At a Glance

Debt consolidation is a process that can help borrowers to streamline payments, lower interest, and decrease their overall monthly payments. But if you’ve successfully consolidated debt and are cruising along on your new debt repayment plan, you may be curious about what’s next. Here are 6 things to do after debt consolidation.

In this article, you’ll learn:

Review the Loan Terms

You may know that you’ve locked in a great interest rate for your debt consolidation loan, but now it’s time to dive into the details. You likely received paperwork or a digital version during the loan process. Now’s the time to dig in and figure out answers to questions like:

  • What is the minimum monthly payment, and what day of the month is it due?
  • Will I get hit with a prepayment penalty if I’m able to pay off the loan early?
  • Under what circumstances will I be charged a late fee?
  • When does the period of zero interest end for a balance transfer credit card with a 0% APR introductory offer?

To keep motivation high, you can plug the loan terms into a debt consolidation calculator to figure out your ultimate debt-free date.

Establish Your Payment Plan

Now that you’ve streamlined payments into a single monthly payment with your debt consolidation loan or credit card, you’ll need to ensure those payments happen in a timely manner. That’s why setting up a repayment plan is a smart thing to do after debt consolidation. An effective repayment strategy where your loan is paid each month on time and in full may help to improve your credit score. And that’s especially critical if you’re thinking about how to rebuild credit after debt consolidation.

Related: Credit Card Payments: How to Pay Off Your Bill

The best option to be sure the payment happens each month is to set up automated payments. You may be able to set up autopay with your lender or through your bank. What matters is that it’s set up to pay the bill in full (and more if you can afford it!) before the monthly payment due date. You can also consider taking the debt snowball approach if you haven’t consolidated all debts into your new loan. That means you’d focus on paying off the lowest balance debt first.

Create an Emergency Fund

If you don’t have one in place already, the months following debt consolidation are the perfect time to build up emergency savings. While you can still use your credit card after debt consolidation, it may be better to use your emergency fund to pay for unanticipated expenses that crop up. In addition, not adding to your credit card as you pay off debt will help you get the debt repaid more quickly.

The recommended size of an emergency fund is three to six months of living expenses. But even setting aside $500 or $1,000 in cash can save you from needing to pay for emergencies using your credit card.

Monitor Your Credit Cards and Credit

The process of consolidating credit card debt does not close your credit cards. So it’s important that you monitor the status of the cards to be sure you know what changes occur. Luckily, most banks now offer automated alerts you can set up to trigger an email or text notification when a transaction is made with your card.

You may want to make a small transaction every few months to keep the cards active. Since the length of credit history is one factor in determining your credit score, leaving your old credit cards active after credit card consolidation can help you gain points in that area. It’s also wise to check your credit report multiple times throughout the year to ensure that your new loan payments are correctly recorded. You can check your credit report with each major credit reporting bureau (Experian, Equifax, and TransUnion) for free annually at

Create a New Budget

When you consolidate credit card debts, you’re also making a commitment to avoid the spending habits that got you in debt in the first place. And that means you may need to re-assess where you’ve been spending previously and make modifications to your budget.

You may also want to find ways to increase your monthly debt payments. And budgeting is a great way to do that. See if you can decrease the amount you’re spending in non-essential areas and shift that money toward making a larger payment on your debt consolidation loan.

Get Help if You Need It

Financial professionals like nonprofit credit counselors or financial advisors are an excellent resource as you look to alter financial habits. They can help you establish a long-term financial plan that includes debt repayment and assist with small habit changes that change the way you spend in the short term.

These professionals can also offer accountability to be sure you stick with your plan. You may also turn to someone close to you, like a loved one or friend, for accountability as you work to leave poor spending habits behind and aggressively pay down debt. Sometimes, the support of others can enable you to take positive steps after debt consolidation and hit your debt-free goal faster.


How long does it take for credit to improve after debt consolidation?

You may see an initial dip in your credit score after debt consolidation from applying for debt consolidation loans. But over the long term, steady payments should help to raise your score. It may take months or years to see an improvement in your score, but since payment history is the largest factor in your credit score, continuing to make payments on time each month should be your top priority.

How can I build my credit after consolidating debt?

Following debt consolidation, you can work to build your credit in several ways. The first area to consider is leaving existing credit cards open to establish a longer credit history. Closing out old credit card accounts could result in a lower credit score. You’ll also want to make payments on time every month since payment history is the most significant contributing factor in your credit score. The final aspect of building credit after debt consolidation is assessing your credit utilization ratio. If you consolidate existing debts to a new credit card or loan with a higher credit limit, you may see improvements in this area and a jump in your score.

Does consolidation ruin your credit?

You may see an initial dip in your credit score following debt consolidation. That’s because applying for debt consolidation loans will trigger hard credit inquiries that may knock a few points from your score. But in the long run, debt consolidation will likely help improve your credit score, not ruin it. And establishing a solid payment history by paying your debt consolidation loan on time and in full each month can help build credit over time.

What happens when you consolidate debt?

Debt consolidation is the process of taking out a new loan, often a personal loan or a balance transfer credit card, to combine multiple debts into one. Typically, the new loan is at a lower interest rate than the combined debts, saving money on interest over time. After you consolidate credit card debt, nothing happens to those credit cards. In fact, they remain open, which is a positive for your credit history. On the other hand, choosing to close credit cards following debt consolidation could shorten your credit history and decrease your credit score.

Related: Does Debt Consolidation Hurt Your Credit Score?