Debt consolidation can be a lifesaver for those struggling to manage multiple debts. It involves combining all your debts into one loan, which simplifies payments and, in many cases, can reduce your interest rate.
One popular option for consolidating debt is a secured loan, where you use an asset, like your home or car, as collateral. By doing so, you may qualify for a larger loan amount and a lower interest rate than with an unsecured loan.
If you’re looking to consolidate debt using a secured loan, this guide will explore the top 10 secured loans for debt consolidation in 2024.
We’ll cover the best lenders, loan terms, and eligibility requirements to help you make an informed decision and choose the right loan for your financial situation.
What is a Secured Loan for Debt Consolidation?
A secured loan is a type of loan in which the borrower provides collateral to the lender. The collateral could be a car, home, or other valuable asset.
Because the loan is backed by an asset, secured loans tend to come with lower interest rates and larger loan amounts compared to unsecured loans.
However, the primary risk of a secured loan is that if you fail to make payments, the lender can seize the collateral.
For debt consolidation, a secured loan can combine multiple debts (credit card bills, personal loans, etc.) into one loan with a single monthly payment.
This can ease the burden of managing multiple payments and potentially save you money on interest over time.
Why Consider a Secured Loan for Debt Consolidation?
There are several advantages to using a secured loan for debt consolidation, including:
- Lower Interest Rates: Secured loans typically offer lower rates than unsecured loans, especially if you have a good credit score.
- Larger Loan Amounts: Because the loan is secured by collateral, lenders may be willing to lend you a larger sum.
- Easier Qualification: For individuals with less-than-perfect credit, secured loans may be easier to qualify for than unsecured loans.
- Simplified Payments: Consolidating your debts into a single loan with one monthly payment can simplify your finances and reduce stress.
However, it’s essential to understand the risks, especially the potential loss of your collateral (e.g., your home or car) if you fail to repay the loan.
Top 10 Secured Loans for Debt Consolidation (2024)
When looking for a secured loan for debt consolidation, it’s important to consider not only the interest rate but also the loan amount, term length, and eligibility criteria.
Below, we’ve highlighted the top 10 secured loans for debt consolidation in 2024 based on these factors.
1. SoFi Home Equity Loans
Best for Homeowners with High Equity
SoFi offers home equity loans with competitive interest rates and no fees for origination, application, or prepayment.
Homeowners with significant equity in their homes can use a SoFi home equity loan to consolidate high-interest debts at a lower rate.
Key Features:
- APR: Starting at 5.74%.
- Loan Amounts: From $5,000 to $500,000.
- Loan Terms: Available for 5 to 20 years.
- Eligibility Requirements: Requires 680+ credit score, sufficient equity in your home (typically 15%–20%), and stable income.
Pros:
- No fees for origination or prepayment.
- Flexible loan terms with fixed rates.
- Fast online application and approval process.
Cons:
- Available only for homeowners with significant equity.
- Best rates reserved for borrowers with excellent credit.
SoFi is a great option for homeowners who need to consolidate debt and are looking for a no-fee, online-friendly experience with competitive rates.
2. Discover Home Equity Loans
Best for Transparent Terms and Low Fees
Discover is well-known for its no-hidden-fee policy and transparent terms. They offer both home equity loans and home equity lines of credit (HELOCs), making it easy for homeowners to consolidate debt on favorable terms.
Key Features:
- APR: Starting at 5.99%.
- Loan Amounts: From $35,000 to $200,000.
- Loan Terms: 10 to 30 years.
- Eligibility Requirements: Requires a 620+ credit score, sufficient home equity, and proof of income.
Pros:
- No origination, application, or closing fees.
- Flexible loan terms ranging from 10 to 30 years.
- Fixed-rate loans with predictable payments.
Cons:
- Higher rates for borrowers with less-than-perfect credit.
- Limited loan amounts for smaller debt consolidation needs.
Discover is ideal for homeowners who prioritize low fees and straightforward terms when consolidating debt.
