Will a debt consolidation loan hurt my credit score?

There can be a small, temporary dip in your credit score when you apply due to the lender's hard credit inquiry. However, in the long run, a debt consolidation loan can significantly help your credit. By paying off revolving credit card balances, you lower your credit utilization ratio, a key factor in scoring models. Making consistent, on-time payments on the new loan will also build a positive payment history, further improving your score over time.

Can I get a debt consolidation loan with bad credit?

Yes, it is possible to get a debt consolidation loan with bad credit. Some lenders specialize in working with borrowers who have lower credit scores. However, you should expect to be offered a higher interest rate than someone with good or excellent credit. Even with a higher rate, it may still be lower than the rates on your current credit cards or payday loans, providing a net benefit. Applying with a cosigner who has good credit can also improve your chances of approval and help you secure a better rate.

What types of debt can I consolidate?

You can typically consolidate most types of unsecured debt. This includes credit card balances, high-interest personal loans, medical bills, store cards, and payday loans. It's generally not possible to include secured debts, such as your mortgage or an auto loan, in a personal loan for consolidation because those loans are backed by collateral (your house or car). The goal is to bundle your expensive, unsecured debts into one more manageable loan.

How quickly will I receive the money?

The funding speed for online personal loans is one of their major advantages. After you are approved and have electronically signed your loan agreement, many lenders can deposit the funds directly into your bank account within one to three business days. Some lenders may even offer same-day funding. This allows you to quickly access the money and begin paying off your old creditors without delay.

Do I pay my old creditors directly?

In most cases, yes. The lender deposits the loan amount into your checking account, and you are then responsible for using those funds to pay off each of your individual debts. It's wise to do this immediately to stop further interest from accruing. A few lenders offer a service where they will send the payments directly to your creditors on your behalf, which can simplify the process even further. Be sure to confirm the lender's policy during the application process.

What's the difference between debt consolidation and debt settlement?

This is a critical distinction. Debt consolidation involves taking out a new loan to pay your existing debts in full. It's a strategy to manage your debt more effectively. Debt settlement, on the other hand, involves negotiating with your creditors to pay back less than the total amount you owe. While it may sound appealing, debt settlement can severely damage your credit score for many years and may have tax implications, as the forgiven debt can be considered taxable income. Consolidation is a much healthier financial strategy.

Debt Consolidation Loans

Compare personal loan offers that may help combine high-interest credit cards and other debts into one fixed monthly payment. Savings are not guaranteed and depend on the terms you qualify for.

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What Are Debt Consolidation Loans?

A debt consolidation loan is a type of personal loan used to pay off multiple existing debts, particularly high-interest ones like credit card balances, medical bills, or other personal loans. Instead of juggling several due dates and interest rates, you combine everything into a single new loan. This leaves you with just one fixed monthly payment, a clear repayment timeline, and often a lower overall interest rate, which can save you money and help you pay off your debt faster.

This financial tool is designed for individuals who feel overwhelmed by their current debt load. If you're struggling to keep track of multiple bills or find that high interest charges are preventing you from making real progress on your balances, a consolidation loan can provide a structured and manageable path forward. It simplifies your financial life and transforms a complex web of debt into a single, straightforward goal: paying off one loan.

Common Reasons to Consolidate Your Debt

People seek debt consolidation for a variety of reasons, but the core motivation is usually to regain control over their finances. One of the most common triggers is accumulating significant credit card debt. With average credit card APRs often exceeding 20%, balances can feel impossible to pay down as interest charges consume a large portion of each payment. Consolidating this debt into a personal loan with a lower, fixed APR can break that cycle.

Beyond credit cards, many use these loans to manage other forms of unsecured debt, such as costly medical bills, high-interest retail financing, or old payday loans. The stress of managing different creditors, due dates, and payment amounts can be immense. By streamlining everything into one predictable payment, borrowers can reduce financial anxiety, create a realistic budget, and see a clear end date for their debt, which is a powerful motivator.

Explore different types of debt consolidation loans based on your specific financial situation and needs:

Browse Debt Consolidation Loan Options

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Buy Now, Pay Later (BNPL) Consolidation Loans
Tired of tracking Affirm, Klarna, and Afterpay payments? A personal loan can consolidate your BNPL debt into one simple monthly payment. Check your rate.

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High-Interest Loan Consolidation
Tired of high APR loans? A debt consolidation loan can combine multiple high-interest payments into one, lower monthly payment. Check your rate without impact.

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Medical Debt Consolidation Loans
Consolidate multiple medical bills into one manageable monthly payment. Get a personal loan for medical debt from $2k-$50k. Check your rate without impacting your credit.

