A debt repayment loan can help you save money on interest, streamline payments and get out of debt faster. But it’s not the only option, and it may not be right for everyone.

Before you apply for a debt repayment loan, you should assess your finances and make a list of your existing unsecured debts. Write down the balances, interest rates, minimum monthly payment and due dates for each account. You also should create an updated budget and tally up your monthly income. You’ll want to include any mandatory costs, like rent or groceries, as well as optional (or discretionary) expenses, such as entertainment or hobbies. Then, determine how much of your monthly earnings you can allocate toward paying down debt.

Debt Repayment Loan: Simplifying Your Financial Recovery

The most popular option for debt consolidation is a personal loan, which can help you combine multiple high-interest credit card or loan balances into a single lower-interest debt payment each month. However, it’s important to understand how debt consolidation works.

For example, a debt consolidation loan can extend your repayment term, which may result in you spending more in cumulative interest charges over the life of the loan.

Debt repayment loans are often unsecured, which means you don’t put up an asset as collateral to back the loan. But applying for one can trigger a hard credit check, which knocks a few points off your credit score temporarily. Ultimately, the loan’s impact on your credit score depends on how you use it and whether you pay off your debts on time.