Debt Consolidation

Simplify your finances and potentially lower your interest rate by combining multiple debts into one manageable payment.

What is Debt Consolidation?

Debt consolidation is the process of taking out a new, single loan to pay off multiple existing debts. Typically, this is done to combine high-interest debts, such as credit card balances, into one loan with a lower interest rate. The result is a single, predictable monthly payment that can save you a significant amount of money on interest over time and simplify your financial life.

How Does It Work?

There are several ways to consolidate debt. You might take out a personal loan, use a balance transfer credit card with a 0% introductory APR, or secure a home equity loan. The funds from the new loan are used to pay off your existing creditors. Once that's done, you are left with only one lender to pay. This strategy is most effective when the new loan has a lower Annual Percentage Rate (APR) than the combined rate of your old debts.

Is Debt Consolidation Right for You?

Debt consolidation can be a powerful tool if you are struggling to manage multiple payments or if your existing debts have high interest rates. It works best for individuals who have a steady income and the discipline to make consistent payments on the new loan. It is not a solution for overspending, but rather a strategy to manage existing debt more efficiently. Before proceeding, it's crucial to compare the total cost of the new loan (including any fees) with the cost of your current debts. Our debt calculator can help you visualize these differences and make an informed decision.