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Should I Use a Personal Loan to Consolidate Debt?

A credit union representative discusses using a personal loan to consolidate debt with a member.

Consolidating debt can be a huge relief in many ways for your finances. Not only will it relieve you from juggling due dates, but it can also save you money by lowering your payment and locking in a lower interest rate.

Whether you are consolidating credit cards, car loans, student loans, or another kind of debt, using a personal loan to combine these into one loan can provide you a ton of freedom and help you get control of your debt easier.

Benefits of Debt Consolidation

There are many benefits to debt consolidation, including that consolidation may save you money on your debt payback plan.

Pay Down Debt Faster

One of the biggest benefits of using a personal loan to consolidate debt is that you could pay your debt down faster. This is especially true if the debt you are consolidating is revolving debt, such as credit cards.

Revolving debt usually has interest accruing daily, which can make these balances incredibly hard to pay down. With a personal loan, you typically are guaranteed to have it paid off within a certain amount of time. This can be much more motivating than paying the debt down from the original accounts.

Save Money on Interest

Using a personal loan to consolidate debt can be a huge money saver when it comes to paying interest on the amount owed. Most personal loans will offer lower interest rates than your revolving credit accounts, saving you money on the total interest paid over the life of your loan.

Can Improve Your Credit Score

Your credit score can be improved by consolidating debt, especially if you leave the revolving accounts opened with a zero balance. This will have a huge positive impact on your credit utilization ratio.

Your credit utilization ratio is the amount you owe divided by the amount of your total credit limit. For a strong credit score, your credit utilization ratio should be below 30%. As long as you leave your accounts open (and do not use them) your credit utilization ratio will improve dramatically by consolidating your debt with a personal loan.

Lower Payments

Another benefit to consolidating debt with a personal loan is that your monthly payment may be lower than the minimum amounts on your other loans. If you are consolidating numerous accounts, you may also be relieved to have one single payment a month versus juggling multiple minimums due at different points throughout the month.

How to Choose a Personal Loan

Before applying for a personal loan to consolidate debt, you should review the following items to ensure the loan will impact your financial situation positively.


The term of the loan is the length in which you will owe payments for the loan. Most personal loans vary in their term lengths, but typically 3 to 5 years is a good average, especially for revolving credit consolidation.

While the terms may vary depending on the type of personal loan, being aware of the length of the term ahead of applying for a loan can be important to ensure you will save money over the duration of your payments.

Interest Rates

Another critical item to review before taking the step to consolidate your loan is the interest rates. At Telcoe, our interest rates start as low as 4.89%* for our most popular personal loan type.

A lower interest rate on the personal loan will ensure that you will pay less interest over time by consolidating. Comparing your current interest rates on your debt with that of your personal loan is an essential step to having the personal loans work in your favor.


Some banks will tack on extra fees when accepting a personal loan, which could keep you from saving as much money by consolidating your debt. Finding an institution that will keep fees to a minimum can pay off significantly.

Another common fee for personal loans is charged if you pay the loan off early. While this kind of fee still may save your money, being aware of this from the beginning of your loan can ensure you are prepared for the fee that may occur.

Turnaround Time

If you have decided to go ahead and apply for a personal loan, you do not want the process to take long as this will cost you more money in interest on your accounts. A quick turnaround on a loan acceptance can make a big difference.

At Telcoe, we offer a turnaround time of as little as 24 hours, which can be a huge benefit to getting your debt consolidated quickly.

A Personal Loan to Consolidate Debt With Telcoe

Are you ready to apply for a personal loan to consolidate debt?

Our quick turnaround depends on when you fill out the application and provide some important details. Learn more about the proper documentation and required paperwork necessary for your application.

*Rates will vary depending on creditworthiness and are subject to change without notice. Loan terms available may vary depending on amount borrowed, the length of contract, credit history, and payment method. All loans are subject to approval. Regular terms and conditions apply. Telcoe Federal Credit Union is an Equal Opportunity Lender.


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