How Debt Consolidation Loans Work

Debt consolidation involves taking out a new loan to pay off existing debts:

• Borrow $250 - $3,000 to cover your existing debts.
• Use the loan funds to pay off multiple creditors or credit cards.
• Make one monthly payment instead of managing multiple payments.
• Repay over 3 to 36 months with a fixed interest rate.
• Simplify your budget with predictable monthly payments.

Benefits of Debt Consolidation

• Simplified payments: One monthly payment instead of multiple bills.
• Potential savings: Lower interest rates may reduce your total cost.
• Better organization: Easier to track and manage your debt.
• Fixed repayment schedule: Know exactly when you'll be debt-free.
• Credit improvement: On-time payments can help improve your credit score.

What Debts Can You Consolidate?

Debt consolidation loans can be used to pay off:

• Credit card balances
• Medical bills
• Previous personal loans
• Store credit accounts
• Overdue utility bills
• Other unsecured debts

When Debt Consolidation Makes Sense

Debt consolidation may be right for you if:

• You have multiple debts with high interest rates.
• You're struggling to keep track of multiple payments.
• You can secure a lower interest rate than your current debts.
• You have a stable income to support the new loan payment.
• You're committed to paying off your debt and not accumulating more.

How to Qualify

Lenders typically consider:

• Your credit score and credit history.
• Your income and employment stability.
• Your debt-to-income ratio.
• Your bank account history and activity.
• Your ability to make regular monthly payments.

Even with less-than-perfect credit, many lenders offer debt consolidation options for borrowers with stable income.

Important Considerations

• Compare interest rates — ensure the consolidation loan offers better terms.
• Understand all fees and costs associated with the new loan.
• Avoid taking on new debt while paying off the consolidation loan.
• Create a budget to ensure you can afford the new monthly payment.
• Consider the total cost over the full loan term.