You might be able to consolidate multiple types of debt, including credit card debt, auto loans, home loans and even medical bills. Take a closer look at some common forms of debt you may be able to consolidate:. Credit card debt consolidation can be done through a balance transfer or a loan.

If a credit card or loan has a lower interest rate than the original credit card accounts, it might be possible to lower payments. Depending on the type of student loans , a single loan with one servicer or lender might make it simpler to manage debt.

It might also offer more favorable loan terms. But there may be drawbacks to consolidating student loans. According to the Department of Education, consolidating federal loans could cause you to lose some benefits. It could also end up increasing the total amount you owe or extending how long it takes to pay off everything.

Considering potential advantages and risks might help you decide whether debt consolidation is right for you. There could be upfront fees, longer repayment terms or other costs that make consolidation more expensive. A debt consolidation loan can be a smart move if it saves you money or if it makes it easier to track and make payments on time.

Finding a lower interest rate on your current debt is one important thing to consider. Comparing the loan offers can help you select the one that works best for your situation.

A credit card balance transfer lets you consolidate multiple balances into one credit card account with a new card issuer. And if the credit card has a lower interest rate than your existing accounts do, it could save you money on interest.

Remember that balance transfers usually generate a fee based on a percentage of the balance you are moving, which also must be factored into your evaluation. Some issuers may offer low introductory rates on credit cards.

If there is an introductory rate, just be sure you know how it works and when it ends. How a balance transfer could affect your credit. Another way to consolidate debt is through a debt management plan. In general, a lump-sum payment is made each month to an organization, which then distributes it among creditors.

Nonprofit credit counseling agencies can offer support. But so can less-reputable debt settlement companies. Working with debt settlement companies can be risky, according to the CFPB. They also typically encourage clients to stop paying bills altogether, which may keep you from being able to use your credit cards in the future.

It can also result in late fees and other penalties. Unless the company actually settles your debt, any savings could be wiped out by those additional costs. And your credit scores could be negatively affected, too. Ultimately, the CFPB says that debt settlement companies could leave you in deeper debt than where you started.

Before working with a credit counseling agency or debt settlement company, be sure to do your research. For example, you could check the Better Business Bureau to see whether previous customers have filed complaints against a company.

If you have equity in your home, a home equity loan or a home equity line of credit might be options to pay off existing debt.

This type of secured loan may offer a lower interest rate because your home is used as collateral. There might be high closing costs with a home equity loan. And if you use your home equity for a loan, it might not be there if you end up needing it in an emergency.

The better your credit scores are, the lower your debt consolidation interest rate might be. You can check your credit for free with CreditWise from Capital One , which gives you your VantageScore® 3. You can also get free credit reports from each of the three major credit bureaus by visiting AnnualCreditReport.

In the short term, a debt consolidation loan might negatively impact your credit scores. One reason is a debt consolidation loan requires a hard inquiry.

Over the long term, however, making monthly payments on time can help your credit scores. Check out this guide to personal loans and learn how balance transfers might affect your credit. CreditWise can help too. Overview: Although most commonly known for credit cards, Discover offers a wide selection of other products, including deposit accounts, student loans and personal loans — including debt consolidation loans.

The bank has only one in-person branch, so it's best for those who are comfortable with completing the entire application process online. Borrowers who need money quickly. Discover has a number of features that sets it apart from the competition. The most compelling is the day money-back guarantee.

If you're able to find a better rate with another lender, you can return the loan without paying anything in penalties or interest. Each lender was ranked using a meticulous point system, focusing on four main categories :.

Debt consolidation is a process where multiple high-interest debts — like credit cards and loans — are rolled into a single payment. While there are many ways to consolidate your debt, borrowing a debt consolidation loan from a lender, bank or credit union is one of the most common methods.

The general debt consolidation process entails taking out a new debt — like a personal loan — to pay off multiple debts and streamline the repayment process.

Your credit score may temporarily drop slightly because of the hard inquiry related to your final personal loan approval. Like any loan, your credit score could drop if you miss a personal loan monthly payment. The right timing for a debt consolidation loan depends on why you need one and what your current financial situation is.

