Key insights:
- A debt consolidation loan allows you to combine multiple debts into one new loan, which may streamline your payments and help you manage your budget
- Before applying, review your current debts, compare loan options and make sure the monthly payment and loan terms fit your finances
- After receiving funds, continue making required payments on all debts until you’ve confirmed that each balance has been paid off
It can be challenging to manage many different debts. Having multiple lenders, interest rates and due dates to juggle can make it difficult to budget and stay on top of your payments.
A personal loan to consolidate debt, sometimes also referred to as a debt consolidation loan may be a way to simplify your finances and potentially help you pay off your outstanding debts more easily. Keep reading to learn how to get a debt consolidation loan and discover a new way to manage your debt.
What is a personal loan for debt consolidation?
A debt consolidation loan is a personal loan that you can use to combine multiple debts into one single loan, potentially with a lower interest rate than you’re currently paying. Depending on the lender, sometimes you receive the money in a lump sum, while in other cases the lender pays off your debts for you. In either case, you’ll generally pay off the new personal loan in fixed monthly installments.
The terms of a debt consolidation loan are varied by lenders and are typically based on factors like the borrower’s credit history and income. Be aware that the interest rate offered may not be lower than what you’re currently paying or that the length of the repayment term may mean you pay more interest overall. Always read through any loan agreement before accepting.
Steps to get a personal loan for debt consolidation
The process for obtaining a personal loan for debt consolidation is fairly simple, but it’s important to understand the steps before you apply.
Evaluate your finances
When applying for a personal loan to consolidate debt, consider whether it’s the right option for you. First, review your current debt load and estimate how much you might need. Then, review your credit report, and correct any errors that you find. personal loans with competitive terms typically require you to have strong credit.
Compare personal loan options
Consider all your choices when applying for a personal loan. Different lenders may have different terms, policies and fees. Some lenders may offer pre-qualification, letting you see potential interest rates before applying. Be aware that pre-qualification does not guarantee approval.
Apply for the loan
Once you’ve decided on a loan, it’s time to apply. Here are some of the documents you may need to complete the application:
- Proof of identity: Documents that confirm your age and identity, like a passport, driver’s license, state ID or military ID
- Proof of address: Many identity documents include this information, but you may need to provide additional proof like a utility bill or lease agreement
- Proof of income and employment status: W2s, tax returns, bank statements or employer information help lenders confirm you have a reliable cash flow
Once you’ve submitted your documents, the lender will review your application and let you know if you’re approved.
Review terms and accept the loan
If you’re approved, review the terms and make sure the loan fits your budget. Note the monthly payment and any additional fees that might be included.
Use the funds to pay off debt
Once approved, you may use your funds to pay off your debt. Citi Personal Loan customers can get their funds deposited directly into an existing Citi® bank account the same business day, or in most cases within 2 business days when deposited to an external bank account.
Make sure to keep paying your monthly payments on any loans, credit cards or other debts until you’ve received confirmation that your debt has been paid off to avoid impacting your creditworthiness or adding late fees to your balance.
Begin making monthly payments
Keep track of your new loan and make your monthly payments on time. Typically, personal loan interest rates are fixed, meaning you’ll pay the same amount each month for the life of the loan.
Decide whether a personal loan for debt consolidation is right for you
Using a personal loan for debt consolidation can be appealing if you’re concerned about handling multiple debts. Combining your debts into one monthly payment may help you keep track of your debt, take control of your budget and provide a longer time frame to pay off your balance. However, a lower interest rate is not guaranteed, and additional fees may apply.
Citibank Personal Loans
Citi offers personal loans to both existing Citi customers and new Citi customers that meet specific eligibility criteria, including an established credit and income history along with additional factors determined by Citi. If you think you could benefit from a Citi® Personal Loan, apply online today.
This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
