How can a Debt consolidation Loan help with Debts If you are careful about managing your spending, a debt consolidation loan can help by: reducing your monthly payments. By spreading out the term of the debt you will often be able to reduce your monthly repayments to a manageable level. Most people are often paying the ‘minimum payment’ allowed on the existing debts. improving your credit rating. If you are able to pay off the loan and accrue no further debt, this will be seen as a positive impact on your credit rating. It is also a good idea to check your credit report before you apply for a debt consolidation loan. reducing the interest you pay. If your debts are with store or credit cards that have a high interest rate, then you will generally pay back less interest on your debt with a loan. Make sure you stop spending on your cards though.