Skip to main content
Advertiser Disclosure
We do receive compensation from some partners whose offers appear on this page. We have not reviewed all available products or offers. Compensation may impact the order in which offers appear on page, but our editorial opinions and ratings are not influenced by compensation.

Ascent-logo

  • Credit Cards
  • Banking
  • Brokerages
  • Loans
  • Mortgages
  • Knowledge
  • Latest Picks
  • Search Icon Click here to search

Credit Cards

Top Picks
  • Best of March 2021
  • Cash Back
  • Balance Transfer
  • Travel
  • 0% APR
  • Rewards
  • Bad Credit
Knowledge
  • Beginners Guide to Credit Cards
  • How to Rebuild Your Credit
  • Maximize Your Credit Card Rewards
  • Learn More About Credit Cards
Credit Card Tools
  • Compare Cards
Looking for a new credit card?

Explore the best credit cards in every category as of March 2021.

Get started!

Banking

Top Picks
  • Best Savings Accounts
  • Best Bank Accounts
  • Best Money Market Accounts
  • Best CDs
  • Best Checking Account Bonuses
Knowledge
  • Beginners Guide to Banking
  • Everything You Need to Know About Savings
  • Money Market Accounts Made Easy
  • Learn More About Banking
Looking for a place to park your cash?

Check out our top picks of the best online savings accounts for March 2021.

Get Started!

Brokerages

Top Picks
  • Best Brokers of March 2021
  • Best Online Brokers for Beginners
  • Best Options Brokers
  • Best IRA Accounts
  • Best Roth IRA Accounts
  • Best Robo Advisors
Knowledge
  • How to Open a Brokerage Account
  • Beginner's Guide to Brokerages
  • Learn More About Brokerage
Just getting started?

Explore our picks of the best brokerage accounts for beginners for March 2021.

Get Started!

Loans

Top Picks
  • Best Loans of March 2021
  • Best Personal Loans for Bad Credit
  • Best Loans for Debt Consolidation
  • Best Low-Interest Personal Loans
  • Best Personal Loans for Good Credit
  • Best Personal Loans for Fair Credit
Knowledge
  • Personal Loans Made Easy
  • Debt Consolidation Guide
  • How to Pay Off Debt
  • Learn More About Loans
Thinking about taking out a loan?

Before you apply for a personal loan, here's what you need to know.

Get Started!

Mortgages

Top Picks
  • Best Mortgage Lenders of March 2021
  • Best Mortgage Lenders for Poor Credit
  • Best Refinance Lenders
  • Best VA Mortgage Lenders
Knowledge
  • First Time Homebuyers Guide
  • Home Loans Made Easy
  • The Complete Guide to Refinancing
  • How to Get a Mortgage with Bad Credit
  • Learn More About Mortgages
Tools & Calculators
  • Mortgage Calculator
Compare Rates
  • Today's Mortgage Rates
  • Refinance Rates
  • 15-Year Mortgage Rates
  • 20-Year Mortgage Rates
  • 30-Year Mortgage Rates
  • Jumbo Mortgage Rates
  • VA Loan Rates
  • 5/1 ARM Rates
  • 7/1 ARM Rates
  • FHA Mortgage Rates

Knowledge

Knowledge Section
  • All Articles
  • Credit Card Articles
  • Banking Articles
  • Brokerage Articles
  • Personal Loan Articles
  • Mortgage Articles
  • Personal Finance Articles
Recent Articles
  • U.S. Chamber of Commerce Says Biden's Stimulus Plan Isn't Targeted Enough

    Personal Finance

    U.S. Chamber of Commerce Says Biden's Stimulus Plan Isn't Targeted Enough
  • Why I Shop for a New Savings Account Twice Per Year

    Banks

    Why I Shop for a New Savings Account Twice Per Year
  • How Much House Could You Afford With a Median Income?

    Mortgages

    How Much House Could You Afford With a Median Income?
  • 1 Feature I'll Look for in All Future Mortgage Lenders

    Mortgages

    1 Feature I'll Look for in All Future Mortgage Lenders
  • The Ascent
  • Knowledge
  • Loans

3 Times to Consolidate Your Debt Using a Personal Loan

by Elizabeth Aldrich | June 18, 2019

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

couple sitting on the floor looking over pile of papers

Image source: Getty Images

Juggling multiple payment due dates, interest rates, and open balances makes it easier to drop the ball and miss a payment. One slip-up, and you can damage your credit score for years, and mounting late fees can wreak havoc on your finances.

Debt consolidation loans allow you to combine multiple loans into a single loan, simplifying the payment process and giving you access to additional benefits. While consolidating debt with a personal loan has its pitfalls, it can also be a financial life-saver when you're drowning in debt. Here are a few times when you should consider consolidating your current debt using a personal loan.

