Debt Consolidation Loans

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One day, you may look up and realize, “I can’t believe I’m drowning in debt!” which could leave you feeling stressed.

If this sounds all too familiar, you may want to consider consolidating your debt with a personal loan from Marcus by Goldman Sachs®.

What is a debt consolidation loan?

A debt consolidation loan is used to combine multiple debts into a single debt. Instead of numerous payments, you would have just one recurring monthly payment. Consolidating your debt with a personal loan could also have the advantage of a fixed or lower interest rate. Interest rates on personal loans are often lower than those of credit cards. Your rate is fixed with a Marcus personal loan, so you’ll know exactly how much you owe each month and when your loan will be paid off. Debt consolidation can simplify your finances. And simple can be a beautiful thing.

That said, debt consolidation doesn’t eliminate your debt. It simply merges your individual debts into one. The goal is to make your debt easier to manage and to, potentially, lower your total interest payments.

Getting out of debt is a multi-step process that could include making changes to how you spend and save. If you’re not sure how you accumulated so much debt in the first place, consolidating won’t do anything to change your spending behavior. It also won’t stop you from accumulating more debt in the future. Debt consolidation can, however, be a step in the right direction.

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A debt consolidation loan is a personal loan used to pay off multiple debts—including credit card debts, loans or medical bills—and consolidates these debts into one monthly payment. Consolidating multiple debts into one debt can help simplify your payments. And simple can be a very good thing.

How does debt consolidation work?

The first step to consolidating debt is to determine how much debt you plan to consolidate and how much you can afford to pay off each month. Let’s say you currently have $15,000 in credit card debt spread over three credit cards, each with 16.99% APR. One credit card has an outstanding balance of $3,000, another of $7,000 and the third of $5,000.

If your credit score is good (660 or above), you could qualify for a Marcus debt consolidation loan with an interest rate that may be lower than the one on your credit cards. For example, assuming you make equal payments on your credit cards and Marcus loan, with a $15,000 loan at 12.99% APR and a 48-month term, you could save $2,305.54 by moving over your debt from your credit cards.

If you’re curious about how much money you could potentially save by consolidating your credit card debt, check out our personal loan calculator.

Applying for a Marcus loan is simple and easy, and it may save you money over time. And who doesn’t love saving money?

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What happens after I consolidate my debt with a personal loan?

Instead of multiple monthly payments, now you’d only have one.

Once you’re approved, you’ll receive the money from your loan in a lump sum, which you can use to pay off each of your credit cards. Then you’ll only have to worry about making one monthly payment on time.

Understanding your options – when is debt consolidation a good idea?

Debt consolidation may be a good option if you’re dealing with a manageable amount of debt but just feeling overwhelmed by the number of creditors. One good indicator of when debt consolidation is a good idea is if your debt doesn’t exceed 50% of your income. If your debt exceeds 50% of your income, debt consolidation alone may not be enough to help whittle down your total debt.

When considering debt consolidation, you may want to look into your credit score. Your FICO score plays an important role in determining your interest rate and whether it makes financial sense to consolidate.

One benefit to consolidating with a Marcus loan is that you’ll know exactly when your debt will be paid off, which could help keep you on track. Consolidating your debt could help with financial discipline, but consolidation works best if you combine it with a plan to stayout of debt (e.g., changing your spending behaviors and cutting spending where you can).

What types of debt can I consolidate?

Unsecured debt can be consolidated with a personal loan. While it varies lender to lender, some types of debt, such as mortgages or car loans, might not be able to be consolidated with  a personal loan. With a Marcus personal loan, you are able to consolidate most debts, including credit card debt or bills. Learn more.

Will debt consolidation affect my credit score?

Your credit score depends partly on your credit card utilization ratio — that’s how much of your available credit you’ve used. Using a personal loan to pay off all or some of your credit card debt could improve your credit score because it will improve your credit utilization ratio. One thing to note is that when you consolidate your debt, your credit score may go down for a time because of the hard credit check the lender makes during the application process.

Debt consolidation loans vs. credit cards

Credit cards, while they can be helpful, can also cause problems if your balance remains unpaid.

Here are some examples of that:

If you forget to make a payment on your credit card, you may be hit with high-interest rates and late fees.

If you don’t pay your balance right away, you may be responsible for a finance charge—a monthly fee based on your overall balance.

If you don’t pay more than the minimum payment due each month, the amount you pay in interest may increase in addition to your credit card balance.

Credit card rates are often variable. This means your interest rate is subject to change and could go up (or down) depending on the month.

