Updated on: May 7, 2020

Debt Consolidation 101: The Basics


When people talk about debt, they often talk about it like it’s one big chunk of money. But that’s rarely the way it works. Most folks don’t just have one source of debt, they have many. They have student loans, plus credit card debt after that Bachelor’s degree in Beyonce Studies didn’t lead to a job, then auto loans to buy a car, and also personal loans to repair the car, and mortgages, and in extreme cases even multiple mortgages.

What is Debt Consolidation?

People may have debt, but that doesn’t mean that they only have one debt. That is, unless they make the decision to consolidate their debt by taking out one large loan and using it to pay off all their smaller loans.

So what are the basics you should know about Debt Consolidation before deciding if it’s a solution for you? Check out the list below for the fundamental facts about Debt Consolidation.

1. Fewer Payments

This means that you only have one payment to make every month, which makes your finances easier to track and also makes you far less likely to miss a payment. Trying to get a handle on your personal finances is always going to be complicated, but debt consolidation can make it easier.

Keeping track of multiple due dates can be a real hassle, as can keeping track of all your minimum payment amounts. Missing a payment can end up having a negative impact on your credit score, which will make it harder to borrow money at affordable rates later on. And speaking of affordable rates, some of those older loans might carry higher interest rates that make them far more difficult to pay down. Debt consolidation allows people to not only simplify their debt load, but it can also save them money in the long run.

2. More Savings

People frequently take on loans when they’re just starting out on their own. Many of these loans—and this goes double for credit cards—come with higher interest rates since the person doesn’t have a long history of credit use. Banks and credit card companies consider them to be a higher risk and so they charge them a higher rate. Higher interest rates mean more money that you’re paying on what you’ve already borrowed, which means less money that you’re paying towards actually getting out of debt.

With debt consolidation, a person can often score a lower interest rate than what they’re already paying. Using a lower interest loan to pay off a high interest credit card will help you save money in most instances. Oftentimes, it will mean that you’re paying less each month towards your minimum payment. (Pro tip: if you can afford to pay more than the minimum payment, then do it.)

In many cases, the lower interest rate will save you money in the long run as well. Now, getting a loan with a longer term can sometimes mean you end up paying more overall, but if it makes the loan more manageable month to month, it might be worth it.

3. Not for Everyone

Of course, this is all going to be partly dependent on your credit score. The higher your score, the lower the rates you’ll be offered. If you’re looking at consolidating your debt and the rates are going to be substantially higher than what you already owe, then don’t consolidate. The increased convenience won’t be worth the higher cost.

If you have questions or are interested in getting started on a single personal loan you can use to attack your consolidated debt today, click below or call us at For more information or to get started on a single personal loan you can use to attack your consolidated debt today, click below or call us at (800) 990-9130. The application process is quick and easy, and does not affect your credit score.

Alex Huntsberger
Communications Specialist
Alex Huntsberger has covered loans, credit scores, and personal finance for OppLoans since 2015. He is a graduate of Oberlin College and a regular contributor to the Chicago Sun-Times.
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