3. LendingClub Home Equity Loans
Best for Online Borrowers with Good Credit
LendingClub is a peer-to-peer lender that provides home equity loans for debt consolidation. As one of the largest online lending platforms, it offers competitive rates and an easy online application process for borrowers with good credit.
Key Features:
- APR: Starting at 6.00%.
- Loan Amounts: From $15,000 to $500,000.
- Loan Terms: 5 to 20 years.
- Eligibility Requirements: Requires a 700+ credit score, substantial equity, and proof of income.
Pros:
- Competitive rates for those with good credit.
- Fast application process with online account management.
- No application fees or prepayment penalties.
Cons:
- Best rates are available for borrowers with excellent credit.
- Not available for borrowers with poor credit or limited home equity.
LendingClub is a great choice for borrowers with strong credit who want the convenience of managing their loan entirely online.
4. Upstart Personal Loans (Secured)
Best for Borrowers with Fair Credit
Upstart provides secured personal loans for debt consolidation with an emphasis on using alternative data (such as education and job history) to approve loans.
Upstart’s application process is quick, and it’s an excellent choice for those with fair credit who might have trouble qualifying for traditional loans.
Key Features:
- APR: Starting at 5.99%.
- Loan Amounts: From $1,000 to $50,000.
- Loan Terms: 3 to 5 years.
- Eligibility Requirements: Requires 600+ credit score, proof of income, and sufficient collateral.
Pros:
- Fast application and funding process.
- Lower rates for borrowers with fair credit.
- No prepayment penalties.
Cons:
- Smaller loan amounts compared to home equity loans.
- Rates may be higher for borrowers with poor credit.
Upstart is a good option for borrowers who want a fast loan process and have fair credit or less-than-perfect financial histories.
5. Best Egg Secured Personal Loans
Best for Fast Access to Funds
Best Egg offers a range of secured personal loans, which are ideal for debt consolidation. These loans can be secured with collateral, such as a vehicle or savings account, and offer fast funding with relatively low interest rates.
Key Features:
- APR: Starting at 5.99%.
- Loan Amounts: From $5,000 to $50,000.
- Loan Terms: 3 to 5 years.
- Eligibility Requirements: Requires 600+ credit score, stable income, and sufficient collateral.
Pros:
- Fast approval and funding process.
- Competitive rates with no prepayment penalties.
- Flexible terms.
Cons:
- Higher rates for borrowers with poor credit.
- Limited loan amounts compared to home equity loans.
Best Egg is a great choice for those who need quick access to funds and are willing to secure a loan with collateral.
6. Wells Fargo Home Equity Loans
Best for Existing Customers
Wells Fargo offers competitive home equity loans for debt consolidation with no application fees and flexible terms.
It’s a great choice for existing Wells Fargo customers who are looking for lower rates and a seamless application process.
Key Features:
- APR: Starting at 6.00%.
- Loan Amounts: From $10,000 to $500,000.
- Loan Terms: 5 to 30 years.
- Eligibility Requirements: Requires a minimum 660 credit score, stable income, and sufficient home equity.
Pros:
- Lower rates for Wells Fargo customers.
- No application fees or closing costs.
- Flexible loan terms up to 30 years.
Cons:
- Higher rates for non-customers.
- Not available for borrowers without a good credit score or sufficient equity.
Wells Fargo is an excellent choice for existing customers who want to consolidate debt into a manageable loan with minimal fees.
7. KeyBank Home Equity Loans
Best for Large Loan Amounts
KeyBank is an established financial institution that offers home equity loans with flexible repayment terms. It is particularly beneficial for those seeking larger loan amounts to consolidate substantial debt.
Key Features:
- APR: Starting at 5.75%.
- Loan Amounts: From $10,000 to $500,000.
- Loan Terms: Available for 5 to 30 years.
- Eligibility Requirements: Requires a minimum 620 credit score, sufficient equity, and proof of income.
Pros:
- Offers large loan amounts for debt consolidation.
– No application fees or prepayment penalties.
Competitive rates.
Cons:
- Requires a higher credit score for the best rates.
- Higher rates for borrowers with less-than-perfect credit.
