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Debt Consolidation Loans for a Debt-Free Future

Content Verified by:John H. Robinson
Free yourself up to save for a big purchase or retirement
Compare all debt consolidation options side by side

What debt do you want to consolidate?

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Note: Others does not include mortgage.

What is a debt consolidation loan? And how does it work?

Debt consolidation is the financial strategy of combining multiple debts into a single, manageable, lower-interest payment. Unsecured debts like credit card balances and medical bills have high interest rates, and reorganizing them into a single, lower- interest loan may save you money and enable you pay your debt off faster.

Are debt consolidation loans a good idea? If you have multiple unsecured loans you would like to consolidate and/or are finding the interest rates to be high on your existing loans then, yes, a debt consolidation loan may be an appropriate option for you.

Related: How does debt consolidation work

How to get a debt consolidation loan in easy steps on Credello?

1. Answer basic questions

Share basic details about your debt, financial health, and whether you own a home.

2. Tell us why & how you want to consolidate

We give you better personalized Recommendations once we know your goals and preferences.

3. Have recent bills & credit card statements handy

This helps us determine which products may work best for you.

4. Get a list of solutions you qualify for that meet your needs

All options are customized to your debt profile and repayment preferences.

5. Easily compare

Prioritize your debt consolidation loans based on how well they match your goals.

Can debt consolidation loans hurt your credit score?

You may see a dip in your credit score after you initially apply for a debt consolidation loan due to the hard credit inquiry the lender makes. But this type of credit decrease usually rebounds quickly.

Learn More: Does Debt Consolidation Hurt Your Credit?

Is a debt consolidation loan right for you?

Simplifies your debt repayment
Might not improve your interest rates
Gives you a fixed monthly payment
Potential fees
Lowers your interest rate
Helps you avoid you dealing with your debt problem
Repays your debt faster
May improve your credit

Learn more in detail here: Pros and Cons of Debt Consolidation

Looking for the next step?

Let’s do it. We can match you with consolidation options based on your goals and debt info.

FAQs about debt consolidation loans

What type of loan is a consolidation loan?

While there are debt consolidation loans out there, most loans used to consolidate debt are personal loans. Personal loan funds can be used for just about anything, including consolidating debt. They are often unsecured, meaning you don’t need collateral to qualify, and they have fixed interest rates and monthly payments. Well-qualified borrowers will likely get a low interest rate and better terms compared to those with poor credit.

What types of debt can I consolidate?

Credit card debt may be best consolidated using a balance transfer credit card or personal loan. Another type of debt you can consolidate is high-interest personal loans. To consolidate debt, it must be unsecured, meaning it’s not backed by any collateral.

Will a debt consolidation loan hurt my credit score?

When you first apply for a loan, it will trigger a hard credit inquiry. This will decrease your score by a few points in a short period of time. However, if you continue to make your debt payments on time each month, your score will quickly rebound and even increase. Note that if you make late payments or miss payments altogether, your score can suffer significantly.

After my loan is approved, how long does it take to get the money?

Once the debt consolidation loan lender approves of you and the closing process is done, funds can appear in your banking account as early as the same day you applied or up to seven days later.

Can you get a debt consolidation loan without collateral?

With good credit and a low DTI ratio, you should be able to get a personal unsecured loan to consolidate debt. This way, you won’t need to put your home, car, or savings at risk to pay off your debt.

Does a debt consolidation loan affect getting a mortgage?

Applying for a debt consolidation loan can cause a temporary dip in your credit score, which could affect your approval odds and terms of your mortgage. However, if you apply for the consolidation loan way before buying a home, your credit score should have time to recover—and, if you’ve eliminated any of your debt, you might have an easier time getting approved for a favorable mortgage.

Can you have two debt consolidation loans?

“They were so preoccupied with whether or not they could, they didn't stop to think if they should.” Yes, that’s a quote from Jurassic Park, but it applies here, too. Technically, yes you can have two consolidation loans or even consolidate a consolidation loan, though it might depend on the lender. But the real question is: Why would you want to, and is that really the best way to deal with your debt?

As you would for the first debt consolidation loan, now you need to figure out if you can also afford to make this new set of payments on time every month and you need to factor in fees such as origination, balance transfer, annual and closing. This could also put a temporary dent in your credit score as a second debt consolidation loan will require a hard inquiry. You may not even be eligible for a second loan and even just attempting a second loan could raise major red flags.

How can debt consolidation lower my interest rate?

A debt consolidation loan can help to simplify your debt payoff plan and lower the interest rate you are paying, if you get a loan that is lower than the rates on your existing debts. However, you can only get a lower rate if you have a high credit score but if you have a good credit score (in the 690 to 720 range) you still have a chance of getting a lower interest rate than your current one.