Short-term (0-3 months): A hard inquiry may drop your score 5-10 points temporarily. A new account slightly lowers average age of accounts. However, if you pay off credit cards, utilization drops significantly (positive).

Long-term (6+ months): On-time payments build positive payment history. Lower utilization improves your score. Debt reduction improves debt-to-income ratio.

Net effect: Usually positive if you make on-time payments and don’t accumulate new debt.

You may save money if:

✓ New loan APR is LOWER than weighted average of current debts
✓ You avoid late fees and penalty APRs on credit cards
✓ You pay off loan on schedule without extending term unnecessarily

Example:

Current situation:
• Card 1: $5,000 at 22% APR
• Card 2: $3,000 at 19% APR
• Card 3: $2,000 at 24% APR
• Weighted average: 21.4% APR
• Minimum payments: $350/month

With consolidation at 15% APR:
• Loan: $10,000 at 15% APR for 36 months
• Monthly payment: $346
• Savings: $2,400+ in interest

Use our calculator above to see your potential savings.

Usually can consolidate:
✓ Credit card balances
✓ Medical bills
✓ Personal loans
✓ Store credit cards
✓ Payday loans
✓ Collection accounts (sometimes)

Usually cannot consolidate:
✗ Secured debts (mortgages, auto loans)
✗ Student loans (use student loan refinancing instead)
✗ Business debts (use business loans)
✗ Tax debt (IRS payment plans are better)

Note: Some lenders can pay creditors directly; others deposit funds to your account.

General recommendation: NO, keep them open.

Why keep cards open:
✓ Maintains credit history (age of accounts)
✓ Keeps available credit high (lowers utilization)
✓ Helps credit score

What to do instead:
• Cut up physical cards if needed for discipline
• Set up small recurring charge (Netflix, etc.)
• Set up autopay to avoid late payments
• Don’t use for new purchases

Exception: Close cards with annual fees you can’t afford or if temptation to overspend is too high.

Timeline:

Application to funding:
• Application: 5-10 minutes
• Initial decision: Same day to 24 hours
• Document verification: 1-2 business days
• Final approval: 1-3 business days
• Funding: 1-7 business days after approval

Total: Typically 3-10 business days from application to receiving funds.

Paying off creditors:
• If lender pays directly: 5-10 business days
• If you pay yourself: As soon as you receive funds

Potential risks to watch for:

⚠️ Higher total cost if you extend term: A 60-month loan may have lower payment but higher total interest than a 36-month loan.

⚠️ Accumulating new debt: If you use credit cards again after consolidation, you’ll have BOTH loan payment + new credit card debt.

⚠️ Origination fees: Some lenders charge 1-8% of loan amount as fee. Make sure savings outweigh fees.

⚠️ Predatory lenders: Avoid lenders charging excessive fees. Watch for loans with APRs higher than current debts.

⚠️ Not addressing root cause: If overspending caused debt, consolidation alone won’t help. Consider budgeting, financial counseling.