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Frequently Asked Questions

Get answers to some of the most common questions we get asked.

What Is Debt Consolidation?

Debt consolidation rolls several high-interest debts into one, manageable payment. This strategy can take the hassle and confusion out of paying off debt. It eliminates the need to keep track of multiple debts with various due dates. Debt consolidation can also save you some money on interest and help you repay your debt faster.

While there are a number of debt consolidation strategies which we’ll dive deeper into below, a debt consolidation loan tends to be the most popular. Once you receive the funds from the loan, you’ll use them to pay off your debts and then make a single monthly payment on your new loan.

Why Should I Choose AmOne?

If you’d like to repay debt through a debt consolidation loan, AmOne can help. We’ve created a free online loan matching system to connect you to the most highly-rated, affordable debt consolidation lenders on the market.

Once you fill out our form above, or call our debt consolidation specialists toll-free, you’ll get instantly matched with loans for debt consolidation that are appropriate for your current situation.

Whether you have any questions about your loan offers, need assistance with your application, have concerns about credit inquiries, or would like more details about a specific lender, we encourage you to contact us for live, U.S. based support. Rest assured any information you share with us will be kept safe and confidential.

What Is the Best Way to Consolidate Debt?

The most popular debt consolidation strategies you might want to consider include the following:

Debt consolidation personal loans

Debt consolidation loans are simply personal loans that are offered by banks, credit unions, and online lenders for the purpose of consolidating debt.

Once you receive the funds, you use them to pay off your high-interest debts.

Then, you focus on repaying your loan with one, easy-to-manage monthly payment. Ideally, you’d find a debt consolidation loan with a lower interest rate than the rates you have on your current debts.

Pros

You may reduce your interest rate.

You’ll only have one monthly payment.

You’ll have a set repayment timeline.

Cons

You may pay a higher interest rate.

You might be on the hook for fees.

You could end up deeper in debt.

Credit card

You can also consolidate debt with a balance transfer credit card, ideally one with a 0% or low interest introductory offer.

If you get approved for this type of credit card, you can transfer all of your existing debts onto it.

Then, you’ll only have to make one payment.

As long as you pay back your balance before the interest offer comes to an end, you’ll save on interest.

Pros

You may save money on interest by taking advantage of a low-interest or 0% interest intro period.

You might lock in rewards like cash-back and travel points.

You can lower your credit utilization ratio and improve your credit score in the long-run.

Cons

You may have to pay balance transfer fees.

You might be stuck with a high regular APR once the intro period is up.

You’ll need good credit to qualify.

Home equity loan

If you consolidate debt through a home equity loan, you’ll take out a new loan that’s secured to your home equity or the difference between what you owe on your mortgage and what your home is currently worth.

You’ll receive a lump sum of money upfront and can put it toward your existing debt.

Since the loan will be tied to your home, you may land at a much lower interest rate than you’d be able to get with a debt consolidation loan. But if you fail to make your payments, the lender can foreclose your home.

Pros

You can secure a lower interest rate than you may be able to with other loan types.

You may get approved, even if you don’t have the best credit.

You’ll have a single, manageable payment.

Cons

You must be a homeowner with sufficient equity.

You risk losing your home to foreclosure.

You may pay several fees.

Debt management plan

A debt management plan or DMP is a debt elimination strategy that involves a credit counseling agency.

If you go this route, you’ll make a monthly payment to a credit counseling agency so they can make payment to your creditors for you. .

While a DMP won’t allow you to pay less than you owe, it can simplify debt repayment and help you become debt free faster.

Pros

You won’t have to take out another loan.

You’ll get an affordable monthly payment based on your income.

You can choose from many credit counseling agencies who offer DMPs.

Cons

You must close all other credit card accounts.

Your creditors aren’t required to agree to your plan.

You won’t be able to apply for or use additional credit.

How Does a Debt Consolidation Loan Work?

If you’d like to pursue debt consolidation with a personal loan, here’s an overview of what you’ll need to do.

1. Check your credit score

Go to a website that offers free credit scores so you can get an idea of where you stand credit wise.

In most cases, debt consolidation loans are reserved for borrowers with good to excellent credit scores, which range from 690 to 850.

If you have bad credit or fair credit, you may want to improve it to increase your chances of approval.

Catch up on late payments, repay small debts, and only apply for new credit if you absolutely need it.

