How to Consolidate Debt with Personal Loans | Credit Direct Blog

Sometimes it’s tough to make ends meet. Maybe you need to tackle a remodeling project in your home but don’t have the extra influx of cash. Perhaps your refrigerator quit on you at the worst possible time or you’re facing some unexpected medical bills. Or maybe – as is the case with millions of Americans right now — you’re drowning in debt and are looking to consolidate. Whatever your unique situation, personal loans for debt consolidation can be a solution.

Personal loans can help uncomplicate your life because you get the cash you need, when you need it, without having to explain to a bank or anyone else what it will be used for. Unlike a mortgage for your home or a car loan for a new vehicle, a personal loan is just that: personal. Many people just like you use personal loans for debt consolidation.

Americans’ total credit card debt continues its upward climb, reaching an estimated $927 billion this year – a five percent increase over last. Debt consolidation is an ideal solution for those who don’t know where else to turn. Even when you have the cash to pay the monthly minimums on all your cards, in the end, you’re only spinning your wheels. It will take years, decades or even a lifetime to pay them all off because of all the interest, fees and penalties you’re shelling out.

It’s time to stop the insanity: get a personal loan to help you better manage that debt with one lump sum to pay each month instead of several. Let’s take a look at how you can benefit from a debt consolidation loan.


Make Changes

Paying off your debt takes a two-pronged approach. First, you have to make meaningful changes in your lifestyle and your budget. Basically, you should earn more, spend less, or if you can’t earn more, at least manage your money better so that the money you do make is spent wisely. That’s where the second part comes in: reducing the cost of your debt so that a bigger portion of each payment goes toward the principal balance.

When you consolidate your debt, you’re essentially paying just one payment a month instead of many smaller ones so that your money goes further.

In a nutshell, debt consolidation involves taking out one new loan big enough to repay some or all of your debt. Once you receive the money, you pay off your accounts, and then make a single monthly payment to pay off that new debt.

This option makes sense for those who wish to make one payment each month instead of several, as well as for those who can lower the amount of interest they pay by taking on a new loan. Debt consolidation isn’t for everyone; if you don’t have a lot of debt incurred it may not make sense for you. CNN Money has a great debt payoff calculator you can try to see how many years it will take you to pay off your debt, which may include high-interest credit card debt.


Explore Whether Debt Consolidation is Right for You

Overall, you want to choose a plan that simplifies your financial life or lowers your cost of debt, or, ideally, both. Are you struggling to make your debt payments, such as student loans? Are your credit cards maxed out so that you can’t qualify for a 0% credit card balance transfer offer any longer? There are some bad credit debt consolidation loans available out there from lenders that may simplify your payment but don’t significantly lower your cost of debt.

That’s why it’s so important to research your personal loan providers before making the choice. One of the biggest stumbling blocks of debt consolidation is the risk you run in incurring new debt before you pay off the consolidated debt. Close all the old accounts or cut them up. You may have heard that closing multiple accounts can hurt your credit. Initially, your score may take a small hit but this is nothing compared to the hit your credit score will take when you keep adding bad debt on top of bad debt.

If you fell into debt due to unexpected circumstances, such as a medical bill or loss of employment, rather than a recurring cycle of making bad purchase decisions, you’re probably best off keeping the accounts open and simply cutting up the cards so your credit score stays intact.


Learn How Debt Consolidation Affects Your Credit

The way in which debt consolidation affects your credit will depend on the options you choose. Whenever you apply for a loan, this is considered new credit, which means a “hard” inquiry will be made into your credit. As a result, your score will take a dip.

Some online lenders let you apply for a debt consolidation loan without an effect on your credit score, giving you a rate without having to do a hard inquiry, unlike banks and credit unions.

With online lenders, those with the best credit will get the lowest rates. Many lenders also don’t charge fees for paying off your loan early; however, they could charge upfront origination fees of up to five percent of your loan. Some may send money directly to your creditors to increase your chances of successful debt consolidation.

Your credit score will depend in part on your credit utilization, which is the amount of debt you have as compared with the total amount of debt available. When all your credit cards are maxed out and you open a new one, this increases your available debt and decreases your utilization ratio, which actually may help your score. But your score will suffer whenever you have a high balance on any one card. Transferring multiple balances to one card will cause your score to suffer even if you have paid off all your other cards.

Using a personal loan to pay off credit cards and consolidate causes that utilization ratio to go down and your score to go up. Many debt consolidation companies will negotiate with your creditors on your behalf, so you get lower balances and interest rates. Look for those who will obtain a written agreement from each one of your creditors outlining the terms of the agreement.


Make Consistent Payments

The key to ensuring your debt consolidation loan doesn’t hurt your credit score is to make consistent, regular and on-time payments. You should always talk to a professional to determine if it makes sense for you to take out a personal loan for debt consolidation. Whether it will save you in the long run depends on your financial situation and the debt you’re consolidating. Before obtaining a personal loan, add up your existing debt and interest, divide by the number of payments it would take to pay it off and see if it’s less than the cost of the loan. If not, it may not be worth it to you to use a personal loan for debt consolidation. You may be better off using it for something else, such as a home improvement or to pay off medical bills.

The other key is to avoid taking on new debt. If you decide to borrow money to pay off your credit cards but just start charging again, you’re in worse shape than you were before. If you think this may happen after you obtain the consolidation loan, stop using the cards.


Our Process

Here at Credit Direct, we have a proven process to get you the money you need for debt consolidation FAST. As one of the best debt consolidation loan companies around, you are sure to get personalized attention by professionals who care about you.


  • Select your loan amount: Choose your desired loan amount up to $40,000 using the slider tool. Fill out the form and get your results in just minutes over a secure, encrypted line.
  • Review loan options: Just sit back and wait while we locate the best loan for you.
  • Accept and sign: Simply e-sign the documents, with no hassle of paperwork to complete.
  • Get your money in the bank: We do this via direct deposit so it’s simple and fast.


Taking the Leap

Listen, we understand the stigma attached to obtaining quick personal loans online. You may have heard some negative things about them, that they’re only for people who are down on their luck. Yes, nobody needs a personal loan unless they are strapped for cash. Yes, it stinks that you need to enlist the help of someone else to get you through that next project, those repair bills, that gap in between jobs, that crushing school loan or credit card debt. But the alternative isn’t rosy either: being saddled to high monthly payments every month that keep you from spending your money where you truly want: increasing your quality of life.

But having a financial burden on your shoulders weighing you down day after day is even worse. There is a solution to your problems, and that is a personal loan. Here at Credit Direct, we make the process easy, seamless, confidential and stress free. Your business is YOUR business…we just help you reach your goals a bit faster with some extra cash or a debt consolidation plan. Any unsecured debt can be consolidated, from medical bills and payday loans to student loans and credit cards.


Contact Credit Direct

Are you ready to consolidate debt with personal loans from Credit Direct? To learn more about the process, please contact us today at 866-414-4198 or fill out our online form. We reply within 24 hours!


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