Debt consolidation, explained

Debt consolidation means taking out one new loan and using it to pay off several existing debts, usually credit cards. Afterward you have a single monthly payment instead of five, and ideally a lower interest rate than the cards were charging.

When it genuinely helps

The math works when the new loan's APR is meaningfully lower than the average rate on the debts you're consolidating. Credit cards commonly charge well over 20 percent. If your credit qualifies you for a personal loan at a lower rate, consolidating can save real money and give you a fixed payoff date, which cards never do. There's a psychological benefit too. One payment is easier to manage than five, and easier to never miss.

When it doesn't

If your credit only qualifies you for a loan at a rate close to what the cards charge, you're mostly reshuffling the debt, and any origination fee makes it a net loss. The bigger trap is behavioral. Consolidating frees up your credit cards, and if they fill back up, you now have the loan and the card balances. Consolidation fixes the structure of debt, not the habits that created it. Only you can judge which problem you have.

What to compare

APR, not the monthly payment. A longer term shrinks the payment while increasing the total interest you pay. Check for origination fees, which come out of the loan before you see the money. Our guide to understanding loan costs goes deeper on the numbers.

If consolidation sounds like your situation, that's the exact use case our comparison form was built for. Free, and checking won't affect your credit score.