Last updated: September 2026.

Data note: Interest rate averages and market figures in this article reflect data as of September 2026. Rates change frequently — verify current figures at the sources cited in the References section before making financial decisions.

Quick answer A debt consolidation loan replaces several debts, most often credit cards, with one fixed-rate loan and one monthly payment. It’s worth pursuing only when the APR, fees, and payment fit your budget and you have a realistic plan to pay it off — not just a way to feel better about the balances for a month or two.

In this article

• Quick answer: the debt consolidation loan process
• Step 1: decide whether consolidation fits your situation
• Step 2: make a complete debt inventory
• Step 3: calculate the amount and payment you can afford
• Step 4: check your credit and improve your application readiness
• Step 5: compare debt consolidation loan offers and apply for one loan
• Step 6: Pay off existing debts
• Step 7: follow the repayment plan and prevent new debt
• Debt consolidation options to consider
• How debt consolidation can affect your credit
• What to do if you are not approved
• Debt consolidation loan FAQ

Key takeaways

• A debt consolidation loan is typically a fixed-rate installment loan that pays off revolving balances like credit cards, replacing several payments with one.
• The CFPB recommends identifying why you took on the debt and building a budget before adding a new loan.
• Checking your rate for a loan through Avant®, issued by WebBank¹, uses a soft inquiry and does not affect your credit score; accepting an offer involves a hard inquiry.
• Fees and APR vary by lender and credit profile — compare the full range and total repayment cost, not just the advertised rate.
• Not every debt qualifies: student loans and secured debts like mortgages typically need separate solutions.

Steps to the debt consolidation loan process

A debt consolidation loan pays off multiple existing debts so you owe one lender instead of several. You apply for a loan to cover your existing balances. If approved, funds are deposited to your account (or, with some lenders, sent to creditors directly). Once you pay off your balances, you will have one monthly payment for your debt consolidation loan. The process generally follows these steps:

1. Review every debt you currently owe.
2. Check whether consolidation fits your budget and goals.
3. Estimate the loan amount and payment you’d need.
4. Check your credit report and score.
5. Compare offers from multiple lenders.
6. Prequalify or apply for the loan you choose.
7. Use the proceeds to pay off the original creditors.
8. Follow the new repayment plan and avoid new debt.

The decision rule underneath all eight: move forward only if the new loan has an APR and total cost you understand, a payment you can afford alongside your other bills, and a payoff plan you’re prepared to follow to zero.

Step 1: Review every one of your debts

Pull a recent statement, (rather than relying on memory), for every debt you’re considering consolidating. Here is an example:

Creditor	Balance	APR	Minimum payment	Due date	Account status	Eligible for consolidation?
Card 1	$4,200	24.99%	$130	5th	Current	Yes — unsecured
Card 2	$2,800	22.99%	$85	12th	Current	Yes — unsecured
Card 3	$1,500	26.99%	$45	20th	Past due	Yes — unsecured
Medical bill	$900	0%	$75	1st	In collections	Maybe — check first
Auto loan	$110,000	7.5%	$310	15th	Current	No — secured

Not every debt is eligible for debt consolidation. Unsecured debts like credit cards, most personal loans, and many medical bills are typical candidates. On the other hand, secured debts like a mortgage or auto loan are tied to collateral and usually need their own refinancing path, and federal student loans and tax debt have their own separate programs. Consolidating a loan you already have through Avant® counts as a refinance, with a different fee structure than a new loan.³

Step 2: Check whether debt consolidation fits your budget and goals

Debt consolidation tends to help more if you’re dealing with multiple high-interest revolving balances but have steady income and already have your spending already under control. It may help less if your income is unstable, you’re still adding charges, or balances are large enough that a new payment would still be difficult.

A quick yes/no check:

• Have you stopped adding new charges to the cards you’d pay off? If not, consolidation may just stack a second round of debt on top.
• Can you name what caused the balances? If not, pause to figure that out first.
• Do you have a budget showing where a new payment fits? If not, see Avant’s guide to building a budget first.

The CFPB recommends identifying the cause of the debt, building a budget, and contacting creditors directly before taking on new debt, since creditors sometimes offer hardship terms without a new loan. It also points to nonprofit credit counseling as an alternative and warns some “debt consolidation” advertisers are actually settlement companies charging upfront fees — a legally distinct service covered later in this article.

Step 3: Estimate the loan amount and monthly payment you need

Add up all of your outstanding balances from Step 2 to get a target amount. Then add up all of your existing monthly payments and check your debt-to-income ratio (DTI) — monthly debt payments divided by gross monthly income — to judge whether a new payment fits.

The total cost and repayment period for the existing credit-card balances will depend on each card’s APR, minimum-payment formula, fees, and future account activity. Before consolidating, compare the estimated total repayment cost of keeping the existing debts with the APR, fees, monthly payment, and total repayment amount of the proposed consolidation loan.  Check the new loan payment against your other fixed expenses — rent, utilities, insurance, other loans — to confirm it fits with room to spare. Avant’s personal loan calculator can help model different amounts and terms.