A debt consolidation loan combines multiple debts into one monthly payment with a fixed rate and a set repayment term, so your monthly payments stay the same. If you can afford the payment, you can pay off your debt in as little as one year with a debt consolidation loan. Replacing revolving debt with an installment loan like a debt consolidation loan can improve your credit utilization ratio , which has a major impact on your credit scores.

There is no minimum payment option with this type of loan, so if you depend on commission or side-hustle income to make ends meet, this may not be a good fit. Bad credit personal loan APRs can be as high as credit cards rates, which may make the fixed payment unaffordable. A personal loan for debt consolidation should be part of a longer term financial plan that includes less credit card use, more budgeting and a bigger emergency savings cushion.

There are three times when a debt consolidation typically makes the most sense. The first is when you want to pay off credit card debts to improve your credit scores. The second is if you want to simplify your bill-paying strategy by combining credit cards, medical bills and other debt into one payment with a set payoff date.

Finally, a debt consolidation loan could help you pay your debt off faster if you can afford the high payment that comes with a one or two year term. Although a debt consolidation loan can be helpful for many people, it won't solve your financial problems on its own. To reap the full benefits and avoid further issues, avoid making late payments and keep balances low on the credit card accounts you pay off.

The ultimate goal of any debt consolidation strategy is to be debt free. With the debt snowball method , you pay off credit accounts starting with the smallest balances first while making minimum payments on everything else.

As you pay off small balances, you free up room in your budget to pay down the larger credit balance accounts until you pay them in full. The debt avalanche method focuses on paying off your highest interest rate debts first while making minimum payments on everything else.

However, you may end up losing assets like a home or car if you include loans you took out to purchase them in your bankruptcy. The interest rate on a personal loan may be lower than on a balance transfer credit card.

When the introductory interest rate expires, you have to pay a much higher interest rate. Balance transfer credit cards may offer more flexible payments, so long as you pay at least the minimum payment, which may be higher than on a personal loan.

But, check whether the personal loan allows prepayment without penalty. The main debt consolidation advantage of a personal loan versus a balance transfer credit card is that it replaces revolving debt with installment debt with a definite payoff date.

Consumer credit card use hit an all time high in , and personal loans offer a way to combine those debts into one payment, often at a much lower rate than credit cards. However, once the introductory period is over, the transfer credit card rate can rise.

To use the debt consolidation calculator, enter your outstanding debts and current interest rates. After receiving your estimated terms and monthly payment structure, adjust the details to find the most ideal consolidation loan for your budget.

Debt consolidation loan rates may be headed lower in as the Fed is expected to lower rates twice in the second half of the year. Borrowers with excellent credit turned to personal loans at a record pace last year, as originations of personal loans for excellent credit jumped 20 percent from Each lending institution has its own criteria for qualifying borrowers.

Common requirements are that borrowers be at least 18 years old, legal residents of the U. and not in foreclosure or bankruptcy. Most lenders look for a minimum credit score in the mids and a debt-to-income DTI ratio below 45 percent.

An excellent credit score and low DTI will get you the best interest rate and may qualify you for a larger loan.

Even if you have bad credit , you may find a lender that's willing to extend you a loan, but you'll pay higher interest rates. If you're in this scenario, you may want to apply with a co-signer who has good credit to improve your chances of being approved.

Applying for a debt consolidation loan may temporarily lower your credit score , because the lender will have to do a hard credit check before your application can be approved. However, if you make your monthly loan payments on time and don't rack up card balances again, a credit card consolidation loan can improve your credit score.

Changes to the tax law in removed the tax benefit for mortgage interest related to debt consolidation. Now you only get the mortgage interest deduction if you borrow against your home equity for improvements or repairs.

Best debt consolidation loans in February Denny Ceizyk. Written by Denny Ceizyk Arrow Right Senior Loans Writer. Rhys Subitch.

Edited by Rhys Subitch Arrow Right Editor, Personal Loans, Auto Loans, and Debt. Mark Kantrowitz. Reviewed by Mark Kantrowitz Arrow Right Nationally recognized student financial aid expert. Book What to know first. Menu List On this page.

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More Filters. Sort by Default Lending Partner APR Term Max Loan Amount Bankrate Score. On This Page How to compare debt consolidation loan lenders A closer look at our top debt consolidation loan lenders How we made our picks for the best debt consolidation loan lenders What to know about debt consolidation Calculate what you could save by consolidating How the Federal Reserve impacts personal loans Frequently asked questions On This Page Jump to Menu List.

