Key points:
- A personal loan for debt consolidation – sometimes called a debt consolidation loan – can allow you to roll your monthly credit card payments into one
- Depending on the loan’s terms, you may be able to simplify your finances and save on interest
- Using a personal loan for debt consolidation may not be worth it if you won’t save money or can’t make the payments
Credit card debt can be a source of stress and a strain on your monthly budget. On top of that, it can be difficult to keep track of, particularly if you have balances on multiple cards with different payment dates and interest rates.
A personal loan may help you get your credit card debt under control. You can use a personal loan for debt consolidation (sometimes called a debt consolidation loan), which may allow you to roll your credit card debts into one monthly payment and potentially save on interest. Here's how it works.
How consolidating debt with a personal loan works
Consolidating debt starts with choosing the right loan. Research personal loans, look into requirements and consider how they might match up with your creditworthiness.
If you’re approved for a personal loan, you then use the money to pay off your credit card debt. Some lenders offer debt consolidation loans, which are a type of personal loan. Rather than depositing the money into your account, the lender may pay the credit card balances directly.
How much debt you can consolidate with a personal loan depends on the amount you qualify for. If you’re approved for a loan that’s greater than or equal to your credit card debt, you can roll all your debts into one monthly payment. If the loan is smaller than your total credit card debt, you’ll only be able to consolidate some of your debt.
Be mindful of the interest rates involved. If you consolidate debt at a higher interest rate than that of your current debts, you could end up paying more in the long run. A long loan term can also mean paying more interest overall.
After you take out a loan and consolidate your debts, you begin making monthly payments. Many personal loans offer fixed rates. So, if you consistently make on-time payments, your monthly payment will be the same for the loan term.