Illustrative example: The total cost and repayment period for the existing credit-card balances will depend on each card’s APR, minimum-payment formula, fees, and future account activity. Before consolidating, compare the estimated total repayment cost of keeping the existing debts with the APR, fees, monthly payment, and total repayment amount of the proposed consolidation loan.

Step 4: Check your credit and improve your application readiness

Your credit report is the detailed record of accounts and payment history held by each bureau; your credit score is a three-digit number calculated from it; and an inquiry is “soft” (no score impact) or “hard” (a small, negative effect on your credit score, tied to a formal application). Avant’s explainer on how a personal loan can affect your credit score covers this in more detail.

Start by pulling your free credit reports from AnnualCreditReport.com, the authorized source for free reports from all three major credit bureaus. Review your reports for errors — accounts that aren’t yours, wrong balances, mislabeled late payments — and dispute anything inaccurate before applying.

Lenders evaluating a consolidation application typically weigh credit history, income, DTI, requested amount relative to income, and payment-history track record together. No single published score guarantees approval, including through Avant — it depends on the full profile, not one number. Avant’s explanation on creditworthiness walks through how these fit together.

Before applying, gather proof of income, know your balances from Step 2, and avoid opening new accounts or large purchases in the weeks beforehand, since new activity can shift DTI, credit score, and credit utilization right before a lender looks.

Step 5: Compare debt consolidation loan offers and apply for one loan

Most lenders follow a similar sequence: submit basic information for estimated terms (prequalification), submit a full application, receive a decision, then sign and receive funds if approved. Prequalification isn’t approval — verified income and credit details can still change the final terms.

First, you can prequalify for a few debt consolidation loans to compare your offers. Once you get your offers, compare the APR, loan amount, terms, and administration fees of each loan. Loans through Avant, issued by WebBank^1,2, range from $2,000 to $35,000, APR 9.95% to 35.99% (with the lowest rates reserved for the most creditworthy borrowers), terms of 24 to 60 months for the debt consolidation loan product, plus an administration fee up to 9.99% for new customers deducted from proceeds and treated as principal. You can check your rates at Avant to see what loan you prequalify for.

Once you’ve chosen a loan, apply to one. Commonly requested information includes your name, address, income, employment, Social Security number, and the amount you want to consolidate.

 Checking your rate through Avant¹ uses a soft inquiry with no score impact; a hard inquiry occurs only if you accept an offer. Avant advertises decisions in minutes,⁵ though the process may take longer if additional documents are requested, and approval and terms vary by credit determination and state law.

Step 6: Pay off existing debts

If approved, funds are typically disbursed to your bank account — Avant deposits via ACH the next business day if approved by 4:30 p.m. CT, Monday through Friday.⁴ Many consolidation offers can allow you to deposit the funds to your debts directly, or deposit to your own bank account.

Before paying, confirm the exact current payoff amount with each creditor. Keep making at least the minimum payment until each creditor confirms a $0 balance in writing — a payment can take days to post, and missing one meanwhile could still trigger a late fee.

Save documentation of every payoff: confirmation numbers, $0-balance statements, and any final letter. Watch for residual “trailing” interest some issuers add between statement close and payoff posting — a small forgotten balance can later report as past due.

Step 7: Follow the repayment plan and prevent new debt

Consider automatic payments or reminders to help avoid missed payments. Track the payment amount, remaining balance, and payoff date somewhere visible — a spreadsheet, budgeting app, or your bank’s tools all work. Avant makes tracking loan balances and payments easy through our app.

Decide in advance what to do with cards paid to zero: keeping them open with small purchases paid in full monthly is one option, closing them is another. What matters is not letting freed-up credit turn into a second round of balances while you’re still repaying the loan.

Build or rebuild an emergency fund and a basic spending plan so an unexpected expense doesn’t land back on a card. Avant’s guide to building a budget and its guide to paying off debt faster cover practical next steps. If a payment is ever missed, contact the servicer promptly — missed payments can mean late fees, a negative credit mark, and, if they continue, default and collections.

Debt consolidation options to consider

A personal loan is one option among several, and the right fit depends on your credit profile, homeownership, how much you owe, and how urgently you need a solution.

Balance transfer credit card. A promotional low or 0% rate can work for smaller balances you’re confident you’ll pay off before the promotion ends, since transfer fees apply and the rate typically rises afterward.

Nonprofit debt management plan. A nonprofit credit counseling agency can negotiate with creditors and consolidate payments into one amount without a new loan — a starting point the CFPB recommends considering.

Creditor hardship program. Many issuers will temporarily adjust your rate or payment if you explain a hardship directly — worth trying before or alongside other options.

Debt avalanche or snowball strategies. These are repayment strategies, not new loans: avalanche targets the highest-APR balance first to minimize interest; snowball targets the smallest balance first for quicker wins.