1. You can lower your interest rate

If you have good credit, you may qualify for a low-interest personal loan that allows you to pay off your balance at a lower rate than your existing debt. This is the best reason for consolidating your debt, because it can save you a significant amount of money. Let's say you're paying off balances on three credit cards with respective interest rates of 14%, 16%, and 17%, but you qualify for a personal loan with an interest rate of 10%. By consolidating, you stand to save hundreds -- if not thousands -- on interest over time.

Most lenders require you to have "fair" or "good" credit -- typically a FICO® Score between 580 and 739 -- and will base your interest rate on your credit history. If your credit score needs a little work, you can give it a boost by reviewing and disputing any inaccuracies on your report and by paying off some of your current debt. You can also wait to apply for the new loan until a negative mark falls off your report, which in most cases happens seven years after the date of the original delinquency.

Be aware that the lender may also charge an origination fee (usually 1% to 5% of the total loan) to cover the cost of processing the new loan. So make sure this fee doesn't outweigh the potential interest savings before signing on the dotted line.

The Ascent's picks of the best personal loans

The Ascent's picks of the best personal loans

Looking for a personal loan but don't know where to start? The Ascent's picks of the best personal loans help you demystify the offers out there so you can pick the best one for your needs.

See the picks

2. You need to simplify your monthly payments

One of the more obvious benefits of debt consolidation is simplification: When you consolidate, you only have to keep up with one monthly payment. However, streamlining the payment process isn't a good reason to consolidate if you'll end up with a higher interest rate. Remember, a higher interest rate means a more expensive loan and likely a longer repayment period. It might make your life easier now, but it's not worth spending extra money on interest just to have a single due date to remember each month.

3. You can't make your monthly payments

Consolidating your debt with a personal loan can help lower your monthly payments by extending the length of your loan. No one wants to increase their interest rate or extend the time it takes them to pay off debt, but if you simply can't make your minimum monthly payments, consolidation can help you avoid defaulting on the loan, which can lead to consequences more dire than an extended repayment period.

Consider other options

Debt consolidation with a personal loan isn't the right solution for everyone, so consider exploring alternative options. You may be able to find a credit card balance transfer offer that serves you better. Some offer low or 0% interest rates for a set period of time, but you'll need good credit to qualify. If you go this route, it's crucial to pay off the balance before the promotional period ends (usually 15 to 21 months) to avoid the high regular interest rate.

You may also want to consider a home equity loan, which may get you a lower interest rate by using the equity in your home as collateral. Just know that you'll be putting your home at risk if you can't make your monthly payments.

Debt consolidation is a valuable tool if you're struggling to make your required payments or can take advantage of a lower interest rate. Weigh each of your options and make sure you understand any associated fees before moving forward with a new personal loan.

Our Picks of the Best Personal Loans for 2021

We've vetted the market to bring you our shortlist of the best personal loan providers. Whether you're looking to pay off debt faster by slashing your interest rate or needing some extra money to tackle a big purchase, these best-in-class picks can help you reach your financial goals. Click here to get the full rundown on our top picks.

About the Author

Elizabeth Aldrich
Elizabeth Aldrich icon-button-linkedin-2x icon-button-twitter-2x

Elizabeth is a writer specializing in credit cards, debt repayment, and small business. Her work has also appeared on MSN Money, Yahoo! Finance, and Business Insider.

Share This Page
Facebook Icon This icon shares the page you are on via Facebook
Blue Twitter Icon Share this website with Twitter
LinkedIn Icon This image links to share the page over LinkedIn.
Email Icon Share this website with email

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

Featured Offer

Logo for Upstart loans

4.5 Star Rating - 580 Minimum Credit Score

Check Rate

Related Articles

Man holding cash image for Best Personal Loans for 2021

Best Personal Loans for 2021

Girl holding credit card image for Balance Transfer vs. Personal Loan: Which Should I Choose?

Balance Transfer vs. Personal Loan: Which Should I Choose?

cap one image for 3 Times When You Should Take Out a Personal Loan

3 Times When You Should Take Out a Personal Loan

Man sitting at a desk celebrating with a fist pump image for How to Get Approved for a Personal Loan

How to Get Approved for a Personal Loan

Featured Articles

Best Personal Loans for 2021

Balance Transfer vs. Personal Loan: Which Should I Choose?

3 Times When You Should Take Out a Personal Loan

How to Get Approved for a Personal Loan


The Ascent Logo

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.

btn_facebook-yellow btn_twitter-yellow btn_instagram-yellow

Copyright © 2018 - 2021 The Ascent. All rights reserved.

About The Ascent
About Us Contact Us Newsroom How We Make Money Editorial Integrity Ratings Methodology
Legal
Terms of Use Privacy Policy Accessibility Policy Terms and Conditions Copyright, Trademark and Patent Information
Learn
Credit Cards Banking Brokerage Loans Recent Articles

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

Back to The Motley Fool