Stop, Consolidate & Listen
(But not in that order)
Debt consolidation simplifies multiple debts into one lower-interest payment.
Did You Know…?
There are at least 7 ways to consolidate your debt.
Credello’s picks for you
Common questions about debt consolidation
Debt consolidation is when you combine multiple debts into a single lower-interest payment. You may consolidate debt to simplify your monthly bills, lower your monthly payments to create more disposable income, or pay off your debt faster.
To consolidate debt with a personal loan, make sure your credit score is as high as possible. The better your credit, the higher your chances of approval. If you have a bad credit score, check your report for errors and catch up on any late or unpaid payments. Next, use a debt consolidation calculator to see if consolidating makes sense for you. If it does, be sure to compare loan options from banks, credit unions, and online lenders. Finally, get your proof of ID, address, and income ready and apply for that loan.
Some popular ways to consolidate debt are personal loans for debt consolidation, balance transfer credit cards, and debt management plans. All accomplish the goal of simplifying your debts into one monthly payment, albeit in different ways.
Other debt consolidation options include home equity loans and 401(k) loans.
Unsecured loans are more common though they typically come with higher interest rates than secured loans. Since secured loans are backed by collateral—like your home or savings account—you’re able to get a lower interest rate. But, as is the case with home equity loans, then you’re putting your house at risk.
Simply put, if you make your payments on time and don’t pick up any additional debt, consolidating shouldn’t hurt your score at all. Your credit score may take a temporary dip when you first apply for a loan, but if you use a debt consolidation loan to pay off debt, your credit will probably improve in the long run.
As with any loan, you’ll want to shop around for the best terms and interest rates available. If you have poor credit, be sure to check your credit report and rid it of errors before you start applying for loans. You can also boost your credit score by improving your debt-to-income ratio. Are there any small debts you can pay off without the loan?
If your prospective lender allows it, you can also get a cosigner to help you qualify for a lower rate on a loan. Your cosigner should have a high credit score and be prepared to take on responsibility for the loan should you default.
Debt consolidation is great if you have a payoff plan and budget in place to avoid additional debt. Consolidating can help you simplify your monthly payments, lower your total interest payments, or make your monthly budget more flexible.
So the short answer is yes, debt consolidation does really work—if you’re prepared, motivated, and disciplined enough.
Looking for the next step?
Let’s do it. We can match you with consolidation options based on your goals and debt info.
Latest on debt consolidation
Compare debt routes
Debt Consolidation Loan
Debt Management Plan
What it is
Credit score requirements
A new single loan with lower interest
Lower interest or monthly payment
Better rate for better credit scores
Some loans might have origination fee
Debt counselor helps manage repayments
Not for secured debts like auto loans
Some charge a monthly fee
Negotiate to settle for less
You don’t have to repay in full
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