Home equity products. A home-secured rate can be favorable, but the CFPB warns this puts your home at risk of foreclosure if payments lapse. Avant does not offer home equity products.

Debt settlement. Legally distinct from consolidation: a settlement company negotiates to pay less than owed, often after you stop paying and save funds separately instead. It typically involves substantial fees, can cause significant credit damage, may create taxable “cancellation of debt” income, and has no guaranteed outcome — and the CFPB cautions some “consolidation” marketers are actually settlement operations charging upfront fees.

What to do if you are not approved

Common denial reasons include income that doesn’t support the requested amount, a high DTI, limited credit history, or recent delinquencies. If a creditor takes adverse action on a completed application, applicable law generally requires notice containing the principal reasons for the decision or information about how to obtain those reasons. If a consumer report contributed to the decision, additional FCRA disclosures may also apply.

Submitting additional applications may result in additional hard inquiries, which may affect your credit score depending on the scoring model and your credit profile. Consider a smaller amount that better matches income, a qualified co-borrower only if both of you understand they’re equally responsible for the full loan, or a few months strengthening your application first.

Other paths include contacting creditors directly about hardship options, working with a nonprofit credit counselor, and rechecking your report for errors. If you have questions about a denied application through Avant, customer support can walk through next steps, and an independent nonprofit counselor can offer a second opinion not tied to any lender’s products.

Debt consolidation loan FAQ

Can I get a debt consolidation loan with fair or bad credit?

It’s possible, though the APR typically reflects added risk to the lender, often toward the higher end of the published range. Eligibility and loan terms depend on the applicant’s credit profile and other underwriting criteria. No particular credit score guarantees approval. For applicants with fair credit, please see how to get a personal loan with a 580-669 credit score. Comparing a few offers, rather than assuming denial, is the best way to find out.

What debts can I consolidate?

Unsecured debts like credit cards, medical bills, and other personal loans are typical candidates. Secured debts, federal student loans, and most tax debt generally need separate solutions.

How much can I borrow for debt consolidation?

That depends on the lender, income, and credit profile — loans through Avant, issued by WebBank, range from $2,000 to $35,000^1,2, with minimums varying by state.

Does debt consolidation lower my monthly payment?

It could, particularly with a longer term or a lower blended APR, but it isn’t guaranteed. A longer term can shrink the monthly amount while increasing total interest.

Does debt consolidation hurt my credit?

Paying down revolving balances may lower reported utilization, which is one factor considered by many credit-scoring models. The effect on a particular score can vary. On-time payments are reported like any installment loan; missed payments can affect your score too.

Should I close my credit cards after consolidating?

Not necessarily. It depends on the card’s age, your overall utilization, and whether you’re confident you’ll avoid running the balance back up.

How long does funding take after approval?

For Avant, funds are generally deposited via ACH the next business day if approved by 4:30 p.m. CT, Monday through Friday.⁴ Other options’ timelines vary.

What happens if I miss a payment on a consolidation loan?

You could be charged a late fee, and the missed payment can be reported to the bureaus, which may affect your score. Contact your servicer before the due date if you think you’ll miss one.

Is debt consolidation better than debt settlement?

Debt consolidation and debt settlement are different approaches to managing debt. Debt consolidation generally uses a new loan to repay existing debts, with the borrower then repaying the new loan. Debt settlement generally involves negotiating with creditors to accept less than the full amount owed. Consumers should review the costs, terms, and potential effects of each before choosing an option.

What happens if a debt has already gone to collections?

If a debt or bill has gone to collections, check out Avant’s overview to see what actually happens and how it can affect your options.

Disclosures

¹ Avant branded credit products are issued by WebBank.

² Loan amounts range from $2,000 to $35,000. APR ranges from 9.95% to 35.99%, with the lowest rates available only for the most creditworthy borrowers. Loan lengths for Avant’s debt consolidation loan product range from 24 to 60 months. Administration fee up to 9.99% for new customers. If approved, actual rates and loan terms may vary based on credit determination, credit history, current income, ability to repay, state law, and other factors. Minimum loan amounts vary by state. See Avant.com for full terms. The administration fee is deducted from the loan proceeds and paid to the lender, and is deemed part of the loan principal and subject to the accrual of interest.

³ Refinance loans range from 24 to 60 months with an administration fee of up to 5% for refinance customers.

⁴ Personal loan funds are generally deposited via ACH for delivery the next business day if approved by 4:30 p.m. CT Monday through Friday.

⁵ The decision process may take longer if additional documents are requested. Approval and loan terms will vary based on credit determination and state law.

References

1. What do I need to know if I’m thinking about consolidating my credit card debt? — Consumer Financial Protection Bureau
2. What is a debt-to-income ratio? — Consumer Financial Protection Bureau
3. How to Consolidate Debt — Experian
4. AnnualCreditReport.com — the only authorized source for free annual credit reports

This article was written and reviewed by Avant staff with AI assistance.