Personal loans can be consolidated. In fact, this can be one of the most useful purposes of personal loans. Debt consolidation refers to the act of obtaining a new loan for the specific purpose of paying off existing debts. While this most commonly applies to credit card debts because of their relatively high interest rates, you can certainly include an existing personal loan in a debt consolidation.
For example, let’s say that you owe $2,000 on a credit card at 22% interest, $3,000 on another credit card at 18% interest, and have a personal loan at 10% interest with an outstanding balance of $10,000. If you can obtain a new personal loan for $15,000, you can use it to consolidate all three, and if the interest rate is lower than 10%, doing so could potentially save you lots of money on interest expenses.
Are credit cards or personal loans worse for credit?
