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
  • Senate Cuts Weekly Unemployment Boost in Stimulus Bill

    Personal Finance

    Senate Cuts Weekly Unemployment Boost in Stimulus Bill
  • Personal Finance

  • The Sad Reason U.S. Wages Are Up

    Personal Finance

    The Sad Reason U.S. Wages Are Up
  • 3 Expenses You Probably Didn’t Know You Could Charge on a Credit Card

    Credit Cards

    3 Expenses You Probably Didn’t Know You Could Charge on a Credit Card
  • The Ascent
  • Knowledge
  • Personal-loans

Study: Personal Loans Can Help Solve Past Debt Problems

by Christy Bieber | Sept. 12, 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.

Could a new loan really help you deal with existing debt? A recent study suggests that it could. 

If you are already in trouble with debt and behind on payments, it may seem as though borrowing more money is just about the last thing you should do. However, a new study from TransUnion found that for a significant percentage of borrowers facing financial trouble, taking out a new loan could be instrumental in helping them to solve their debt problems.  

According to the TransUnion research, close to one-third of borrowers who were behind on debt payments experienced an improvement in delinquent debts when they took out a new personal loan. Furthermore, nearly one-quarter of borrowers who obtained a new personal loan performed well at paying it off.

This may come as a surprise, but it makes a lot of sense when you look at how a new personal loan could help borrowers deal with debt that’s currently overwhelming them. 

Here are a few key ways that a new loan might help solve existing debt problems. 

Relaxed woman lying on a grassy hill overlooking the ocean.

Image source: Getty Images

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

1. A new loan can reduce the interest paid on existing debts

Many people turn to their credit cards or payday loans during times of temporary financial trouble. 

Unfortunately, as soon as you’ve taken on high interest consumer debt, paying it off can be really difficult. With many of these types of debt, the interest and fees can be so expensive that you’re making huge monthly payments and barely reducing what you owe.

If you qualify for a new personal loan at a lower rate, it can help. For example, if you have a credit card that’s charging you 15% or more in annual interest and you can score a personal loan at a 10% interest rate, your debt will be significantly cheaper and easier to repay. 

2. A new loan can reduce your monthly payments on existing debts

Not only can a new personal loan make your debt cheaper in the long run, but it can also lower your monthly payments in the following three scenarios:

  • If you can lower your interest rate. When you’re charged less interest, less money is needed each month to cover interest costs. As a result, your total monthly payment may be lower, even if you keep the same repayment timeline. 
  • If you can extend your repayment deadline. If you give yourself more time to pay off a debt, you’ll be paying less each month toward what you owe. Be aware that this approach can raise total repayment costs, even if you’ve reduced the interest rate on your debt, because you’ll be paying that interest for a much longer period. Still, if you can't afford your current monthly payments and a new personal loan would help to bring them within your budget, it may be worth considering. 
  • If you can pay off multiple creditors. If you owe many creditors, each debt will likely have its own minimum monthly payment, and they all add up. If you take out a new personal loan to pay off multiple existing debts, your single monthly payment may be less than the sum of the other minimum payments.

If any of these scenarios apply to you, then it is worth exploring the possibility of a new personal loan ASAP. 

3. A new loan can help prevent fees

If you have maxed-out credit cards and can’t afford to pay them off, you may have to deal with over-the-limit and late fees. If you’ve taken out payday loans and need to keep doing so to pay them back, you could end up paying fees on each new loan.

A new personal loan could help you stop these fees from hitting you over and over. Many lenders offer personal loans with no origination fees, application fees, or other upfront fees. You could use your new personal loan to pay off your payday loans and credit cards, and then just work on paying down your new debt without having to worry about a bunch of new fees every month. 

The Ascent's picks for the best debt consolidation loans

Want to pay off debt faster? Check out our shortlist of the best personal loans for debt consolidation and cut your monthly payment with a lower rate.

Pay off debt faster

Should you take out a new loan if you’re struggling with debt?

Getting a new loan when you’re already in debt can be difficult -- especially if you miss a payment and your credit isn’t great. That’s why it can be important to act quickly to refinance high-interest debt with a more affordable loan. 

So if you are able to get a new loan at a lower rate, with a reduced monthly payment, this could be a wise approach that helps you avert financial disaster. Just be sure you can pay off the new loan you take out and live within your means so you don’t end up further in debt than you were in the first place. 

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

Christy Bieber
Christy Bieber icon-button-linkedin-2x

Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

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 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