What is debt consolidation loan?

A debt consolidation loan is a single new loan you take out to pay off multiple existing debts, such as credit cards, medical bills, or personal loans. The goal is to combine those payments into one monthly installment, ideally at a lower interest rate, to simplify your finances and reduce total interest costs over time.

If you searched this question, you are likely carrying revolving credit card debt across two or more accounts, and you may be feeling the strain of multiple due dates and high minimum payments. Your hardship is probably not yet critical—you are still making payments—but you recognize the debt is not shrinking fast enough. The risk level here is moderate: you are proactive but need to ensure a consolidation loan does not simply extend your debt term or add fees without lowering your rate.

Before applying, review your credit score and current interest rates. A consolidation loan works best if you have good credit (typically 660 or higher) and can qualify for a rate meaningfully lower than your current average. The tradeoff is that you must close or stop using the paid-off accounts; otherwise, you risk doubling your debt load. Prepare a list of each debt’s balance, interest rate, and minimum payment.

If your credit score is below 640 or your debt exceeds 40% of your gross annual income, a loan may not be the right tool. In that case, a debt management plan or settlement program could be more appropriate, though each has its own costs and credit impact. Keep in mind that debt relief availability depends on your state, the type of debt you hold, your financial hardship, the current status of your accounts (current vs. delinquent), and each partner’s specific criteria.

A practical next step is to get a clear picture of your total unsecured debt and monthly cash flow. Before you speak with any lender or counselor, you can use the DebtSense AI assessment on this site’s homepage. It is a private, no-obligation review that will help you see which options might fit your situation. That way, you come to any conversation informed and prepared.