What Is Debt Consolidation?
Debt consolidation is the process of combining multiple debts into a single loan with one monthly payment. Instead of juggling several credit card bills, Online Loans, or other debts each month, you take out one loan to pay off all your existing balances. This leaves you with just one payment to track and typically at a lower interest rate than what you were paying on your high-interest debt.
For example, if you have three credit cards with balances at 18%, 22%, and 24% APR, you might consolidate them into a single personal loan at 10% APR. This not only simplifies your finances but can also save you thousands of dollars in interest and help you pay off your debt faster.
💰 Real Savings Example
Sarah had $25,000 in credit card debt across four cards with an average APR of 21%. By consolidating with TriPoint Lending at 11.5% APR for 5 years, she reduced her monthly payment from $850 to $550 and will save over $16,000 in interest while becoming debt-free 2 years faster.
How Debt Consolidation Works
The debt consolidation process with TriPoint Lending is straightforward and can be completed in just a few steps:
- Calculate Your Total Debt: Add up all the balances you want to consolidate, including credit cards, Online Loans, medical bills, and other unsecured debts.
- Check Your Rate: Apply with TriPoint Lending and receive personalized loan offers based on your creditworthiness. This won't affect your credit score.
- Choose Your Loan: Select the loan amount, interest rate, and repayment term that works best for your budget.
- Pay Off Your Debts: Once approved, use your consolidation loan to pay off all your existing debts in full.
- Make One Monthly Payment: Going forward, you'll make just one fixed monthly payment to your consolidation loan at a lower interest rate.
Benefits of Debt Consolidation
Lower Interest Rates
Replace high-interest credit card debt (often 18-24% APR) with a lower-rate personal loan, potentially saving thousands in interest.
One Simple Payment
Eliminate the stress of tracking multiple due dates and payment amounts. Make just one payment each month.
Faster Debt Payoff
With lower interest rates, more of your payment goes toward principal, helping you become debt-free faster.
Improve Credit Score
Paying off credit cards can lower your credit utilization ratio, potentially boosting your credit score over time.
Fixed Monthly Payment
Unlike credit cards with variable rates, consolidation loans offer fixed payments that never change, making budgeting easier.
Reduce Financial Stress
Stop the cycle of minimum payments and finally see real progress toward becoming debt-free.
Before & After: Real Example
See how debt consolidation can transform your monthly finances with this realistic example:
💵 Your Savings with Consolidation
Monthly Savings: $283/month
Interest Savings: $16,980 over 5 years
Peace of Mind: Priceless
What Debts Can You Consolidate?
TriPoint Lending debt consolidation loans can be used to pay off a wide variety of unsecured debts, including:
- Credit Card Debt: The most common use for debt consolidation, especially for high-interest cards
- Online Loans: Consolidate existing Online Loans into one payment
- Medical Bills: Pay off outstanding medical expenses
- Store Credit Cards: Eliminate high-interest retail financing
- Payday Loans: Replace predatory short-term loans with affordable long-term financing
- Collection Accounts: Settle debts in collections and improve your credit
- Past-Due Bills: Catch up on utilities, rent, or other past-due accounts
- Other Unsecured Debt: Any debt not tied to collateral
Note: Debt consolidation loans cannot be used to pay off secured debts like mortgages or auto loans, as these require specific refinancing products.
Is Debt Consolidation Right for You?
Debt consolidation can be an excellent strategy for many people, but it's important to determine if it's the right choice for your situation. Consider consolidating if:
Good Candidates for Debt Consolidation:
- You have multiple high-interest debts (especially credit cards above 15% APR)
- You have steady income and can afford the monthly payment
- Your credit score is 580 or higher (higher scores get better rates)
- You're struggling to keep track of multiple due dates and payments
- You're committed to not accumulating new debt after consolidating
- You want a clear timeline to become debt-free
When Debt Consolidation May Not Be Ideal:
- Your debts are already at low interest rates (below 8%)
- You don't have steady income to make monthly payments
- You're not addressing the underlying spending habits that created the debt
- Your debt is so overwhelming that bankruptcy or debt settlement might be better options
💡 Expert Tip
After consolidating your debt, consider keeping one credit card open with a small balance to maintain your credit history. Just be disciplined about paying it off in full each month. Closing all your credit cards immediately after consolidating can temporarily hurt your credit score.