KeyBank is a solid choice for homeowners with substantial debt who need a larger loan for debt consolidation.
8. PNC Home Equity Loans
Best for Long-Term Loan Options
PNC offers home equity loans with a wide range of repayment terms, making it ideal for borrowers looking to consolidate debt with manageable monthly payments over a long period.
Key Features:
- APR: Starting at 6.49%.
- Loan Amounts: From $10,000 to $500,000.
- Loan Terms: 5 to 30 years.
- Eligibility Requirements: Requires a 660+ credit score, adequate home equity, and stable income.
Pros:
- No application fees or prepayment penalties.
- Long repayment terms (up to 30 years) for lower monthly payments.
- Fixed-rate loans with predictable payments.
Cons:
- Rates may be higher than some competitors.
- Available only for homeowners with good credit and sufficient equity.
PNC is a good option for borrowers who want long-term repayment options to keep their monthly payments affordable.
9. Citizens Bank Home Equity Loans
Best for Transparent Pricing
Citizens Bank offers home equity loans for debt consolidation with clear and transparent pricing. Borrowers can consolidate their debt with a predictable loan term and competitive interest rates.
Key Features:
- APR: Starting at 6.00%.
- Loan Amounts: From $10,000 to $500,000.
- Loan Terms: 5 to 30 years.
- Eligibility Requirements: Requires a minimum 620 credit score, sufficient home equity, and proof of income.
Pros:
- No application fees and flexible terms.
- Transparent pricing with fixed rates.
- Loan amounts up to $500,000.
Cons:
- Best rates available only to borrowers with higher credit scores.
- Not available for all borrowers.
Citizens Bank is ideal for homeowners who prioritize clear and transparent pricing without hidden fees.
10. SunTrust (Now Truist) Home Equity Loans
Best for High Loan Limits
Truist (formerly SunTrust) offers home equity loans with high loan limits and competitive rates. This lender is ideal for homeowners with significant equity who need a larger loan amount for debt consolidation.
Key Features:
- APR: Starting at 5.75%.
- Loan Amounts: From $25,000 to $500,000.
- Loan Terms: 5 to 30 years.
- Eligibility Requirements: Requires a 620+ credit score, sufficient equity, and stable income.
Pros:
- High loan limits (up to $500,000).
- Competitive rates and flexible loan terms.
- No application fees.
Cons:
- Requires good credit for the best rates.
- May take longer to process than other online lenders.
Truist is a great option for homeowners with significant equity who need a large loan to consolidate multiple debts.
Conclusion: Choosing the Right Secured Loan for Debt Consolidation
When considering a secured loan for debt consolidation, it’s crucial to assess your needs, including the loan amount, repayment terms, and your current financial situation.
Homeowners with good credit and substantial home equity may find the best options with home equity loans from lenders like SoFi, Discover, and LendingClub.
For those with smaller loan needs or less-than-perfect credit, options like Best Egg and Upstart can provide more flexibility.
By comparing rates, terms, and eligibility criteria, you can choose the secured loan that best aligns with your debt consolidation goals and financial situation.
Frequently Asked Questions (FAQs)
1. What is a secured loan?
A secured loan is a type of loan where you provide collateral (e.g., a home or car) to the lender. This collateral reduces the lender’s risk, allowing for lower interest rates and higher loan amounts.
2. How do I qualify for a secured loan?
To qualify for a secured loan, you need to have sufficient equity in your collateral (like your home or car), a good credit score (typically 620+), and proof of income.
3. What are the benefits of debt consolidation with a secured loan?
Debt consolidation with a secured loan simplifies your finances by combining multiple debts into one loan. It can also lower your interest rate, reduce monthly payments, and provide access to a larger loan amount.
4. What is the risk of a secured loan?
The primary risk of a secured loan is that if you fail to repay, the lender can seize the collateral (e.g., your home or car) to recover the loan amount.
5. Are secured loans for debt consolidation tax-deductible?
In some cases, if the loan is secured by your home and used for home improvements, the interest may be tax-deductible. However, it’s important to consult a tax professional for specific advice.