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Paying Off Debt Requires a Plan

To choose the best route, you need to know your options. Fortunately, you may have several — including debt consolidation loans. The best way to reduce the financial load depends on the type of debts, how much you owe and whether or not you are up to date on the payments. If you are considering a debt consolidation loan to manage debt, read on to learn about the pros and cons and get your life back on track.

What Is a Debt Consolidation Loan?​

A debt consolidation loan takes multiple debts and rolls them into one loan with one payment. With a single source, borrowers often find it easier to make payments without forgetting a bill. Many people use debt consolidation to get a handle on credit card debt, but they may also use a loan to deal with medical bills, personal finances or payday loans. Consolidation loans are ideal for people who have multiple small bills they have to pay and need to make it easier to manage each month.

How Do Consolidation Loans Work?​

There are several approaches to debt consolidation, although not everyone has access to all of the options. For example, some homeowners may choose to refinance a mortgage for a higher loan amount, allowing them to pay off credit cards and other bills. Similarly, people might use a balance transfer to move smaller credit card debt onto a card with a larger limit.

You can also apply for personal loans for debt consolidation. In some cases, these loans come at a lower interest rate, which could make it easier to pay off the debt more quickly. Your rate may depend on your credit score and other factors.

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Pros and Cons of Debt Settlement

Advantages of Debt Consolidation


Disadvantages of Debt Consolidation


Choosing to consolidate your debt may require a little research into your options. By considering the pros and cons, you can decide whether a debt consolidation loan or other solution — such as a debt settlement — would be more appropriate for your needs.

Is a Debt Consolidation Loan Right For You?

If you have excellent credit and can obtain an unsecured loan for the amount needed to pay off your other unsecured debt, a debt consolidation loan might be beneficial. However, keep in mind interest rates have risen in recent years, making it challenging to find a loan with favorable terms. Additionally, it’s common for lenders to ask for some form of security or collateral for the loan, putting you at risk of losing the asset you provide as collateral if you fail to make timely payments on the loan.

Need Help navigating the the various debt relief options?

Speak with a Certified Debt Analyst for a free consultation.

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