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Prev Next. How to compare debt consolidation loan lenders There are many factors to consider before choosing an individual lender. Approval requirements.

Lenders consider your credit score, income and debt-to-income ratio when assessing loan applications. If you have bad credit, look into lenders with more flexible approval criteria.

Interest rates. Different lenders advertise different annual percentage rates. The lowest advertised rate is never guaranteed and your actual rate depends on your credit.

Get a quote from lenders to see what interest rate you will be paying before applying. While some lenders do not charge any additional fees, be on the lookout for late fees, origination fees and prepayment penalties.

Factor these in when calculating your monthly payment. Loan amounts. Make sure you know how much you need to borrow before choosing a lender, as each lender has its own loan amount range.

Repayment options. Lenders typically offer several repayment term options. If you are taking out a larger loan, finding a lender that offers a long repayment period could help you decrease your monthly payment.

LENDER BEST FOR EST. APR LOAN AMOUNT LOAN TERM MIN. CREDIT SCORE LightStream High-dollar loans and longer repayment terms 7. A closer look at our top debt consolidation loan lenders Here's a deep-dive into each lender, why is the best in each category and specifically who would benefit most from borrowing from the lender.

Borrowers who want a longer repayment term. Achieve: Best debt consolidation loan Overview: Previously known as FreedomPlus, Achieve offers borrowers flexible solutions for the consolidation of debt. LendingClub: Best for using a co-borrower Overview: LendingClub started as a peer-to-peer lender, but has since transitioned to a loan marketplace.

Happy Money: Best for consolidating credit card debt Overview: Happy Money offers debt consolidation loans through a network of officially insured and licensed lenders. Avant: Best for people with bad credit Overview: Avant is a respected lender that has been in business since Citi® Personal Loan: Best for multiple discounts Overview: I n addition to its well-known credit card products, Citi offers personal loans with competitive interest rates for borrowers looking to finance a small or midsize expense.

Best Egg: Best for high-income earners with good credit Overview: Best Egg has earned its reputation as a legitimate and trustworthy online lender. Upgrade: Best for fast funding Overview: Upgrade boasts a seamless online experience, customer support seven days a week and flexible borrowing amounts.

Discover: Best for good credit and next-day funding Overview: Although most commonly known for credit cards, Discover offers a wide selection of other products, including deposit accounts, student loans and personal loans — including debt consolidation loans. How we made our picks for the best debt consolidation loan lenders.

The interest rates, penalties and fees are measured in this section of the score. Lower rates and fees and fewer potential penalties result in a higher score. We also give bonus points to lenders offering rate discounts, payment grace periods and that allow borrowers to change their due date.

Minimum loan amounts, number of repayment terms, eligibility requirements, ability to apply using a co-borrower or co-signer and loan turnaround time are considered in this category.

Customer experience This category covers customer service hours, if online applications are available, online account access and mobile apps. This includes listing credit requirements, rates and fees, in addition to offering prequalification. Clock Wait. years in business. Credit Card Search.

lenders reviewed. loan features weighed.

Debt consolidation loans help borrowers combine multiple high-interest debts into a single payment. Compare our picks for the best debt consolidation loans Debt consolidation is the process of paying off multiple debts with a new loan or balance transfer credit card—often at a lower interest rate Debt consolidation is a process where multiple high-interest debts — like credit cards and loans — are rolled into a single payment. While there

Consolidation of high-interest debts - Debt consolidation rolls multiple debts, typically high-interest debt such as credit card bills, into a single payment. Debt consolidation Debt consolidation loans help borrowers combine multiple high-interest debts into a single payment. Compare our picks for the best debt consolidation loans Debt consolidation is the process of paying off multiple debts with a new loan or balance transfer credit card—often at a lower interest rate Debt consolidation is a process where multiple high-interest debts — like credit cards and loans — are rolled into a single payment. While there

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Your credit profile and credit wellness are about how you use your credit — money that's loaned to you by a bank, a credit card or a loan. Start small and secure. Secured credit cards or loans are accounts where you're getting credit, but it's tied to a cash deposit that the lender can easily collect if you don't make your payments.

