Can You Combine Loans Into a Single Payment? (Yes, Here's How)

Many people find themselves wondering if they can combine their loans into a single payment, and just asking about this is an amazing start to getting on the right financial track and figuring out how to pay off debt.

Put simply, yes, you can combine the total amount of multiple loans into one single loan. And having just a single monthly payment to worry about can make all the difference in your budget. Plus, you might be able to save money by securing a lower interest rate.

If you think this might make sense for you, read on to learn how to get started (and what to avoid).

What is debt consolidation?

When you're struggling with debt and not sure where to turn, it might be time to consider debt consolidation. Debt consolidation combines multiple loans into one bigger loan amount from a single lender. That big loan pays off all your individual loans, so you just have one monthly payment to make. Your debt consolidation service may also offer alternative repayment plans that make your monthly bill more affordable.

In addition, you'll likely have a fixed interest rate on your new loan, which can make your payment amounts more predictable than the variable interest rate that you typically have on credit card debt.

Think of it like all of your loans and existing debts being combined into one. Making a single payment instead of multiple each month can keep you motivated and help your situation feel more easily manageable. It may mean that the amount you're paying each month is less than before, as well.

Securing a lower monthly payment with consolidation has many positives, but you should be aware that it could also mean you'll stay in debt longer since everything you owe is all rolled into one amount. The longer you stay in debt, the more you pay to the lender over the life of the loan. 

This alone shouldn't deter you from choosing debt consolidation if it's the right solution for you, though. In fact, this is the reason the debt consolidation industry exists. Many people find this solution fits their current needs and helps them take a step in the right direction. 

How to get started with consolidating debt

Whatever you do, please do not ignore your bills. Many of us have made this mistake, and it can sometimes feel like the less stressful thing to do, but nothing good comes from putting off your bills. Here's what to do instead:

1. Contact your creditors and let them know your situation

Don't be embarrassed, even if you have no income. They won't judge you for your financial problems. They just want you to repay the loan. Your creditor may have ways to help you lower your payment, which they can explain to you over the phone. If you're not able to work out an agreement with them, then it might be time for debt consolidation.

2. Compare debt consolidation companies

Debt consolidation can be an incredible opportunity if you do it right. Many people report feeling less stressed once they group all their loans into one larger loan. It's more manageable and easy to remember.

It's good to note, however, that not all debt consolidation companies and plans are the same. You need to find the right debt solution and, just as importantly, the right debt consolidation company to work with in order to address your financial needs. Thankfully there are now many online lenders who specialize in debt consolidation.

Make sure you take the time to compare all your loan options and read the fine print when it comes to the loan terms they are offering you.

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What is the best debt consolidation company?

The best debt consolidation companies will work with you to determine what type of consolidation may help you the most. The opportunities available to you really depend on the type of loans you have and what your loan repayment terms could be. Term length is typically between 5 and 20 years, depending on the amount of debt you have and the type of consolidation you choose. We'll break out some of our recommended options for different types of debt next.

Compare our top debt consolidation companies and take charge of your financial future >>>

Best debt consolidation loans for each type of debt

All types of unsecured debt, as well as certain secured debts, are likely to be eligible for debt consolidation. The most common situation is that people have multiple types of high-interest debt that they haven't been able to pay off. Here's a look at some of the more common types of debt and how you could improve your situation:

Student loans

Federal loans, loans that are issued by the government, can be consolidated into one loan. The interest rate on the new loan will be the weighted average of the interest rates of the loans you're consolidating. Never pay any company a fee to consolidate a federal student loan. Simply go to studentaid.gov to find out your options.

Another option for education loans is to refinance them. When you refinance, your loans are consolidated at a new interest rate. This can be a great way to lower your interest rate or reduce your monthly payments by extending your payment period. Refinancing is available for both federal and private student loans, but be aware that you will lose certain protections on your federal loans, like income-based repayment options, if you refinance them. You'll also typically need a good credit score to qualify for refinancing.

One of our favorite sites for refinancing student loans is Credible.com. Credible is free to use with no hidden fees. I like it because you only have to fill out one form to access multiple lenders. Otherwise, you'll have to go to each lender's website directly and fill out their applications.

According to Credible's website, the average savings is $18,668. See how much you might be able to save in just two minutes.

Credit, auto, home loans, tax relief, and other debt

If you have other types of loans, working with a top-rated debt consolidation company may be the best answer to reduce your debt payments and help you avoid bankruptcy. If you're struggling with high credit card balances and feel like you'll never be free of them by just paying the minimum payments each month, know it doesn't have to stay that way.

All of our best debt consolidation companies offer free savings estimates with no obligation. If you do decide to use a debt consolidation company, there will likely be a nominal monthly fee. While there may be a fee, when you compare it versus your loan savings, it's usually minimal. Be sure to always check the fine print.

Alternative consolidation options

Personal loans

Traditional loan consolidation may not be the most affordable option for you, depending on the interest rates involved. If you are very cautious about your finances and can 110% manage your expenses, then a personal loan may be a more affordable option.

Some of the top-rated companies offer personal loans up to $50,000 and $40,000 respectively, and the loan application process is not complicated. If you qualify, you could use a personal loan to pay down your debts as long as you use the money responsibly. 

For more on this financing option, check out our best personal loans.

Balance transfer credit card

If you think you can pay off your debt in less than two years and you have good credit, you might choose a 0% annual percentage rate (APR) balance transfer credit card.

All of your payment goes toward reducing your balance when you aren’t paying interest. You might need to have good credit to get the best balance transfer deal and keep in mind that balance transfer fees may apply.

Home equity line of credit (HELOC)

In some cases, you might have too much debt to pay it off with a personal loan or a credit card balance transfer. A bank or credit union might let you use your home as collateral to get a bigger loan if you’ve built up a large amount of home equity over time. You can then use this money to pay off your high-interest debt and then repay your home equity loan or line of credit.

You can usually get a better rate than you would with a personal loan because you secure the debt consolidation loan with your home. However, this can be risky because you’ve taken unsecured debt and tied it to your home’s value. If you fall behind on your loan payments, you could lose your home.

FAQs about how to combine loans

Bottom line

Before you decide to use any of the debt management options above, make sure you're genuinely ready to get out of debt. This means avoiding taking on any more debt and aggressively cutting back on unnecessary expenses. It also means sending the money on time every month of the repayment period so you can build a positive credit history and never waste money on late fees.

Even after debt consolidation, continually monitoring your finances will help make sure you don't get into debt ever again. Once you have the right mindset, you'll be unstoppable in achieving your personal finance goals.