Debt Consolidation Loans: How They Work

What is a debt consolidation loan?

A debt consolidation loan is a personal loan used to pay off multiple existing debts — commonly credit cards — so you're left with a single monthly payment to a single lender, instead of juggling several balances, rates, and due dates. It's a standard personal installment loan structurally; "debt consolidation" describes what you use it for, not a separate loan product.

How to tell if it'll actually save you money

Consolidation helps when the new loan's APR is lower than the weighted average APR of the debts you're combining, and the new term isn't so long that you end up paying more in total interest despite the lower rate. Both parts matter — a lower rate over a much longer term can still cost more in total. Our full breakdown, Does Debt Consolidation Actually Save You Money?, walks through the exact math to run before you consolidate.

Where it tends to work well

• High-interest credit card debt, where a personal loan's APR comes in meaningfully lower
• Multiple due dates causing missed payments or late fees, simply from losing track
• You have a plan to avoid re-accumulating the balances you're paying off

Where it tends to backfire

• The new loan's rate isn't actually lower once fees are included
• The credit cards you consolidated stay open and get used again
• Origination fees or early-payoff penalties offset some or all of the interest savings

What to have ready before you apply

• A list of the debts you want to consolidate, with their current balances and APRs
• The weighted average APR across those debts, so you can compare it against any new offer
• A plan for the accounts you're paying off — closing them, or at least not using them the same way

How LendingGates fits in

LendingGates is not a lender. We connect your request with lenders and lending partners in our network offering personal loans from $100 to $5,000 that can be used for debt consolidation. Compare the APR and total repayment amount of any offer against what you're currently paying before you decide.