This can be a great way to start building your history. If you pay your secured card on time, eventually you will be able to qualify for unsecured credit. Another option might be to co-borrow with a person who has established credit history.

It's common for younger adults to co-borrow with their parents who have a longer credit history. Learn more about loans and getting credit.

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Generally, a higher credit score will allow you to qualify for lower interest rates, while a lower credit score will land you higher interest rates. It's also a good idea to not apply for a new loan if you've recently applied for other lines of credit since too many hard inquiries on your credit report can lower your credit score and lead to higher interest rates.

Personal loan and debt consolidation lenders do accept applicants with less than ideal credit scores — while you'll be approved for the loan, you'll likely receive a higher interest rate if your credit score is on the lower side. Debt consolidation works best when you are able to receive an interest rate that's lower than the rates you're paying for your current debts.

Many lenders allow you to check what rate you'd be approved for without hurting your credit score so you can make sure you're okay with the terms before signing on the dotted line.

If you are not comfortable with the interest rate you'll receive for your debt consolidation loan, you might want to consider using the debt snowball method instead, which entails paying more toward your debt with the lowest balance while paying just the minimum on all your other debts.

Once that debt is paid off, you can move onto the second lowest balance and repeat the process until you're debt-free. This process allows you to knock out one debt faster, which can make you feel more accomplished and motivated to keep tackling the others.

See if you're pre-approved for a personal loan offer. As with any form of credit or loan, late or missed payments have the potential to hurt your credit score. Remember that any time you apply for a new loan or line of credit, you're opening up a hard inquiry on your credit report, and as a result, your credit score will be temporarily lowered.

Skipping a payment or making a late one on top of that can result in an even lower credit score. Many lenders will also charge extra fees for missing or late payments, which can end up making your debt consolidation process feeling even more costly.

To avoid the potential for missing or late payments, make sure you are enrolled in Autopay for your debt consolidation loan. That way, your monthly payments will be automatically deducted from your bank account prior to the due date and you won't have to worry about accidentally missing one.

Lastly, while consolidating your debt may help you to pay it off faster, the loan itself won't keep you out of the debt cycle. Many borrowers mistakenly believe debt consolidation doesn't work for them because shortly after becoming debt-free , they fell back into old habits and eventually, more debt.

Debt consolidation itself is just another tool meant to alleviate multiple high-interest monthly payments. It's important to figure out what causes you to go into debt in the first place.

According to financial expert and author Paco de Leon, many people may have certain certain root causes, like overspending when they're stressed out, which push them to rack up credit card debt they're unable to pay off.

It can be really helpful to speak to a financial therapist or a financial advisor if you're having trouble keeping the debt away. Catch up on Select's in-depth coverage of personal finance , tech and tools , wellness and more, and follow us on Facebook , Instagram and Twitter to stay up to date.

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It's also important to understand that debt consolidation involves taking out a new loan. As with any other type of loan, the application process and the loan itself can affect your credit scores. Weigh the pros and cons of debt consolidation and how it might affect your credit scores to decide whether it's the right path for you.

Consolidation isn't the only option for debtholders looking for relief. Consider these alternatives:. Debt management plans. Some non-profit credit counseling services offer debt management programs , where counselors work directly with the creditor to secure lower interest rates and monthly payments.

This approach may help you avoid taking out a new loan, but there's a catch. You'll also lose the ability to open new credit accounts as long as the debt management plan is in place. Credit card refinancing. This introductory rate is only temporary, however, and these kinds of cards are difficult to get without good credit scores.

Filing for bankruptcy is a legal process for individuals and businesses that find themselves unable to pay their debts. During bankruptcy proceedings, a court examines the filer's financial situation, including their assets and liabilities.

If the court finds that the filer has insufficient assets to cover what they owe, it may rule that the debts be discharged, meaning the borrower is no longer legally responsible to pay them back.

While bankruptcy can be a good choice in some extreme situations, it's not an easy way out. Bankruptcy proceedings will have a severe impact on your credit scores and can remain on your credit reports for up to 10 years after you file.

Bankruptcy should generally only be considered as a last resort. Juggling multiple debts can be overwhelming, but it's important not to let those bills pile up.

