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Debt Consolidation Guide

Debt consolidation could be a great way to get out of debt and improve your financial picture, but it is not right for everyone. This guide will help you understand which types of debt can benefit most from debt consolidation and which solution might be right for you. You'll also learn how debt consolidation can impact your credit score.

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What is debt consolidation?

It can be difficult to manage debt payments, especially if you have multiple high interest debts. Debt consolidation is the process of combining several debts into one new loan. The goal of debt consolidation is to streamline debt and thereby reduce monthly payments, pay less in interest and pay off your debt more quickly. 

You can consolidate several different types of debt, including credit cards, auto debt, medical debt, personal loan debt and student debt. Combining different types of debt into one loan makes it easier to keep up with monthly payments, and it can save you a lot of money. If you want to consolidate your debt, there are four major debt consolidation methods to consider. 


Ways to consolidate your debt

There are a variety of ways to consolidate debt and the right method for you depends on your unique financial situation. It is important to understand and compare your options before making a decision. 

Balance transfer card

A balance transfer credit card allows you to transfer your existing debt balances with an introductory 0 percent APR.


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    Introductory APR: 0%

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    Easier to get than securing other loans

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    Best for smaller debts to be paid early

Home equity loan

A home equity loan is a secured, variable rate loan that allows you to borrow against your home’s equity, typically with lower rates.


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    Average APR: 3-12%

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    Best for homeowners with equity

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    Higher loan amounts are available

Personal loan

A personal loan is typically unsecured and comes with a fixed interest rate that will not change over the life of the loan.


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    Average APR: 5-35%

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    Possible direct payments to creditors

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    Best for borrowers with good credit

Debt management plan

A debt relief company or nonprofit agency will negotiate with creditors on your behalf and come up with a plan to pay off the debts.


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    Average fee: 15-25%

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    Low cost alternative to bankruptcy

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    Best for those who are deep in debt



Should you consolidate with a personal loan?

To figure out if debt consolidation is right for you, add up your outstanding loan amounts, credit card balances and other debts. The calculator below will help you determine how debt consolidation would impact your overall monthly payment, and how much you would save on interest. 

Pros and cons of debt consolidation

Before deciding on a lender, make sure that consolidating your debt is the right decision for your situation.

PROS

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    Consolidating your debt can help you qualify for a lower interest rate

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    Combining multiple payments into one makes it easier to make monthly payments on time

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    Making on-time debt consolidation loan payments can help you boost your credit score

CONS

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    There are often upfront costs such as loan origination fees, balance transfer fees, closing costs and annual fees

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    You might not qualify for a lower interest rate

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    If you miss payments or make them late, you could end up spending more money overall



Types of debt you can consolidate

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Consolidating your credit card debt

Credit cards are easier to qualify for than other credit products, but they typically come with higher interest rates. If you are looking to consolidate credit card debt, it is important to find a product with a lower interest rate than the one you’re currently paying. Personal and home equity loans generally have lower interest rates than credit cards. If you choose to refinance with a 0 percent balance credit card, make sure you know how long the interest rate will stay 0 percent and what rate you will qualify for once the introductory rate ends. 
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Consolidating your student loan debt

If you have multiple student loans and want to consolidate them, you can either refinance through a private lender or, if you have federal student loans, you can apply for the U.S. Department of Education’s Direct Consolidation Loan. If you apply for the federal loan, you will have more flexible repayment options and access to federal benefits. If you refinance through a private lender, you might be able to secure a lower interest rate. 
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Consolidating your medical debt

If you have multiple medical debts, consolidating will give you the convenience of a single monthly payment. If your medical provider doesn't offer a payment plan, or if the monthly payments are too high, a personal loan could be a good option. Personal loans offer lower interest rates than credit cards and could help you avoid bankruptcy due to high medical bills. You could also use a 0% APR credit card if you can pay off your medical debt before the interest rate increases.
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Debt consolidation basics

There are a variety of ways to consolidate debt and the right method for you depends on your unique financial situation. It is important to understand and compare your options before making a decision. 

How to get a debt consolidation loan in 3 easy steps

1. Answer a few questions
It only takes a few minutes to enter your information and see what loan offers you may qualify for. Answer a few questions about yourself and the loan you need, and we can match you with potential lenders. This service is free and will not affect your credit score.
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Many lenders require a good credit score. Make sure you have good credit, look into a cosigner or find a lender that works with bad credit borrowers.
compare offers
2. Compare your offers
Get prequalified and compare loan product offers based on important factors like APR and minimum monthly payments.
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Take your time and check with multiple lenders to ensure you get the best deal possible.
apply for loans
3. Lock in your rate
Choose a lender and visit its website to complete the application process. If you’re approved, you could get funding within a few weeks.
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Make sure you have financial documents regarding existing loans, income verification, etc.


Find a personal loan to consolidate your debt

Get prequalified loan offers in two minutes or less - with no impact on your credit score.

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Check Your Personal Loan Rates

Answer a few questions in two minutes or less to see which personal loans you pre-qualify for. It's free and will not impact your credit score.

4.6

Bankrate Score
APR from

7.99- 22.49%*

with Autopay
Loan Amount

$5k- $100k*

Term: 2-7 yr*
Min. Credit

749

Apply on partner site

4.8

Bankrate Score
APR from

7.96- 35.97%

with AutoPay
Loan Amount

$1k- $50k

Term: 2-7 yr
Min. Credit

560

Check rate with Bankrate

4.6

Bankrate Score
APR from

8.99- 35.99%

Loan Amount

$2k- $50k

Term: 3-5 yr
Min. Credit

600

Check rate with Bankrate

4.6

Bankrate Score
APR from

8.99- 24.99%

Loan Amount

$5k- $40k

Term: 2-5 yr
Min. Credit

600

Check rate with Bankrate

4.8

Bankrate Score
APR from

6.99- 24.99%

Loan Amount

$3.5k- $40k

Term: 3-6 yr
Min. Credit

Not disclosed

Check rate with Bankrate

4.3

Bankrate Score
APR from

8.30- 36.00%

Loan Amount

$1k- $40k

Term: 3-5 yr
Min. Credit

Not disclosed

Check rate with Bankrate

4.5

Bankrate Score
APR from

9.95- 35.95%

Loan Amount

$2k- $35k

Term: 1-5 yr
Min. Credit

None

Check rate with Bankrate

3.8

Bankrate Score
APR from

18.00- 35.99%

Loan Amount

$1.5k- $20k

Term: 2-5 yr
Min. Credit

None

Check rate with Bankrate

4.6

Bankrate Score
APR from

7.99- 29.99%

Loan Amount

$5k- $50k

Term: 2-5 yr
Min. Credit

620

Check rate with Bankrate