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Being deep in debt can strain your monthly budget, tarnish your credit and fill your life with stress.

Feeling overwhelmed by your debt? Consider a personal loan to consolidate what you owe. The best personal loans can help lower your monthly payments and put your mind at ease with a clear path to repayment in full.

What’s a personal loan?

Unlike credit cards, which let you take as long as you want to pay off debt, personal loans are fully paid by the end of the term, typically ranging from about one to four years. Often these loans are based on your creditworthiness, which means no collateral is needed.

Consolidating worrisome debt with a personal loan makes the most sense if:

• You have a lot of high-interest debt, such as multiple credit cards with high balances.
• You don’t have another way to pay off your debt anytime soon, such as consolidating your debt with a low-rate credit card.
• Your credit is good enough to qualify for a loan.

Why use a personal loan to consolidate debt?

Personal loans offer distinct advantages:

• Lower annual percentage rates. Personal-loan interest rates are often substantially lower than those of most credit cards, saving you money in the end. Consider a credit union like Mutual 1st Federal because, on average, credit unions charge lower personal loan rates than you’ll find at banks.
• Predictable payments. Fixed interest means payments won’t fluctuate over the life of the loan. And you may be able to schedule automatic electronic payments to make budgeting truly effortless.
• No collateral. Unlike home equity financing or other secured loans, you won’t have to put your home or other assets on the line.
• Quick approval. Personal loan applications tend to be simple, with minimal processing time required.

Meanwhile, it’s best not to use a consolidation loan unless you’re confident you can keep from taking on more debt. In other words, don’t borrow to pay off credit card balances only so that you can use that plastic for more payments that reinflate those balances.

Why debt consolidation helps

Debt consolidation can help alleviate your anxiety in a few key ways:

• A debt-consolidation loan payment should be lower than what you’re paying monthly on the balances to be consolidated.
• It can be convenient to have just one payment to make, too, rather than keeping track of many and possibly missing one.
• Paying off revolving debt, like credit card balances, can be challenging. Consolidating with an installment loan gives you a repayment plan and a structure — the same amount every month over a specified length of time — for getting rid of your debt.

What to watch out for

Sometimes, your new loan payment can be smaller because you’re paying a lower interest rate than was charged on the balances you were paying down. In other cases, though, you may be paying less each month because the loan has a longer term, which can mean you end up paying more overall. That can still be a good decision, depending on your financial situation, but it’s worth thinking over.

Also, some lower-interest loans can be secured loans, those that you back with an asset like a house or a car. It’s best to be sure you’re in a stable financial situation before taking out a secured loan, because if you can’t make the payments, the lender may seize that asset.

Ultimately, it’s important to make sure a personal loan for debt consolidation is the right option for you. But for those with sizable debt, a personal loan can bring much needed relief.

Roberta Pescow and Devan Goldstein, NerdWallet

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