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Online Debt Consolidation Loans
Get an online debt consolidation loan to combine high-interest debts. Apply from anywhere with a digital process. Check your rate without impacting your credit score.

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Tax Debt Consolidation Loans
Owe back taxes? A personal loan for tax debt can help you pay the IRS or state, potentially stopping penalties. Check rates for loans from $2k-$50k.

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How the Debt Consolidation Process Works

Using a personal loan to consolidate debt is a straightforward process designed to be completed online. The goal is to replace your expensive, disorganized debts with a single, more affordable loan. Here’s a typical step-by-step look at the journey.

From Multiple Bills to One Simple Payment

1
Check Your Eligibility
Complete a short online form to see potential loan offers. This initial step is a soft credit inquiry and won't affect your credit score.
2
Compare and Choose Your Loan
Review offers from various lenders. Compare the APR, loan term, and monthly payment to find the option that best fits your budget.
3
Receive Funds & Pay Off Debts
After final approval, the funds are typically deposited directly into your bank account. You then use this money to pay off each of your old debts.

Ready to see your options?

Find out what you could qualify for in minutes.

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What to compare before choosing an offer

What to compare	Why it matters
APR	APR includes the interest rate and certain fees, so it is usually better for comparing loan offers than interest rate alone.
Monthly payment	Make sure the payment fits your budget before accepting an offer. A longer term may lower the monthly payment but can increase total interest.
Origination fee	Some lenders deduct a fee from the loan proceeds. Compare how much cash you would actually receive after fees.
Total repayment	Look beyond the payment and compare the total amount repaid over the full loan term.
Funding timing	Funding speed varies by lender, bank, verification steps, and when you accept final terms.
Credit inquiry	Initial rate checks generally use a soft inquiry. If you choose an offer, the lender may complete a hard credit inquiry before final approval.

Compare your current debts against the new loan terms before deciding whether consolidation makes sense.

What to have ready before checking rates

Requested loan amount: Use a realistic estimate based on the bill, quote, invoice, or project cost you need to cover.
Income and employment details: Lenders typically review income, employment, and debt obligations when evaluating final terms.
Monthly budget: Know the payment range you can handle before comparing term lengths.
Use of funds: Be ready to explain what the loan is for, especially for medical, home repair, startup, or emergency expenses.

Checking rates is not a loan approval. Final rates, terms, loan amount, and funding timing depend on lender review.

Understanding the Costs and Savings

The primary cost of a debt consolidation loan is the Annual Percentage Rate (APR), which includes the interest rate plus any fees. APRs on personal loans can range from around 8% for borrowers with excellent credit to 35.99% for those with challenged credit. The rate you secure is the single most important factor in determining how much money you can save compared to your current high-interest debts.

Some lenders charge an origination fee, which is a one-time fee deducted from the loan proceeds to cover processing costs. This fee typically ranges from 1% to 8% of the total loan amount. It's crucial to factor this into your calculations. A loan with a low APR but a high origination fee might be more expensive overall than a loan with a slightly higher APR and no fee.

Loan amount: $5,000 – $100,000
APR: 7.99% – 35.99%
Term: 24 mo – 84 mo

Loan amounts, terms, and APRs are determined by individual lender partners and depend on your credit profile, income, and other factors. Not all applicants will qualify for the lowest rates or highest loan amounts.

The loan term you choose also impacts your costs. A longer term (e.g., 60 or 84 months) results in a lower monthly payment, making it more manageable for your budget. However, you'll pay more in total interest over the life of the loan. A shorter term means a higher monthly payment but allows you to become debt-free faster while paying less overall interest.

How Debt Consolidation Loans Compare to Other Options

A personal loan is a powerful tool for debt consolidation, but it's important to understand how it stacks up against other common methods. Each option has unique benefits and drawbacks depending on your debt amount, credit score, and financial discipline.

Personal Loan vs. Alternatives

	Personal Loan	Balance Transfer Card	HELOC
Interest Rate	Fixed (e.g., 8%-35.99%)	0% Intro APR, then high variable rate	Low variable rate
Best For	Larger debts, predictable payments	Smaller debts paid off quickly	Homeowners with large debts
Key Risk	Fees and interest if rates aren't low enough	High APR after intro period ends	Secured by your home; risk of foreclosure
Repayment	Fixed term (2-7 years)	Revolving; requires discipline	Long draw and repayment periods

Choosing the Right Debt Consolidation Loan

The best loan isn't just the one with the lowest interest rate; it's the one that aligns with your financial goals and capabilities. As you compare offers, it's essential to look beyond the headline number and evaluate the complete loan structure. A successful consolidation plan requires a loan that you can comfortably repay and that provides a clear financial benefit. Consider the following factors to make an informed choice.

