Combine Debts into One Simpler Payment
A consolidation loan pays off multiple debts and replaces them with a single fixed monthly payment — potentially at a lower interest rate.
How Consolidation Works
Understanding the mechanics helps you decide if it's the right move for your situation.
Assess Your Debts
List all your outstanding debts — credit cards, personal loans, medical bills — including balances and interest rates.
Apply for a Consolidation Loan
If approved, the new loan pays off your existing debts. You now owe one lender instead of many.
Make One Monthly Payment
Instead of juggling multiple due dates and minimums, you make a single fixed payment each month.
Pay Down Over a Set Term
With a fixed rate and term, you know exactly when your debt will be paid off.
When It May Help — and When It May Not
Consolidation is a tool, not a solution for every situation. Be honest about your circumstances.
May Help If...
- You have multiple high-interest debts
- You qualify for a lower APR than your current rates
- You want a clear, fixed payoff timeline
- You're committed to not taking on new debt
- You can afford the new monthly payment
May Not Help If...
- You can't qualify for a lower rate than you currently pay
- Your total debt is small enough to pay off directly
- You're likely to run up new balances after consolidating
- The fees outweigh the interest savings
- You need to reduce the principal amount you owe
Consolidation vs. Other Options
Different debt strategies serve different needs. Understand what sets each apart.
| Consolidation Loan | Balance Transfer | Debt Management | Debt Settlement | |
|---|---|---|---|---|
| Combines multiple debts into one | ||||
| New loan pays off existing debts | ||||
| Negotiates reduced principal | ||||
| Works with a credit counselor | ||||
| May impact credit score | ||||
| Fixed monthly payment |