Debt Consolidation Loan - Consolidate Debt with Personal Loan (2024)

FAQs

Can you include personal loans in debt consolidation? ›

They can also use debt consolidation to combine and pay off other types of debt, such as auto loans and other personal loans.

You can have more than one debt consolidation loan at a time, but you'll need to follow your lender's guidelines. Some lenders limit the number of loans you can have at one time, or how soon you can apply for a second loan after receiving the funds from the first.

What's covered: Unsecured debts, such as credit cards and personal loans. Secured debts — such as those for houses and cars — aren't covered. Nor are student loans. What the agency does: The counselor will contact each creditor to notify it of the debt management plan and make itself the payer on your account.

Bottom line. Debt consolidation can be a handy strategy for paying off multiple debts as quickly (and as affordably) as possible. This can be especially true if the personal loan you use to consolidate your debts doesn't charge you a penalty for paying back the balance early.

Private student loans are not eligible for consolidation. Learn what to do if you're not sure what kind of loan(s) you have.

Private student loans cannot, in general, be consolidated with federal student loans.

You can consolidate credit card, student loan and high-interest personal loan debt to lower your interest rates and make your monthly payments more affordable.

Success with a consolidation strategy requires the following: Your monthly debt payments (including your rent or mortgage) don't exceed 50% of your monthly gross income. Your credit is good enough to qualify for a credit card with a 0% interest period or low-interest debt consolidation loan.

You can consolidate multiple bills into one monthly payment using a debt consolidation loan. Other common ways to consolidate debt include using a balance transfer credit card or debt management plan. It's also possible to leverage your home equity to pay off debt, or tap into your 401(k).

While debt management plans can be effective tools for repaying your debt, they're not always the best strategy. For example, secured debts and student loans aren't eligible for debt management plans, and credit counseling agencies may cap how much debt you can have to participate.

Can you use a personal loan to pay off debts? ›

You can consolidate your debts into one payment

You have to make sure you're making and maximizing your payments each month. Using a personal loan to pay off debt helps you get rid of multiple payments and go down to one payment per month — and hopefully with a much lower APR.

A personal loan will cause a slight hit to your credit score in the short term, but making on-time payments will bring it back up and can help improve your credit in the long run. A personal loan calculator can be a big help when it comes to determining the loan repayment term that's right for you.

If you qualify for a lower interest rate, debt consolidation can be a smart decision. However, if your credit score isn't high enough to access the most competitive rates, you may be stuck with a rate that's higher than on your current debts.

While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds. The biggest grant the government offers may be housing vouchers for those who qualify.

The short answer is Yes, people are generally allowed to use their credit cards after debt consolidation as it does not typically involve closing credit card accounts.

Debt relief companies, sometimes called debt settlement companies, are one option for those struggling with credit card debt, tax debt, personal loan debt and other types of unsecured debt.

It measures your monthly recurring debt (including loans, credit card payments, and rent or mortgage payments) in relation to your gross income. Lenders typically want to see a DTI of 35% to 40% or less. You might be able to lower your DTI by consolidating higher-interest debt into a personal loan.

Increasing Overall Debt

When you take out a personal loan, you add to your total debt load, and that can have a negative impact on your credit scores.