With a few deep breaths and some careful consideration, finding a strategy for debt management that keeps your credit healthy is well within your reach. We get it, credit scores are important. No credit card required. Home My Personal Credit Knowledge Center Debt Management What Is a Debt Consolidation Loan?

Does Debt Consolidation Hurt Your Credit? Reading Time: 5 minutes. In this article. Highlights: Debt consolidation is a debt management strategy that combines your outstanding debt into a new loan with a single monthly payment.

What is debt consolidation?

Consolidation of high-interest debts - Debt consolidation rolls multiple debts, typically high-interest debt such as credit card bills, into a single payment. Debt consolidation Debt consolidation loans help borrowers combine multiple high-interest debts into a single payment. Compare our picks for the best debt consolidation loans Debt consolidation is the process of paying off multiple debts with a new loan or balance transfer credit card—often at a lower interest rate Debt consolidation is a process where multiple high-interest debts — like credit cards and loans — are rolled into a single payment. While there

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While we strive to provide a wide range of offers, Bankrate does not include information about every financial or credit product or service. A debt consolidation loan is a type of personal loan that allows you to roll multiple debts into one loan with one fixed monthly payment. Consolidation is a popular debt relief method that borrowers use to help make their debt more organized and less expensive over time.

Just like with other loans, each lender will offer different terms and conditions. However, finding the right consolidation loan may require a bit more heavy lifting when comparing lenders. To be worth it financially, the rate on your new loan must be lower than that on your existing debts.

The key to making the most of your consolidation loan is to know exactly how the process works and how lenders differ.

This can help you stay organized and save money, especially if you have an overwhelming amount pile of high-interest debt, such as credit card debt.

Debt consolidation loans are personal loans that consolidate multiple loans into one fixed monthly payment. To optimize your total savings, focus on consolidating the debts with the highest interest rates first and keep your loan term as short as possible.

If your monthly payments are a bit too high for your budget, you may be able to extend the loan term. A debt consolidation loan is a type of personal loan.

Both are fixed rate installment loans that can be used to consolidate a wide range of debts. However, a personal loan does differ in that you can use the loan for a variety of reasons.

Unless the lender has specific restrictions, you can use a personal loan to fund nearly every legal expense — including debt consolidation. On the other hand, consolidation loans can only be used to combine two or more debts. The lender will typically prohibit using the funds for any other use.

Most debt consolidation loans are fixed-rate, which means the interest rate never changes and you make the same payment every month. So if you have three credit cards with different interest rates and minimum payments, you could use a debt consolidation loan to pay off those cards — leaving you with just one monthly payment to manage instead of three.

To calculate your potential savings through consolidation, use a credit card payoff calculator and a personal loan calculator. However, because consolidation loans involve multiple debt streams, that monthly payment can add up fast. When trying to find the best option for your situation, compare at least a few lenders and pay close attention to the features.

Caret Down. A debt consolidation loan is worth considering if:. However, there are instances where it could be more sensible to explore other options. If you can qualify for a low interest rate , a debt consolidation loan can streamline the repayment process and save you money in interest at the same time.

Before you commit to consolidating, explore your loan options and details, specifically the rates and fees of each. If you qualify for a lower rate and the monthly payments fit comfortably within your budget, then a debt consolidation loan may be the best relief method for your finances.

How to consolidate business debt. Should you use a home equity loan for debt consolidation? How to choose the best fast business loan. OnDeck vs. Credibly: Which small business lender is right for you? Hanneh Bareham. Written by Hanneh Bareham Arrow Right Writer, Personal Loans and Debt Relief.

Hanneh Bareham has been a personal finance writer with Bankrate since She started out as a credit cards reporter before transitioning into the role of student loans reporter. She is now a writer on the loans team, further widening her scope across multiple forms of consumer lending.

Hannah Smith. Edited by Hannah Smith Arrow Right Editor, Personal Loans. Hannah has been editing for Bankrate since late Getting a debt consolidation loan means you apply for a specific amount of money, usually enough to cover the exact amount of total debt you're trying to pay off.

Once approved, lenders will typically pay your creditors directly, asking for their information and the amount you wish to send to each. Alternatively, the funds could simply be deposited into your bank account — they would have to be used to pay off your debts and once that was done, you'd just need to pay back your debt consolidation loan with fixed, equal monthly payments over a specified timeline.