Calculate Your Break-Even Point: Ensure the new loan's APR is significantly lower than the average APR of your current debts. The interest savings should outweigh any origination fees.
Verify Fixed Rates and Payments: The primary benefit of a personal loan is predictability. Confirm that the loan has a fixed interest rate, so your monthly payment will not change over the life of the loan.
Check for Prepayment Penalties: Most reputable lenders do not charge a fee for paying off your loan early. This gives you the flexibility to make extra payments and become debt-free even faster without penalty.
Commit to Changing Habits: A consolidation loan is a tool, not a cure. To avoid falling back into debt, it's crucial to create a budget and avoid running up new balances on the credit cards you've just paid off.

Take control of your debt.

A single monthly payment could be just a few clicks away. See your personalized rate now.

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Frequently Asked Questions

Will a debt consolidation loan hurt my credit score?
There can be a small, temporary dip in your credit score when you apply due to the lender's hard credit inquiry. However, in the long run, a debt consolidation loan can significantly help your credit. By paying off revolving credit card balances, you lower your credit utilization ratio, a key factor in scoring models. Making consistent, on-time payments on the new loan will also build a positive payment history, further improving your score over time.
Can I get a debt consolidation loan with bad credit?
Yes, it is possible to get a debt consolidation loan with bad credit. Some lenders specialize in working with borrowers who have lower credit scores. However, you should expect to be offered a higher interest rate than someone with good or excellent credit. Even with a higher rate, it may still be lower than the rates on your current credit cards or payday loans, providing a net benefit. Applying with a cosigner who has good credit can also improve your chances of approval and help you secure a better rate.
What types of debt can I consolidate?
You can typically consolidate most types of unsecured debt. This includes credit card balances, high-interest personal loans, medical bills, store cards, and payday loans. It's generally not possible to include secured debts, such as your mortgage or an auto loan, in a personal loan for consolidation because those loans are backed by collateral (your house or car). The goal is to bundle your expensive, unsecured debts into one more manageable loan.
How quickly will I receive the money?
The funding speed for online personal loans is one of their major advantages. After you are approved and have electronically signed your loan agreement, many lenders can deposit the funds directly into your bank account within one to three business days. Some lenders may even offer same-day funding. This allows you to quickly access the money and begin paying off your old creditors without delay.
Do I pay my old creditors directly?
In most cases, yes. The lender deposits the loan amount into your checking account, and you are then responsible for using those funds to pay off each of your individual debts. It's wise to do this immediately to stop further interest from accruing. A few lenders offer a service where they will send the payments directly to your creditors on your behalf, which can simplify the process even further. Be sure to confirm the lender's policy during the application process.
What's the difference between debt consolidation and debt settlement?
This is a critical distinction. Debt consolidation involves taking out a new loan to pay your existing debts in full. It's a strategy to manage your debt more effectively. Debt settlement, on the other hand, involves negotiating with your creditors to pay back less than the total amount you owe. While it may sound appealing, debt settlement can severely damage your credit score for many years and may have tax implications, as the forgiven debt can be considered taxable income. Consolidation is a much healthier financial strategy.

Take the First Step Towards a Simpler Financial Future

Consolidating your debt is more than just a financial transaction; it's a decisive step toward regaining control and reducing stress. By simplifying your bills into one predictable payment, you can create a clear, manageable path to becoming debt-free. It allows you to focus on a single goal, budget more effectively, and potentially save thousands in interest along the way.

The best way to find out if a debt consolidation loan is right for you is to see what you qualify for. Checking your rate is fast, free, and won't impact your credit score. In just a few minutes, you can see real numbers and decide if this is the right move for your financial health.

Personal loan disclosure

Money Savvy is not a lender. We are a marketing service that connects consumers with participating lenders. Rates, amounts, and terms vary by lender, your credit history, and other factors.

Loan amounts: $1,000 – $100,000
Repayment terms: 3 – 84 months
Min APR: 5.99%
Max APR: 35.99%
Origination fees: 0% – 10% of the loan amount
Late fees: May apply; vary by lender

Representative example: A $10,000 loan with a 36-month term at an 18.99% APR would have an approximate monthly payment of $366.39 and a total cost of $13,190.04, including interest and a $500 origination fee.

Your actual APR depends on your credit score, income, and other factors. Only borrow what you can afford to repay.

California residents: California Financing Law disclosures available upon request.

Compare debt consolidation loan offers

Check available rates without affecting your credit score. If you choose an offer, the lender may complete a hard credit inquiry before final approval.

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