Debt Consolidation Loans: What You Need to Know

Debt consolidation is a popular way to simplify your finances and save money. It involves taking out a single loan to pay off multiple debts, such as credit cards, medical bills, or other loans. Most debt consolidation loans last three to five years, although some lenders offer short- and long-term options. Typical interest rates for debt consolidation loans range from 6% to 36%.

To get a rate at the lower end of that range, you'll need an excellent credit score (720 to 850). But even a good credit score (690 to 719) could help you get a better rate than you have now. Multiple sources of debt consolidation loans can make it difficult to determine a single average rate of debt consolidation loans. However, according to a study carried out in April by Bankrate in which the responses of more than 160,000 applicants were analyzed, debt consolidation was the most reported reason for obtaining a loan in the first quarter, with 38%.

Debt consolidation loans were also the

most requested dollar amounts, much more so compared to loans for other needs, such as emergency expenses, vacations, weddings, and even home improvements. So, how does debt consolidation save you money? The key is to choose a personal loan with an annual percentage rate lower than your current debts.

Bankrate's debt consolidation calculator is designed to help you determine if debt consolidation is the right option for you. Then, find out how much you could save with a debt consolidation loan and compare the options based on your credit score. There are many options for those looking to consolidate their debts, such as a home equity loan, a credit card with a balance transfer, or a personal loan. Select explains the difference between debt consolidation and credit card refinancing, how each one works, and how a personal loan could save you money. Once you've transferred your debts to one card, focus on paying it off as quickly as possible and avoid accumulating additional debt with your other cards. If you have several debts, for example, if you have balances on several different credit cards, you can get a debt consolidation loan to pay them all at once.

This calculator shows how a Wells Fargo personal loan can benefit you if you consolidate your current debts into a single fixed-rate loan. By understanding how consolidating your debts benefits you, you'll be in a better position to decide if it's the right fit for you.