How to Get a Debt Consolidation Loan in 5 Steps
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1. Know how much you want to borrow
2. Check your credit score
- Credit history: Lenders like to see that you’ve used credit responsibly in the past, meaning you have a history of on-time payments, ideally spanning a couple years across two or three accounts.
- Income: Lenders prefer steady cash flow and will ask to see proof of income as part of your application. The higher your income, the more likely you may be approved, though not all lenders have a minimum income requirement.
- Debt-to-income ratio: Lenders also look at how much of your monthly income goes toward existing debts — this figure is called your debt-to-income ratio. Most lenders prefer a DTI of 40% or less.
- Loan details: The smaller the loan amount and the shorter the repayment term, the more likely you may be approved. That’s because small, short-term loans represent less risk for the lender. Resist the temptation to borrow more money than you need and choose the shortest repayment term in which you can still afford the monthly payment.
3. Pre-qualify with a few lenders
- Annual percentage rate: The annual percentage rate, or APR for short, represents the true cost of the loan and includes interest and any fees. The lower the APR, the more affordable the loan. For consolidation to make the most sense, you want a loan that has a lower APR than the average interest rate across your existing debts.
- Loans amounts and terms: Make sure any lender you’re considering offers flexibility in its loan amounts and terms. For example, some lenders only offer two repayment terms to choose from, while others will offer terms ranging from one to seven years. A wide range of amounts and terms helps you better customize the loan to fit your needs.
- Special perks: Some lenders offer unique features like direct payment to creditors. This means that after the loan closes, the lender will send your loan proceeds to your creditors at no extra cost, saving you that step. Other examples include a rate discount for setting up automatic payments, credit score monitoring or free financial education.
Personal loans from our partners
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4. Submit your loan application
Ask NerdWallet: Why can’t I get a debt consolidation loan?
5. Get funded and pay off debts
Article sources
- 1. Federal Reserve Bank of St. Louis. Finance Rate on Personal Loans at Commercial Banks, 24 Month Loan. Accessed May 23, 2025.
- 2. Consumer Financial Protection Bureau. What Is a Debt Relief Program and How Do I Know if I Should Use One?. Accessed Jan 16, 2025.
- 3. Internal Revenue Service. Canceled debt – Is it taxable or not?. Accessed Apr 1, 2025.
- 4. National Credit Union Administration. Credit Union and Bank Rates 2024 Q4. Accessed May 23, 2025.
- 5. Consumer Financial Protection Bureau. Consumer Use of Buy Now, Pay Later and Other Unsecured Debt. Accessed Jan 27, 2025.
- 6. Consumer Financial Protection Bureau. What is a payday loan?. Accessed Apr 4, 2025.
- 7. The Pew Charitable Trusts. Payday Loans Cost 4 Times More in States With Few Consumer Protections. Accessed Apr 4, 2025.
- 8. Federal Reserve. Military Lending Act. Accessed Apr 4, 2025.
Methodology
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Lenders reviewed
We review over 35 lenders, including major banks, top credit unions, leading digital platforms, and high interest installment lenders operating across multiple states.
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Categories assessed
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Data points analyzed
Our team tracks and reassesses hundreds of data points annually, including APR ranges, fees, credit requirements, and borrower tools, ensuring up to date, accurate comparisons.
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NerdWallet’s review process evaluates and rates personal loan products from more than 35 financial technology companies and financial institutions. We collect over 70 data points and cross-check company websites, earnings reports and other public documents to confirm product details. We may also go through a lender’s pre-qualification flow and follow up with company representatives. NerdWallet writers and editors conduct a full fact check and update annually, but also make updates throughout the year as necessary.
Our star ratings award points to lenders that offer consumer-friendly features, including: soft credit checks to pre-qualify, competitive interest rates and no fees, transparency of rates and terms, flexible payment options, fast funding times, accessible customer service, reporting of payments to credit bureaus and financial education. Our ratings award fewer points to lenders with practices that may make a loan difficult to repay on time, such as charging high annual percentage rates (above 36%), underwriting that does not adequately assess consumers’ ability to repay and lack of credit-building help. We also consider regulatory actions filed by agencies like the Consumer Financial Protection Bureau. We weigh these factors based on our assessment of which are the most important to consumers and how meaningfully they impact consumers’ experiences.
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