01
Review Your Debts
List your balances, current interest rates, monthly payments and remaining terms so you know what you are trying to replace.
DEBT CONSOLIDATION
Debt Consolidation Loans Explained for Smarter Debt Management
Learn how debt consolidation works, what it can change about your monthly payments, which costs to compare, and what to consider before replacing several debts with a single loan.
01
Understand the Process
02
Compare Total Costs
03
Review Your Options
SIMPLIFY
Multiple Debts
↓
One Payment
DEBT PLANNING
Bring your debt picture into one clearer view.
DEBTS
MULTIPLE
PAYMENT
ONE
GOAL
CLARITY
COMPARE
Rate • Term • Fees
WHAT IT MEANS
What is debt consolidation?
Debt consolidation means combining multiple debts into a new repayment arrangement so you can manage them through fewer payments. A debt consolidation loan can be used to pay off separate eligible debts, leaving you with the new loan to repay over its agreed term.
The main attraction is often simplicity. Instead of keeping track of several balances, interest rates and payment dates, you may have one scheduled payment to manage. Depending on the loan terms you qualify for, consolidation may also change your interest rate or repayment period.
Simplifying payments does not automatically make debt cheaper. The new interest rate, loan term, fees and total repayment amount all matter. A lower monthly payment can sometimes result from extending the repayment period, which may increase the total amount paid over time. :contentReference[oaicite:1]{index=1}
DEBT MANAGEMENT
Simplifying payments is only one part of the decision.
HOW IT WORKS
How debt consolidation works
The basic process replaces several eligible debts with a new repayment arrangement. The exact process depends on the lender and the type of consolidation product.
02
Compare New Terms
Look at the proposed APR, fees, repayment term and total repayment amount instead of focusing only on the new monthly payment.
03
Pay Eligible Debts
If approved and you proceed, the new consolidation arrangement is used to address the debts included in the agreement.
04
Manage One Payment
You then repay the new loan according to its terms. Keeping the new payment within your budget is essential.
COMPARE FIRST
A lower payment is not the same as a lower total cost.
WHEN IT MAY HELP
When might debt consolidation make sense?
Consolidation can be worth exploring when managing several debts has become difficult to track or when the terms of a new arrangement could fit your financial situation better.
For example, someone managing several credit-card balances may value having fewer payment dates to remember. A consolidation loan may also be worth comparing if its terms are meaningfully different from the debts being replaced.
But consolidation is not a reset button. If the underlying spending or budgeting problem continues, taking on a new loan may not solve the reason the debt accumulated in the first place. CFPB recommends looking at your budget and understanding why you are carrying debt before deciding whether consolidation is appropriate. :contentReference[oaicite:2]{index=2}
YOUR OPTIONS
Different ways people consolidate debt
Debt consolidation is not one single product. Different approaches have different costs, eligibility rules and risks.
Debt Consolidation Loan
A bank, credit union or other lender may offer an installment loan that can be used to repay multiple eligible debts. The new loan has its own rate, fees and repayment term.
Balance Transfer
Some credit cards offer promotional balance-transfer terms. Promotional rates can be temporary and transfer fees may apply, so the full terms need to be reviewed carefully. :contentReference[oaicite:3]{index=3}
Home Equity Borrowing
Home equity products can sometimes be used to consolidate debt, but they put the home at risk if the borrower cannot meet the repayment obligations. Closing costs may also apply. :contentReference[oaicite:4]{index=4}
Credit Counseling
Nonprofit credit counseling organizations may help consumers review their debts, budget and repayment options. A debt management plan is different from a consolidation loan. :contentReference[oaicite:5]{index=5}
TOTAL COST MATTERS
Do not judge a consolidation offer by the monthly payment alone
A lower monthly payment can look attractive, but the payment may be lower because the new loan stretches repayment over a longer period.
Compare the interest rate, repayment length, origination or other fees, and the total amount you expect to repay. A consolidation loan can simplify your finances while still costing more overall.
CFPB specifically recommends considering the loan's length, fees and costs when evaluating whether consolidation actually benefits you. :contentReference[oaicite:6]{index=6}
01
APR
Compare the new rate with the rates on the debts you are replacing.
02
TERM
A longer repayment period can reduce monthly payments while increasing total interest.
03
FEES
Include origination, transfer, closing or other applicable charges.
04
TOTAL COST
Look at the complete repayment amount rather than one monthly figure.
CONSOLIDATION VS SETTLEMENT
Debt consolidation and debt settlement are not the same
Debt consolidation generally means borrowing or arranging a new repayment structure to combine debts. You still owe the debt and repay it under the new arrangement.
