Debt Consolidation Loans: Turn Several Payments Into One
| What it does | Replaces several debts with one fixed payment |
|---|---|
| Saves money when | New APR (with fees) is lower and term isn't stretched |
| Amounts via our network | $100–$5,000 (state and lender dependent) |
| Typical terms | Monthly payments over months to a few years |
| Collateral | Usually none (unsecured) |
| Cost to use our service | Free, no obligation |
How a debt consolidation loan works
Juggling three or four due dates is stressful, and it's easy to miss one. A debt consolidation loan simplifies things: you borrow one lump sum, use it to pay off your existing balances, and then make a single fixed payment each month until the loan is paid off.
Most consolidation loans are unsecured personal loans with a fixed rate and a set end date. Unlike a credit card, the balance goes down every month, and you know exactly when you'll be done. Some lenders send money straight to your creditors; others deposit it in your account so you can pay them yourself.
People commonly consolidate credit cards, store cards, medical bills and other installment loans. If you're carrying several payday loans, see consolidating payday loans.
Side-by-side: your cards vs one loan
Here's a worked example with three card balances totaling $4,500. To compare fairly, both sides are paid off over the same 36 months. The rates are assumptions for illustration only.
| Debt | Balance | Assumed APR | Monthly (36 mo.) | Total paid |
|---|---|---|---|---|
| Card A | $2,000 | 29.99% | $84.89 | $3,056.12 |
| Card B | $1,500 | 27.99% | $62.04 | $2,233.34 |
| Card C | $1,000 | 25.99% | $40.29 | $1,450.27 |
| Cards combined | $4,500 | — | $187.21 | $6,739.73 |
| One consolidation loan, $4,500, 36 months | Monthly | Total paid | vs. cards |
|---|---|---|---|
| At 20% APR | $167.24 | $6,020.50 | Saves about $719 |
| At 24% APR | $176.55 | $6,355.72 | Saves about $384 |
| At 30% APR | $191.03 | $6,877.16 | Costs about $137 more |
The takeaway: consolidation pays off when your new rate is meaningfully lower than the average rate on your current debts. Plug in your own numbers with the personal loan calculator.
Don't forget the origination fee
Some lenders charge an origination fee that comes out of the loan before you get it. That changes the math in two ways: you may need to borrow more to cover your balances, and the fee is part of your total cost.
Example: if a lender charges a 5% origination fee and you need $4,500 to pay off your cards, you'd borrow about $4,737 so that roughly $4,500 reaches you. At 20% APR over 36 months, that's about $176.04 a month and $6,337.58 in total. That's still about $402 less than the cards in the example above, but much less than the no-fee $719 savings.
The APR on your offer includes the origination fee, which is why comparing APRs, not just interest rates, gives you the clearest picture. See APR vs interest rate.
When a consolidation loan makes sense
- Your new APR is lower than the average APR you pay now, fees included.
- The term is similar or shorter. A lower payment over a much longer term can cost more overall, as the CFPB points out.
- The payment fits your budget comfortably every month.
- You want one due date and a fixed payoff date.
- You'll stop adding new balances to the cards you paid off.
Consolidation may not help if your monthly spending is higher than your income; in that case, the debt tends to come back. Building a simple budget first makes the loan work harder for you.
Other ways people consolidate
A personal loan isn't the only route. Here's how the main options compare, based on CFPB guidance:
| Option | How it works | Things to know |
|---|---|---|
| Personal consolidation loan | Fixed-rate loan, fixed payoff date | Origination fee possible; no collateral usually |
| Balance transfer card | Move balances to a card with a promotional rate | Transfer fee; promo rate is temporary; good credit usually needed |
| Home equity loan | Borrow against your home | Closing costs; your home secures the debt |
| Nonprofit credit counseling | Counselor may set up a repayment plan with creditors | Not a loan; creditors must agree |
If you rent, have fair or bad credit, or need money deposited quickly, a personal loan request is often the most accessible choice. See personal loan vs credit card.
Can you get a debt consolidation loan with bad credit?
You can apply. Lenders in our network consider all credit types and look at your income and banking history, not only your score. Some use alternative credit data instead of a traditional hard pull. A lower score can mean a higher rate, which matters for consolidation, so compare the offer's APR against your current debts using the example above.
Tips: list every balance, rate and minimum payment before you apply; request only what you need to pay them off; and set up autopay on the new loan. More: personal loans for bad credit and credit score for a personal loan.
Request a consolidation loan in minutes
Zebra Finance is a free matching service, not a lender. One short form shares your request with lenders in our network that serve your state, for about $100 to $5,000. Many lenders decide within minutes, and approved funds are often deposited the next business day. Each lender shows the APR, monthly payment and total cost before you sign, so you can check the numbers against your current debts.
See if you qualify — it takes about 3 minutes. Start your free request. There is no obligation to accept an offer.
Frequently asked questions
Do debt consolidation loans hurt your credit?
Applying may involve a credit inquiry, which can lower your score slightly for a short time, and a new account changes your credit mix. Over time, paying the loan on time and lowering your card balances can help, because on-time payments and lower credit card utilization are important scoring factors.
How do I calculate if debt consolidation saves money?
Add up what you'd pay in total on your current debts over a set period, then compare it with the new loan's total of payments over the same period, including any origination fee. If the loan total is lower and the monthly payment fits your budget, consolidation saves money. Our personal loan calculator can help.
What credit score do I need for a debt consolidation loan?
There's no single minimum. Each lender sets its own standards, and the best rates usually go to higher scores. Lenders in our network consider all credit types and focus on income and bank activity, so you can apply with fair or bad credit and compare the offer to your current rates.
Can I consolidate credit card debt with a personal loan?
Yes. That's one of the most common uses for a personal loan. You use the loan to pay off your card balances and then repay the loan in fixed monthly payments. It works best when the loan's APR is lower than your cards' rates and you stop adding new card balances.
What are typical debt consolidation loan rates?
Rates depend on your credit, income, amount and term, and they vary widely between lenders. Your offer's APR includes interest and any origination fee. Compare that APR to the average rate on the debts you're paying off; see our personal loan rates guide for published averages.
Sources
- CFPB — What do I need to know about consolidating my credit card debt?
- CFPB — What is a personal installment loan?
- eCFR — 12 CFR Part 1026 (Regulation Z, Truth in Lending)