How to Get a Debt Consolidation Loan

Key Takeaways

• Start by checking your balances, annual percentage rates (APR), monthly payments, and budget to see whether consolidation could improve your repayment plan.
• You can consolidate debt through a personal loan, balance transfer credit card, home equity loan, or home equity line of credit (HELOC).
• Your credit, income, existing debt, loan amount, and lender requirements can affect the financing terms you receive.
• Before applying, review the APR, fees, monthly payment, repayment term, and total borrowing cost.
• Once approved, confirm the final terms and use the funds to pay the debts included in your consolidation plan.

Managing several debts can mean tracking different APRs, monthly payments, and due dates. If you’re looking for a simpler repayment plan or a way to lower borrowing costs, debt consolidation can be one way to do it.

Debt consolidation combines selected balances under one new loan or credit account. A debt consolidation loan is a personal loan you use to pay off those balances, but balance transfer cards and home equity borrowing can also consolidate debt.

Here’s how to get a debt consolidation loan, from assessing what you owe and checking your credit to choosing a lender, applying, and finalizing the loan.

Table of Contents

1. Assess Your Current Repayment Plan

2. Add Up the Debts You Want to Consolidate

3. Check Your Credit

4. Choose a Debt Consolidation Method

5. Compare Debt Consolidation Loans and Lenders

6. Gather Your Documents and Apply

7. Finalize Your Loan and Pay Off Your Debts

8. Get Started With a WEOKIE Debt Consolidation Loan

1. Assess Your Current Repayment Plan

Start by asking what you want debt consolidation to accomplish. Are high-interest balances costing you too much? Are several monthly payments becoming difficult to track? Would a set payoff schedule give you a clearer repayment plan?

Debt consolidation may be worthwhile if the new financing provides a meaningful improvement, such as:

• A lower annual percentage rate (APR)
• Less interest paid across the repayment period
• One monthly payment instead of several
• A payment that works better with your budget
• A defined payoff date

It may not provide much value if the new rate is similar to what you already pay, fees outweigh the savings, or a longer term significantly increases the total borrowing cost.

If you’re still unsure if debt consolidation makes sense, look at the full repayment picture before applying.

2. Add Up the Debts You Want to Consolidate

List each debt you want to include and write down the:

• Current balance
• Annual percentage rate (APR)
• Minimum monthly payment
• Due date
• Any payoff or prepayment fees

Add the selected balances to estimate how much you need to borrow.

You don’t have to consolidate every debt. If your main goal is lowering interest costs, you could focus on higher-rate balances and leave lower-rate debt in place. A balance with only a few payments remaining may also be less useful to consolidate.

If much of what you owe is on credit cards, consolidating credit card debt follows a similar process, but has a few additional considerations around paid-off cards and future spending.

3. Check Your Credit

Your credit history can affect loan approval and the terms you receive. Before applying, get a general sense of where you stand by checking your score and credit reports.

WEOKIE members can access their Free Credit Score anytime in Online or Mobile Banking. It’s free, and checking won’t affect your score. You can also request free credit reports from all three bureaus at AnnualCreditReport.com.

Review it for inaccurate information that could affect your application. If you find an error, you can dispute it with the credit bureau. Try to avoid opening several new credit accounts right before applying for a consolidation loan.

Credit is only part of the lending decision. Lenders may also look at your income, existing debts, housing expenses, employment information, and other application details.

4. Choose a Debt Consolidation Method

You can consolidate debt in several ways. The best method depends on what you owe, your credit profile, available home equity, and the repayment structure you prefer.

Debt Consolidation Loan

A debt consolidation loan is a personal loan you use to pay off existing balances. You receive a lump sum and repay the new loan through scheduled monthly payments.

This approach may provide a fixed rate, predictable payments, and a defined repayment term. Because you receive the funds at once, it can work well when you already know how much debt you want to consolidate.

A debt consolidation loan may be worthwhile if the new annual percentage rate (APR) and total borrowing cost are lower than what you’re paying now. The rate and terms you qualify for depend on factors such as your credit profile, income, and existing debt.

Balance Transfer Credit Card

A balance transfer moves existing card balances to a new credit card, sometimes with a promotional annual percentage rate (APR) for a set period.

This approach can work well if the approved credit limit covers the balances you want to transfer and you can repay a substantial portion before the promotional rate expires. Transfer fees may apply, and the card’s regular terms apply to any balance left after the introductory period.

Home Equity Loan or Home Equity Line of Credit (HELOC)

Homeowners can also use a home equity loan or home equity line of credit (HELOC) to consolidate debt.

A home equity loan provides a lump sum that you repay through scheduled installments. A HELOC is a line of credit you can borrow from as needed, up to your approved limit.

Many HELOCs have variable rates, but WEOKIE’s HELOC has a fixed rate.

Because your home is collateral—meaning it secures the debt—the application process and risks differ from unsecured borrowing. Closing costs may also apply. If you can’t make your payments, you could lose your home.

5. Compare Debt Consolidation Loans and Lenders

When deciding where to get a debt consolidation loan, look beyond the advertised rate. Banks, credit unions, and other lenders can have different eligibility requirements, loan amounts, fees, and repayment terms.

For each loan, check the:

• Annual percentage rate (APR)
• Monthly payment
• Repayment term
• Loan amount
• Origination or application fees
• Total repayment cost
• Prepayment penalties, if any

A lower monthly payment doesn’t necessarily mean a less expensive loan. A longer repayment term can lower the required payment but increase the total interest paid.

Credit unions are member-owned and not-for-profit. That structure can translate to competitive loan rates and lower fees, giving you another useful point of comparison when weighing lenders.

6. Gather Your Documents and Apply

When you’re ready to apply for a debt consolidation loan, the lender may request information such as:

• Government-issued identification
• Proof of income
• Employment information
• Housing expenses
• Existing debt information
• The amount you want to borrow

Lenders may offer applications online, by phone, or in person, depending on the lender.

Submitting a full loan application may result in a hard credit inquiry, which can temporarily affect your credit score. After the lender processes your application, you’ll receive a decision and, if approved, your final loan terms.

7. Finalize Your Loan and Pay Off Your Debts

If you’re approved, read through the final loan agreement before signing. Confirm the:

• Annual percentage rate (APR)
• Loan amount
• Monthly payment
• Repayment term
• Fees
• First payment date

Ask about anything you don’t understand before accepting the loan.

Once the funds are available, use them to pay the debts included in your consolidation plan. Keep making required payments on the original accounts until each payoff is processed, then confirm each balance is paid in full.

After that, begin making the scheduled payments on your new debt consolidation loan.

Get Started With a WEOKIE Debt Consolidation Loan

At WEOKIE, our debt consolidation loans come with:

• A fixed rate
• Terms from 1 to 5 years
• No payments for the first 60 days on qualifying loans
• No prepayment penalties
• Online application and account management

If you qualify for the 60-day payment deferral, interest will continue to accrue during that time.

We consider your full financial picture when you apply, so less-than-perfect credit doesn’t automatically rule you out. You can apply online in just a few minutes or visit any WEOKIE branch in person.

Want to see what the numbers could look like? Use our Debt Consolidation Calculator to estimate your monthly payment and payoff cost.

Have questions? Stop by a branch or give us a call. Not a member yet? Joining WEOKIE is easy, and you’ll need to become a member before applying.

Know what to expect before you apply.