter of 2022, applications for personal loans in general increased by 12.3%, while applications for personal loans to use for debt consolidation increased by 29.1% during this period.

The report highlighted the increase in annual percentage rates, or APRs, coinciding with interest rate hike by the Federal Reserve as the main reason for the recent spikes.

Below, Select details what you can do if you want to take out a personal loan for debt consolidation purposes.

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How to apply for a personal loan

Before applying for a personal loan, you will want to check your credit score. Although there are several lenders, such as Reached and OneMain Financialwho will always consider borrowers with low credit ratings or one poor credit historyyou may have to pay a higher interest rate. However, those with higher credit scores will generally have to pay a lower interest rate.

Beginner personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, credit card refinancing, marriage, moving or medical

  • Loan amounts

  • Terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so poor that they have no credit score)

  • Assembly costs

    0% to 8% of target amount

  • Prepayment penalty

  • Late charge

    Greater of 5% of monthly amount past due or $15

OneMain Financial Personal Loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, big expenses, emergency expenses

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

    Flat fee from $25 to $1,000 or percentage ranging from 1% to 10% (depending on your state)

  • Prepayment penalty

  • Late charge

    Up to $30 per late payment or up to 15% (depending on your state)

Click here to see if you are prequalified for a personal loan offer. Conditions apply.

Next, you’ll want to determine how much money you actually need to borrow. If you are consolidating debt, simply add up all of your balances to get a total.

While the smallest personal loan amounts — with a lender such as PenFed Credit Union, for example – tend to start around $600, minimum amounts closer to the $1000 mark are often more common. Be careful not to ask for more than you need, as you will eventually have to pay back all the money.

PenFed Personal Loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, home improvement, medical bills, car financing and more

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Next, you’ll want to do your homework by researching and compare rates, fees and conditions from different personal loan providers. Some lenders will let you check your rate without hurting your credit score before you even apply.

Ideally, you’ll want to go with a lender that offers a low interest rate with no fees (or the least amount of fees) and a term that best fits your budget. LightStream and Marcus of Goldman Sachs are each known to offer personal loans with no origination fees, late fees or prepayment fees.

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    5.99% to 21.49%* when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, renovation, car financing, medical expenses, marriage and more

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

Marcus by Goldman Sachs Personal Loans

  • Annual Percentage Rate (APR)

    6.99% to 24.99% APR when you sign up for autopay

  • Purpose of the loan

    Debt consolidation, home improvement, wedding, moving and moving or vacation

  • Loan amounts

  • Terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

When you decide which lender you want to go with, submit your application and wait for approval, which can take anywhere from one to a few days. After that, just wait for the funds to be paid out.

With debt consolidation, lenders will usually disburse money directly to up to 10 of your chosen creditors – you only need to provide their information and how much money each needs to be sent. This way, you will simply be responsible for reimbursing your personal lender.

Get matched with personal loan offers.

At the end of the line

If you’ve noticed that your debt APR increases as interest rates rise, consolidating your debt can be a smart and strategic way to lower it while organizing the money you owe into one monthly payment. .

Before applying for a debt consolidation loan, make sure your credit score is as healthy as possible, as this is key to helping you get approved for the lowest interest rates available.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

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