Is debt consolidation a good idea? Here’s how to know, plus where to find a loan

Debt consolidation combines multiple debts into a single loan, ideally with a lower interest rate and more manageable monthly payment. But is it the right move for you?

Debt consolidation may be a good fit if you have multiple high-interest debts, such as credit card balances, and can qualify for a lower-cost loan with repayment terms you can afford. Your credit profile, income and existing debt can all affect the options available to you.

Here's what to know about who may benefit from debt consolidation, where to find debt consolidation loans, plus how best to prep before taking one out.

Consolidating debt through a personal loan makes most sense if you fit the below:

• You have several credit card balances or other debts and want to combine them into one payment
• You're paying high interest rates, particularly on credit cards
• You have steady income and a realistic plan to make the new payments
• You have good enough credit to potentially qualify for a lower-rate personal loan
• You want to simplify repayment by having one monthly payment instead of several
• You can avoid accumulating new debt after consolidating

What to watch out for: If the new debt consolidation loan doesn't meaningfully reduce your interest rate or monthly cost, it's likely that a longer repayment period (if that's the case) would substantially increase your total interest paid, making it not a good fit.

There are many online lenders that offer solid personal loan options when you want to consolidate your debt.

LightStream is good for fast funding as it can approve and fund a loan the same day you apply, as long as you sign by 2:30 p.m. ET. It also lets you choose your funding date and repayment terms.

SoFi doesn't charge late fees, nor an origination fee and you can make extra payments or pay off your loan early without penalty. Plus, SoFi membership comes with referral bonuses, rate discounts* and financial planning tools.

Although the better your credit, the more likely you are to get a lower interest rate on your debt consolidation loan, if you do have bad credit or no credit and need to combine multiple debts, consider Achieve or Upstart.

Achieve approves debt consolidation loans for borrowers with a FICO® Score of 560 and Upstart's underwriting model looks at hundreds of data points beyond your credit score, including education, work history, income and savings patterns.

Before committing to a new personal loan, Anna N'Jie-Konte, a CFP at Poder Wealth Advisors, recommends getting a clear picture of your actual monthly expenses. Don't consolidate your debt without first fixing the habits that led to the debt in the first place, she suggests.

You can do this with a budgeting app that tracks where your money is going, so the loan terms you choose actually match your real cash flow and other financial goals, not just what feels manageable in the moment.

If you're new to budgeting, Rocket Money has a free version that automatically categorizes each transaction, allows you to customize budgets, plus it offers subscription management and bill tracking. The app also provides monthly snapshots of your total spending and income.

PocketGuard is a great budgeting tool if you're prone to overspending because it notifies you if you're approaching or exceeding your limit in any spending category. You can also create up to five custom "rules" to monitor specific categories, accounts or merchants.

At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Anna N'Jie-Konte, a certified financial planner and founder / CEO of Poder Wealth Advisors.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every debt consolidation article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of loan products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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*To be eligible for an additional 0.25% interest rate reduction on a Personal Loan, you must, within 31 days of loan funding, either (1) meet SoFi Plus eligibility criteria, (2) receive an Eligible Direct Deposit into a SoFi Checking or Savings account, or (3) receive at least $5,000 in Qualifying Deposits into a SoFi Checking or Savings account. You must continue to meet at least one of the above eligibility criteria every 31 days to maintain the discount. See the SoFi Plus terms for details on SoFi Plus subscription. For more details on Eligible Direct Deposit or Qualifying Deposits, please see https://www.sofi.com/legal/banking-rate-sheet. Once you become eligible during the initial period, the discount will be removed or reinstated depending on whether the criteria have been met. Each time your loan is re-amortized, your monthly payment amount will change based upon the interest rate that was in place. SoFi reserves the right to modify or terminate this offer at any time for unenrolled participants. You are not required to meet these criteria to be approved for a loan.