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How to get a debt consolidation loan

Man sitting on couch smiling at laptop while using it
damircudic/Getty Images

Like any loan, debt consolidation loans require you to fill out an application and submit a variety of information about yourself and your finances. The process may take no more than a few days if you have everything ready to go. And once you submit an application, it may be only a week or two before your debt is consolidated and you’re making payments to your new lender. 

Step 1: Gather info on your current debts 

If you don’t already have a list of your current debts, start a spreadsheet. You’ll need to include some important information about each:  

  • Original principal balance, if applicable. 

  • Current amount owed. 

  • Payoff amount, if different from amount owed. 

  • Interest rate and annual percentage rate (APR). 

  • Loan term, if applicable. 

  • Prepayment penalties, if applicable. 

  • Creditor. 

This information will be important when you apply for a debt consolidation loan and when you are ready to pay your creditors.  

Step 2: Research lenders 

Debt consolidation is one of the more common ways to use a personal loan, so you can find a variety of lenders that offer them. Banks, online lenders and credit unions offer similar loan products. 


Banks are the most traditional source for personal loans — but not every bank offers them. When you’re looking to consolidate your debt, you may need to work with a bank where you don’t have an account. This is not uncommon, but it could mean you miss out on relationship benefits the bank may offer. 

Online lenders 

Online lenders offer a wide variety of debt consolidation loans. Because there are options for borrowers with a range of credit profiles, you should be able to find a lender that suits your needs. But like with any loan, you’ll need to have excellent credit and sufficient income to cover the loan in order to qualify for the lowest rates. 

Credit unions 

Credit unions require you to have an account to qualify for any loan, including loans for debt consolidation. This means checking if you are eligible for membership and putting down some money to open a checking account. However, credit unions tend to have lower rates and more lenient criteria than banks and some online lenders. 

Step 3: Prequalify 

Many lenders offer prequalification. This allows you to submit your information and see what rates you qualify for without affecting your credit score. While the numbers are subject to change — and approval isn’t guaranteed until you submit a full application — prequalifying is a great way to compare lenders. 

And you should be comparing lenders. The prequalification process is how you can determine what lender offers the best rates, terms and service. Apply with at least three lenders that offer debt consolidation loans for people with your credit score. The more you do upfront, the better your chances of scoring a competitive rate on your debt consolidation.  

Step 4: Choose a lender and apply 

You likely submitted basic information like your income, contact details and a list of debts. To finalize your application, your lender will require you to submit a few pieces of information, including:  

  • Proof of identity. 

  • Proof of income.  

  • Documentation on your current debts. 

Other information may also be required. However, if you applied for prequalification, your lender should already have most of this saved. 

Step 5: Receive funds and start making payments 

Once you finalize your loan documents with your lenders, there are two ways to consolidate your debt:  

  • Your new lender will pay your current creditors with the loan funds. 

  • You will receive the loan funds in your bank account and pay off your creditors yourself. 

Either way, you should follow up with your creditors to ensure every balance is paid in full and that your loans and credit cards are closed out.  

Then you’ll start making payments on your new loan. Your lender will provide you with your amortization schedule. And since most lenders don’t charge a prepayment penalty, you can make additional payments to reduce the total amount of interest you pay — and pay off your loan faster.