1. Jot down your debts and payments: Next, make a list of the debts you’d like to consolidate. These can include credit cards, payday loans, store credit cards, and other high-interest debts. Be sure to add up the total amount you owe.
2. Compare debt consolidation loans: Do some research and look for banks, credit unions, and online lenders who offer personal loans for debt consolidation. If possible, hone in on lenders who offer direct payments to creditors so you don’t have to worry about repaying your creditors on your own. Also, consider other benefits like autopay discounts and free credit score monitoring.
3. Apply for a loan: Once you find a debt consolidation loan that checks off all or most of your boxes, collect documents like a government-issued ID, pay stubs, tax returns, and bank statements so you can apply for it. Most lenders will let you go through the application process online, from the comfort of your own home. If you don’t meet a lender’s requirements, improve your credit and apply later or find a cosigner.
4. Close the loan and make payments: Upon approval, read and sign your loan documents. If the lender offers direct payments and you agree to them, they’ll distribute your loan proceeds to your creditors. In the event they don’t, you’ll need to repay your debts with the money you’ve received. Do this as soon as possible to avoid extra interest charges and the temptation to spend the money elsewhere.

Is Debt Consolidation Worth It?

Whether or not debt consolidation makes sense depends on your unique situation. It may benefit you in these situations:

You understand why you’re in debt and committed to controlling your spending: While consolidating your debt can help you become debt free, it won’t stop you from overspending. It’s only a good option if you know you can stick to your budget and keep your spending in check going forward.

You want to reduce the number of monthly payments you have: It can be overwhelming to keep tabs on multiple debt payments with different due dates. Debt consolidation is worth exploring if you prefer a single, easy-to-manage payment.

You can qualify for a lower-interest loan or a balance transfer credit card: If you have good or excellent credit and you know you’ll get approved for a loan or balance transfer credit card with a better rate than you have on your current debts, consolidating debt can likely help you out.

Your current income can cover the debt payment plus any other bills you have: Debt consolidation will only work if you’re able to afford your monthly debt payment. As long as you have room for it in your budget, consolidating debt may be worthwhile. Otherwise, it can lead to more financial challenges in the future.

What Are Some Dos and Don’ts of Debt Consolidation?

If you do move forward with debt consolidation, be sure to keep these dos and don’ts in mind.:

Do: Shop for a low interest rate.

A low interest rate is one of the keys to debt consolidation. That’s why you should do some research and find lenders that will offer you a loan with a good rate. The higher your credit score, the more likely you are to land an attractive rate.

A low interest rate is one of the keys to debt consolidation. That’s why you should do some research and find lenders that will offer you a loan with a good rate. The higher your credit score, the more likely you are to land an attractive rate.

Don’t: Ignore the root cause of your debt.

While debt consolidation can help you repay debt and save money, it won’t solve a spending problem. Therefore, think about why you got into debt in the first place and come up with a plan for how you can avoid it in the future. You may have to tweak your budget, reduce your expenses, or increase your income.

Do: Stay disciplined.

Debt consolidation will only work if you commit to it. Once you decide on this strategy, stick to your monthly payment and plan. Avoid the temptation to spend your money elsewhere and think about how much your finances will improve when you become debt free.

Don’t: Be afraid to seek support.

Paying off debt is easier said than done. If you pursue debt consolidation, let your friends and family know so they can support you. Also, don’t hesitate to contact the debt consolidation experts at AmOne for advice and assistance.

Do I Need Good Credit for Debt Consolidation?

In most cases, debt consolidation requires good credit. If you have a credit score of at least 650, you should be able to qualify for a debt consolidation loan or balance transfer credit card with a low interest rate. In the event your credit is shaky, you may want to hold off on debt consolidation and focus on improving it.

Can debt consolidation save me money?

If you lock in a lower interest rate than the rates you have on your current debts, debt consolidation through a personal loan, balance transfer credit card, home equity loan, or 401(k) loan may save you money. Depending on your situation, this may equate to hundreds or even thousands of dollars in savings.

Will debt consolidation hurt my credit?

Debt consolidation can hinder your credit temporarily. When you go through the process, lenders will likely perform a hard inquiry, which may lower your credit score by a few points. Consolidating several accounts into one loan can also reduce your credit utilization ratio, which can hurt your score for a short while as well. The good news is consolidating your debt and paying it off can improve your credit in the long run.

Will debt consolidation help me get out of debt sooner?

If you use a debt consolidation strategy that lets you lock in a lower interest rate, you’ll save on your total interest and in turn, be able to pay off your balance quicker. The sooner you get rid of your debt, the sooner you can work towards other financial goals like buying a house or saving for retirement.

How can debt consolidation help me?

Debt consolidation offers some great benefits. First and foremost, it can reduce the number of payments and interest rates you have to worry about. If your credit score is in a good place, you may also be able to lower your overall interest payments and save a significant amount of money. In addition, you may be able to reduce your monthly payment and improve your credit score in the long run through consistent, on-time payments.