Like any loan, you'll be charged interest , but unlike credit card interest — which averages about Typically, your interest payments are calculated into your monthly payment and divided over the lifetime of the loan, with most loan terms ranging anywhere from six months to seven years.

The longer the term, the lower your monthly payment will be, although you'll be charged more interest over time so it's best to elect for the shortest-term loan you can afford. Some lenders also charge a sign-up or origination fee, however there are several no-fee options with varying interest rates available depending on your credit score.

Choose a personal loan that doesn't carry too many fees whenever possible and always make sure you're comfortable with the terms and features of the loan before you accept it. So let's say you apply for a credit card like the Citi Simplicity® Card or the U.

Just keep in mind that you'll have to pay a balance transfer fee, which will vary depending on the credit card you choose. Still, if you have a high amount of debt paying the balance transfer fee can definitely be worth it , as you won't have any interest compounding.

Read our Citi Simplicity® Card review. One major draw to consolidating your debt is the potential to receive a lower interest rate, which can end up saving you hundreds or even thousands of dollars in the long run. Bankrate's website has an online interest calculator you can use to figure out how much you'd have to pay in interest over the life of a loan — or until you pay off your debt.

Keep in mind that while the new interest rate you receive may not always be drastically lower than your current rate, some savings are still better than none at all. To earn cash back, pay at least the minimum due on time.

See rates and fees. Terms apply. Read our Citi Double Cash® Card review. After that, the variable APR will be Balance transfers for both cards must be completed within 4 months of account opening.

Another side effect of having a lower interest rate for your debt is the ability to repay your balance a little faster. Having high interest rates often leaves borrowers feeling as though the majority of their monthly payment goes toward the interest rather than the principal, while having a lower interest rate may actually allow you to put some extra cash toward the principal.

If this is your goal with debt consolidation , apply for a personal loan that doesn't charge prepayment penalties , extra fees charged for paying off your loan earlier than you were supposed to. While the actual cost of a prepayment penalty varies depending on how it's being charged, these can appear as a percentage of your loan balance, as the amount of interest your lender is missing out on since you paid it off early or as an additional fixed fee.

Read the terms of the loan to figure out if there's a prepayment penalty. Rates without AutoPay are 0. Excellent credit required for lowest rate. Rates vary by loan purpose. Not only can debt consolidation help you save money, it can also help you feel more financially organized.

When you apply for a debt consolidation loan, the lender will send the funds to your creditors to pay off those balances , so the only monthly payment you'll be making is for the loan itself.

Having just one monthly payment instead of several can help ease the pressure of having to remember to make multiple payments each month before their due dates, which can be especially stressful if you don't have an Autopay option set up.

Remember, if you do miss a payment or if it is late, the lender may report this to the credit bureaus, which could result in your credit score taking a hit. Some personal loan lenders try to make your monthly payments as easy as possible by offering an interest rate discount just for enrolling in Autopay.

SoFi and LightStream Personal Loans are just a couple of lenders that offer a 0. The interest rate you receive for any new loan or line of credit will depend on your credit score and credit report. Generally, a higher credit score will allow you to qualify for lower interest rates, while a lower credit score will land you higher interest rates.

It's also a good idea to not apply for a new loan if you've recently applied for other lines of credit since too many hard inquiries on your credit report can lower your credit score and lead to higher interest rates.

Personal loan and debt consolidation lenders do accept applicants with less than ideal credit scores — while you'll be approved for the loan, you'll likely receive a higher interest rate if your credit score is on the lower side.

Debt consolidation works best when you are able to receive an interest rate that's lower than the rates you're paying for your current debts. Many lenders allow you to check what rate you'd be approved for without hurting your credit score so you can make sure you're okay with the terms before signing on the dotted line.

If you are not comfortable with the interest rate you'll receive for your debt consolidation loan, you might want to consider using the debt snowball method instead, which entails paying more toward your debt with the lowest balance while paying just the minimum on all your other debts.

Once that debt is paid off, you can move onto the second lowest balance and repeat the process until you're debt-free. This process allows you to knock out one debt faster, which can make you feel more accomplished and motivated to keep tackling the others. See if you're pre-approved for a personal loan offer.

As with any form of credit or loan, late or missed payments have the potential to hurt your credit score.

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