How to get a debt consolidation loan in 5 steps

Here’s how to get a debt consolidation loan in five steps.

1. Check your credit score

Start by checking your credit score. Borrowers with good to excellent credit scores (690 to 850 FICO) are more likely to get approved and get a low interest rate.

Ideally, the new debt consolidation loan has a lower rate than the combined interest rate on your other debts. A lower rate lowers the overall cost of your debt and can help you get out of debt faster.

Be prepared for any loan request

NerdWallet tracks your credit score and shows you how to build it – for free.

If you have bad credit (300 to 629 FICO) and can take a while to build your credit, you may be eligible for a low-interest loan. Here’s how:

  • Catch up on late payments. Late payments are reported to the credit bureaus 30 days late, which can lower your credit score by up to 100 points. If you’re within the 30-day window for a debt payment, there’s still time to submit it.

  • Check credit report errors. Errors on your credit report, such as payments applied to the wrong debts or incorrectly marked closed accounts, could affect your score. Check your credit reports for free at and dispute any errors you find.

  • Repay small debts. Debts owed represent 30% of your credit score. If you can, pay off all high-interest credit cards before consolidating. It will improve your debt to income ratiowhich can help you get a lower rate on the consolidation loan.

2. List your debts and payments

Make a list of the debts you want to consolidate (credit cards, store credit cards, payday loans, and other high-interest debt) and add up the total amount owed. You will want the amount of your debt consolidation loan to cover the sum of these debts.

Add up the amount you pay each month for your debts and check your budget for any spending adjustments needed to continue paying off your debts. The new loan should have a lower rate and a monthly payment that fits your budget. Commit to a repayment plan that takes into account your budget.

debt consolidation calculator

Use the debt consolidation calculator below to see if it makes sense to consolidate. After you enter your debts, you’ll see typical lender rates and potential savings if you consolidate at a lower rate.

Shop around for a loan that’s right for you. Online lenders, credit unions, and banks all offer personal loans for debt consolidation.

  • Online lenders cater to borrowers with all credit lines. Most online lenders allow you to prequalify so you can compare custom rates and terms without impacting your credit score.

  • credit unions are non-profit organizations that can offer lower rates to borrowers with bad credit. You must become a member to apply for a loan, and many credit union loans require a hard shot with your application, which may temporarily affect your credit score.

  • bank loans work best for those with good credit, and customers with an existing banking relationship may qualify for a rate reduction.

Look for lenders that offer direct payment to creditors, which simplifies the consolidation process. After the loan closes, the lender sends your loan proceeds to your creditors at no additional cost.

Consider other features offered by some lenders, such as a rate reduction for setting up automatic payment, access to your credit score, or free financial education.

When you’re ready to apply for the loanGather documents such as proof of identity, proof of address and proof of income.

Take the time to read the fine print of the loan document. Any additional fees, prepayment penalties, and the lender reporting payments to credit bureaus can affect your credit score as well as the total cost of the loan.

If you do not meet the lender’s requirements, consider adding a co-signer with good credit to your application. It can help you get a loan that you wouldn’t qualify for on your own.

5. Close the loan and make payments

Now that you’ve found and secured the loan you want, there’s one more important step.

If the lender offers direct payment, they will pay your loan proceeds to your creditors, paying off your old debts. Check your accounts for a zero balance or call each creditor to make sure the accounts are paid.

If the lender does not pay your creditors, you will repay each debt with the money deposited in your bank account. Do it right away to avoid additional interest on your old debts and to eliminate the temptation to spend the loan money on something else.

Finally, within about 30 days of receiving the debt consolidation loan, make your first payment.

Which lender is right for me?

NerdWallet has reviewed over 30 lenders to help you choose the right one for you. Below is a list of lenders that offer the best debt consolidation loans.

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