Debt consolidation
Rolling several balances into one fixed monthly payment, usually at a lower rate than the cards you are paying off.
Debt consolidation is the practice of combining multiple separate debts — most commonly credit card balances — into a single new loan with one fixed monthly payment. The most common use case is rolling several high-interest credit cards (often charging 18-30% APR) into a fixed-rate personal loan at a lower rate.
When debt consolidation helps
It helps when the consolidation loan has a meaningfully lower APR than the debts you’re consolidating, AND when you stop adding to the original credit cards after consolidating. Combining a $15,000 credit-card balance at 24% APR into a 14.99% APR personal loan, for example, can save several thousand dollars in interest over a 4-year term — but only if you don’t run the cards back up.
When it doesn’t help
Consolidation can backfire if: (1) the new loan’s APR is similar to or higher than the existing debt; (2) the longer term means you’re paying more interest in dollars even at a lower rate; (3) you continue charging on the cards after consolidating, ending up with both the loan AND new card debt; or (4) origination fees on the consolidation loan eat into the savings.
How specialists evaluate a consolidation request
A real specialist will look at the actual rates and balances on your current debts, the term you’re considering, your income, and your spending patterns. The goal is to confirm consolidation saves you money in dollars (not just simplifies the bills). Some borrowers are better served by a balance-transfer credit card (if they qualify), a hardship program with the existing creditor, or a debt management plan through a nonprofit counselor.
What to bring to a consolidation conversation
Be ready to share: (1) the balance, APR, and minimum payment for each debt you want to consolidate; (2) your monthly income and major expenses; (3) the term you’re considering. With those, a specialist can run a side-by-side comparison: total interest paid under your current situation vs. consolidation.
Talk through your specific debt picture with a specialist. Check my rate — no credit pull at this stage.
Find out in 2 minutes.
No credit pull at quote stage. A specialist walks you through your rate. Then you decide.