With a debt consolidation loan from Marcus, your interest rate could be as low as 6.99% APR—which is lower than most high-interest credit cards. Rates range from 6.99% to 24.99% APR, and loan terms range from 36 to 72 months. Only the most creditworthy applicants qualify for the lowest rates and longest loan terms. Rates will generally be higher for longer-term loans. Also, your rate will never change during the life of your loan. Learn more

And rather than worry about fluctuating payment amounts, if you consolidate debt with a Marcus personal loan, you can select a desired monthly payment amount and receive options based on your loan request.

If you make timely payments, consolidating debt could help you improve your credit score over time. A big portion of your FICO credit score – 35% – is determined by your on-time payment history.

Debt consolidation vs. debt management

A debt management plan is offered by a credit counseling agency. It’s similar to debt consolidation in that you’re making one payment, but instead of paying a creditor directly, you pay the agency who disburses payments across your creditors. The agency will try to work with your creditors in an attempt to secure more favorable terms. Payments are usually made on a monthly basis for three to five years.

Another difference between debt management and debt consolidation is that you’re typically forced to close all of your credit card accounts and won’t be able to open any new lines of credit while you’re paying off your debt.

When you consolidate with a personal loan, you’ll still have access to credit. So you’ll have to impose your own spending limitations.

Debt consolidation vs. debt settlement

Debt settlement is when you come to an agreement with your lender to pay back a smaller portion of the debt you owe.

Your account is then considered “settled” on your credit report. Debt settlement can have a negative impact on your credit score for a long time—typically seven years! Yes, seven years. In other words, if your credit score were one year old at the time of a settlement, it could be in the third grade and studying long division before it finally recovered.

A debt consolidation loan from Marcus allows you to take debt from multiple creditors and combine it into a single, fixed-rate, no-fee personal loan.

Consolidating your debt could even improve your credit score over time.

Debt consolidation loans from Marcus

Using a debt consolidation loan from Marcus allows you to replace debt across A debt consolidation loan from Marcus allows you to replace debt across multiple creditors with a single, fixed-rate, no-fee personal loan.

Simplify your life

Making multiple credit card payments each month takes time. It can be easy to miss one and rack up late fees. Marcus can help you end the cycle of high-interest credit card debt with a single, no-fee, fixed-rate personal loan.

Borrow up to $40,000

With Marcus, qualified applicants can borrow from $3,500 to $40,000 to pay off credit card debt, as well as other forms of debt.

The interest rate on your credit card can change. Ours doesn’t.

Our rates are fixed for the life of your loan. Loans from Marcus start as low as 6.99% APR to 24.99% APR. Only the most creditworthy applicants qualify for the lowest rates. Rates will generally be higher for longer-term loans. Learn more

Never any fees, and easy to apply

There are no fees on our personal loans. Ever.

Other debt consolidation options, such as balance transfer credit cards, can have fees or interest rates that increase over time, which may wind up costing you more money. You should know that if you refinance your existing loan, you may lose rights or benefits under it, including state or federal rights (such as those under the Servicemembers Civil Relief Act). Loans cannot be used for education-related expenses (e.g., tuition and fees, books, supplies, miscellaneous personal expenses, room and board) or to refinance student loans. Please read the important information about consolidation. Learn more

You can easily find your loan options online and see if a personal loan from Marcus makes sense for you. There is no need for an appraisal or to put up collateral to get a personal loan.

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Debt comes in all shapes and sizes. Credit cards, monthly bills, even debt you can plan for, like vacation or wedding expenses. Any one of these could be manageable on its own, but together... Marcus by Goldman Sachs presents: Debt Consolidation Loans. Here's how a debt consolidation loan works. Let's say you max out your credit card to bring your dream vacation to life. But when you come home, you find your water heater has broken, and you open new credit cards to pay your monthly bills. Tackling each debt separately can be difficult, and more expensive than other options. This is where a debt consolidation loan can help. This type of personal loan allows you to pay off your existing debts, and roll them into one new, easy to manage loan. Some debt consolidation loans have fixed interest rates and monthly payments. And, unlike secured loans, unsecured debt consolidation loans do not require you to use your possessions as security. Instead, lenders use factors such as your creditworthiness to determine whether you qualify. So, if you want to go from this to this. Consider a debt consolidation loan. Many lenders offer them, including Marcus by Goldman Sachs. Ours have fixed monthly payments, fixed interest rates, and have no fees. Ever. Learn more at Marcus.com.

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Taking control of debt is a great idea, and it’s up to you to make a plan to get it done.

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This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this site were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of Goldman Sachs Group, Inc., Goldman Sachs Bank USA or any of their affiliates, subsidiaries or divisions.