Debt settlement is different. Settlement companies generally attempt to negotiate with creditors to accept less than the amount owed. The process can involve significant risks, including additional fees, collection activity, credit damage and possible tax consequences depending on the circumstances. :contentReference[oaicite:7]{index=7}
DEBT CONSOLIDATION
New repayment arrangement
- Combines eligible debts
- Creates a new repayment obligation
- May simplify the number of payments
- Rate and term determine the new cost
DEBT SETTLEMENT
Negotiating debt obligations
- Attempts to change what is owed
- Different risks and fees apply
- May involve collection activity
- Should not be confused with a consolidation loan
BEFORE YOU APPLY
What should you check before consolidating debt?
Start by creating a complete picture of what you already owe. Record each balance, interest rate, minimum payment and remaining repayment period. This gives you something meaningful to compare against a new offer.
Then review your budget. A consolidation loan can reduce the number of payments you manage, but the new payment still needs to fit comfortably within your monthly finances.
It can also be worth contacting your existing creditors. Depending on the situation, a creditor may offer payment adjustments, fee changes or other options without requiring you to replace the debt with a new loan. :contentReference[oaicite:8]{index=8}
Finally, read the full agreement before accepting an offer. Pay attention to the APR, whether the rate is fixed or variable, fees, repayment term, prepayment conditions and the total repayment amount.
✓
List every current debt
Balance, rate, payment and remaining term.
✓
Calculate your current cost
Know what your existing repayment plan costs.
✓
Compare the new APR
Do not rely on the monthly payment alone.
✓
Review all fees
Include fees in the total cost comparison.
✓
Check the repayment term
Understand how long you will make payments.
DEBT CONSOLIDATION CALCULATOR
Compare your current debt with a potential consolidation loan
Enter your actual figures to estimate how a new consolidation loan could compare with your current monthly payments and interest costs. No sample financial values are pre-filled.
CURRENT DEBT
Enter your existing debt
$
%
years
NEW LOAN
Enter consolidation terms
%
years
$
i
This calculator is for educational comparison only. Actual loan offers, rates, fees and repayment terms vary by lender and borrower.
ESTIMATED NEW MONTHLY PAYMENT
Enter your debt details
Enter your current balance, current rate, new rate and loan terms to see an estimate.
Current Estimated Payment
—
New Estimated Payment
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Estimated Monthly Difference
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Estimated Current Interest
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Estimated New Interest + Fees
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Important
A lower estimated monthly payment does not necessarily mean lower total borrowing cost. Compare the full repayment period, interest and fees before making a decision.
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GROWTHSMARTLY
Clearer answers for smarter debt decisions.
Understand your options before replacing existing debt with a new repayment arrangement.
DEBT CONSOLIDATION FAQ
Questions people ask about debt consolidation
A debt consolidation loan is a new loan used to repay multiple eligible debts. Instead of managing those separate balances, you repay the new loan according to its terms.
It can, depending on the new rate, loan amount and repayment term. However, a lower payment may result from extending the repayment period, so the total cost should also be compared.
A consolidation loan generally does not erase the underlying debt. It changes how the debt is financed and repaid. Debt settlement is a different process.
No. Consolidation generally replaces multiple debts with a new repayment arrangement. Debt settlement involves attempts to negotiate with creditors to accept less than the amount owed and carries different risks.
Compare the APR, loan term, fees, monthly payment and total repayment amount. Also check whether the rate is fixed or variable and understand any conditions attached to the offer.
Credit-card balances are commonly considered in debt-consolidation strategies, but whether they can be included depends on the product and lender. Balance transfers are another possible consolidation approach.
Applying for new credit can have credit-report and scoring implications, and the overall effect depends on your individual circumstances and how the new account is managed.
Consolidation is not automatically appropriate in this situation. Review your budget, contact your creditors and consider speaking with a reputable nonprofit credit counselor before taking on another loan. :contentReference[oaicite:9]{index=9}
STAY ALERT
Be careful with debt-relief promises
Be cautious of companies that guarantee fast debt forgiveness, promise results without reviewing your finances, or demand payment before providing the promised service. The FTC warns consumers about debt-relief scams and recommends avoiding companies that make guarantees or demand upfront payment for debt relief services. :contentReference[oaicite:10]{index=10}
MAKE THE NUMBERS CLEARER
Compare My Debt
→
Compare your debt options before making a decision.
Use the calculator to explore different consolidation scenarios, then compare the full cost, repayment term and risks of the options available to you.