Types of Debt Consolidation
Apply for an unsecured personal loan from a bank, credit union, or online lender. The loan funds pay off your credit cards and other debts. You then make one fixed monthly payment at a fixed rate until the loan is paid off. Best for: $5,000–$50,000 in unsecured debt with 580+ credit score.
Transfer high-rate credit card balances to a 0% introductory APR card. Most 0% offers last 15–21 months. Pay as much as possible during the 0% period — the remaining balance will be charged the regular APR (typically 20–29%) after the intro period ends. Best for: $3,000–$25,000 in credit card debt with 670+ credit score.
Use equity in your home to take out a loan at mortgage rates (typically 7–10% in 2026). Lower rate than personal loans, but your home is collateral — missing payments risks foreclosure. Best for: homeowners with $20,000+ in high-rate debt and significant home equity.
A nonprofit credit counseling agency negotiates reduced interest rates (often 0–9%) with creditors and you make one monthly payment to the agency. Best for: those who don't qualify for a personal loan but want structured repayment with credit counseling support.
Frequently Asked Questions
Initially, applying for a consolidation loan causes a small temporary dip (5–10 points) from the hard credit inquiry. Long-term, debt consolidation typically improves credit by reducing your credit utilization ratio and ensuring on-time payments. As long as you don't close old accounts (which reduces available credit) and don't accumulate new debt, consolidation is generally credit-positive.
With credit scores below 580, traditional debt consolidation loans become difficult to qualify for at meaningful interest rate savings. Options include: secured loans (using collateral), credit union loans (more flexible underwriting), Achieve or Upstart (approve lower credit scores), or a Debt Management Plan through a nonprofit credit counselor (no credit score requirement).