Debt Consolidation vs. Other Options
| Feature | Debt Consolidation Loan | Balance Transfer Card | Debt Management Plan | Bankruptcy |
|---|---|---|---|---|
| Credit Impact | Minimal/Positive | Temporary dip | Moderate negative | Severe negative |
| Interest Rate | 5.99%-35.99% fixed | 0%-29.99% variable | Reduced/waived | N/A |
| Monthly Payment | Fixed amount | Minimum varies | Fixed amount | N/A |
| Payoff Timeline | 12-84 months | Varies | 3-5 years | Immediate |
| Fees | Origination fee (1-6%) | Transfer fee (3-5%) | Monthly fees | Legal fees |
| Best For | Most borrowers | Excellent credit | Severe hardship | Last resort |
How to Succeed with Debt Consolidation
Getting a debt consolidation loan is just the first step. Here's how to maximize your success:
- Create a Budget: Track your income and expenses to ensure you can comfortably afford your new payment.
- Set Up Automatic Payments: Never miss a payment by automating your monthly loan payment.
- Avoid New Debt: Don't use your newly-paid-off credit cards to accumulate more debt. Consider reducing your credit limits or removing cards from your wallet.
- Build an Emergency Fund: Save $500-$1,000 as a buffer to avoid going back into debt for unexpected expenses.
- Consider Extra Payments: If possible, make additional payments toward your principal to pay off the loan faster and save on interest.
- Track Your Progress: Monitor your decreasing balance and celebrate milestones to stay motivated.
- Address Root Causes: Identify and change the spending habits or financial behaviors that led to debt in the first place.
Frequently Asked Questions
Your savings depend on your current interest rates, loan amount, and the rate you qualify for. On average, borrowers who consolidate $20,000 in credit card debt at 20% APR into a loan at 10% APR save between $10,000-$15,000 in interest over a 5-year period. Use our calculator above to see your personalized savings estimate.
Debt consolidation typically has a positive long-term effect on your credit score. Initially, you may see a small dip from the hard credit inquiry and new account, but this is temporary. As you make on-time payments and lower your credit utilization ratio (by paying off credit cards), your score often improves significantly within 3-6 months.
The entire process typically takes 1-2 weeks. You can get pre-qualified in minutes, receive loan offers within hours, and once approved, funds are disbursed within 1-3 business days. Some borrowers complete the entire process in as little as 5-7 days.
Generally, no. Closing credit cards can hurt your credit score by reducing your available credit and shortening your credit history. Instead, keep them open but put them away or set small recurring charges that you pay off monthly. If you have trouble with temptation, consider asking your issuer to lower your credit limits rather than closing accounts entirely.
TriPoint Lending works with borrowers with credit scores as low as 580. However, your credit score significantly affects your interest rate. Scores above 670 typically qualify for the best rates (5.99%-12% APR), while scores between 580-669 may see rates of 15%-35.99% APR. Even at higher rates, consolidation can still save you money compared to credit card interest.
Yes, you can technically consolidate debt while still using credit cards, but it's not recommended. The whole point of consolidation is to eliminate debt and create a clear path to financial freedom. If you continue accumulating new debt, you'll end up worse off with both credit card balances AND a consolidation loan payment. Commit to stopping new debt before consolidating.
No, they're very different. Debt consolidation involves taking out a new loan to pay off existing debts in full - you still pay back everything you owe, just at a better rate. Debt settlement involves negotiating with creditors to accept less than you owe, which severely damages your credit and should only be considered as a last resort before bankruptcy.
Ready to Start Saving?
If you're ready to simplify your finances, lower your interest rates, and take control of your debt, TriPoint Lending is here to help. Our debt consolidation loans offer competitive rates, flexible terms, and the support you need to succeed.
Check your rate today with no impact to your credit score and see how much you could save each month.