Consolidating your debt with a personal loan can simplify your debt repayment process, and it can also save you money if you get an interest rate that is lower than the rates on your existing debts.
Typical interest rates on debt consolidation loans range from around 6% to 36%. To get a rate at the bottom of this range, you will need an excellent credit score (720 to 850 FICO). But even a good credit score (690 to 719 FICO) could help you get a better rate than you currently have.
Borrowers with fair credit (630 to 689 FICO) and bad credit (300 to 629 FICO) may not be able to qualify for a lower rate than their current debts. may improve your chances of qualifying in the future.
Interest rates and terms may vary depending on your credit score, and other factors.
Source: Average rates are based on aggregated and anonymized supply data of users who prequalified in the NerdWallet lender market from July 1, 2020 through July 31, 2021. Rates are estimates only and are not intended for use. specific to any lender.
If you have more than one debt – for example, if you have balances on several different credit cards – you can to pay them all at once. Then you make a payment for the new loan.
But how does it save you money? The main thing is to choose a personal loan with a it is less than your existing debts.
Let’s say you have $ 9,000 in total credit card debt with a combined 22% APR and a combined monthly payment of $ 450. It will take a little over two years to be debt free and will cost $ 2,250 in interest.
But if you consolidate the cards into a loan with 14% APR and a two-year repayment term, you’ll save $ 879 in interest. Your new monthly payment would be $ 432, and you could apply the additional monthly savings to the loan to pay off the debt even faster.
Use our to plug in your current balances, interest rates and monthly payments. Then see how much you could save with a debt consolidation loan and compare the options based on your credit score.
A good first step is to compare what each lender can offer you. Online lenders allow you to see what rates, repayment terms and loan amounts you may be entitled to. Pre-qualifying with multiple lenders can help you compare rates and terms, and it won’t hurt your credit score.
It is a good rule of thumb to choose the lender that offers the lowest rate, but you should also pay attention to the repayment term. Longer terms mean more interest, even if your monthly payment is more affordable.
You can also look for lenders who specialize in debt consolidation. These lenders will offer benefits such as sending loan funds directly to your creditors and free financial education to help you manage your debts.
NerdWallet has reviewed over 30 lenders to help you choose the right one for you. While borrowers with higher credit scores will likely receive the lowest rates, there are still some .