Can I use a personal loan to pay off debts?

If you need to borrow some money to pay some bills, but your credit isn’t very good, you have some options.

Borrowing money to pay the bills can make sense in that you’re staying current on your financial obligations. That will keep your credit history from getting worse. But you need to understand that you still owe the money — just now you owe it to a lender of personal loans.

Personal loans to pay off other unsecured debt

With a debt consolidation loan, you can borrow enough money to pay off your other unsecured debts and wind up with one monthly payment for the personal loan.

Lenders base their loan decisions on your credit history, which goes into a credit-scoring model to come up with your credit score. The lower the credit score, the higher the interest rate on the loan. Too low a score and the lender just won’t approve the loan.

Peer-to-peer lenders’ rates

Peer-to-peer lenders will let you check on rates without it impacting your credit score. That’s a good way to check on an interest rate amount. You also can use myBankrate.com to get a free credit report and score.

If you belong to a credit union, talk to a loan officer there about qualifying for a personal loan. Always ask the lender whether its loan application will show up on your credit report. Loan applications stay on your credit report for two years, and it impacts your credit score during the first year.