Your new APR is lower
The loan's APR, including fees, is clearly below the average APR on your current debts.
One payment, one payoff date, less interest.
A debt consolidation loan pays off several balances, usually credit cards, so you are left with one fixed monthly payment. It only pays off if the new APR and fees beat what you pay now. Here is how to tell.
- One fixed payment. Replace several due dates and minimums with one.
- A real finish line. A set term means a known payoff month.
- Check the math first. Compare APR and total cost, not just the monthly payment.
Written by the Lendli Editorial Team under our editorial policy. Last reviewed .
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~$3,460Interest saved in our $12,000 example
24–60 moCommon consolidation terms
1 paymentInstead of several card minimums
The math: $12,000 of card debt
Say you owe $12,000 across credit cards at an average 24% APR. You qualify for a consolidation loan at 13.99% APR for 36 months. Here is what each path costs if nothing new is charged.
Three ways to pay off $12,000
- Consolidation loan: $410.07 a month for 36 months, $2,762.64 total interest
- Cards, same $410.07 a month: 45 months, about $6,226 interest
- Cards, 3% minimum only: about 27 years, about $22,887 interest
The loan saves about $3,460 and finishes nine months sooner than paying the same amount on the cards. An origination fee would shrink those savings, which is why you compare APR and total cost.
Signs consolidation could work for you
Consolidation is a tool, not a cure. It works best when several of these are true for you.
You juggle several payments
Multiple due dates and minimums make it easy to miss one; one payment simplifies it.
You can afford the payment
The fixed payment fits your budget every month for the whole term.
You have stopped adding debt
You have a plan to keep the cards you pay off at a zero balance.
Your credit has improved
A better score since you opened the cards can unlock a lower rate now.
You want a firm payoff date
Unlike card minimums, a term loan ends on a known date.
Loan payment calculator
Estimated monthly payment
$336.89
Principal $10,000
Total interest $2,128
Total repaid $12,128
Estimates only, for fixed-rate installment loans with payments made on time. Your actual rate, fees and payment depend on the lender's review of your credit and income.
Estimate your consolidation payment
The calculator is set to our example: $12,000 at 13.99% APR for 36 months. Enter your own total balance and the APR you have been offered.
Then compare the result with what you pay now. Add up your current minimum payments, and estimate how long it would take to clear the balances at that pace.
Break-even check: new total cost < current total cost
If a lender deducts an origination fee, borrow enough to cover the full balances, or you will be left with a remainder on a card.
Consolidation loan vs. other ways to pay down debt
Each option suits a different situation. Here is how they compare.
| Option | How it works | Best for | Watch out for |
|---|---|---|---|
| Consolidation loan | A fixed-rate loan pays off your cards | Good credit, several balances | Origination fees, running cards back up |
| Balance transfer card | Move balances to a 0% intro APR card | Amounts you can clear before the promo ends | Transfer fees, often 3%–5%; the rate after the promo |
| Nonprofit credit counseling | A debt management plan may lower card APRs | Trouble qualifying for a new loan | Monthly program fees; cards usually closed |
| Debt settlement | A company negotiates to pay less than you owe | A last resort after other options | Credit damage, fees, possible taxes on forgiven debt |
How to consolidate, step by step
Plan it out before you apply, so the loan actually clears everything.
List every debt
Balance, APR and minimum payment for each account.
Find your average APR
Weight each APR by its balance to see what you pay now.
Prequalify with soft checks
Compare several lenders without affecting your score.
Pay off and confirm $0
Pay each card, or let the lender pay them, then confirm the balances are gone.
Average APR, worked out
- $5,000 at 27% + $4,000 at 22% + $3,000 at 19%
- (5,000×27 + 4,000×22 + 3,000×19) ÷ 12,000
- = 23.3% average APR, the number your new loan should beat
Have these ready
- A list of balances and APRs
- Recent statements for each card
- Pay stubs or proof of income
- Government-issued photo ID
Pros and cons of consolidating
It can save real money, but only with the right rate and habits.
Pros
- One simple paymentOne due date instead of several.
- Lower total interestWhen the new APR is lower, savings add up fast.
- Fixed payoff dateYou know exactly when you will be debt-free.
- Can help your creditLower card utilization often helps scores over time.
Cons
- Debt can come backRunning up the cleared cards leaves you worse off.
- Fees can erase savingsAn origination fee raises your real cost.
- Longer terms can cost moreA lower rate over a longer term can still add interest.
- Look-alike scamsSome debt settlement firms advertise as consolidation.
Before you sign
Run through this list with every offer so there are no surprises.
Compare APR
Use APR, which includes fees, not the interest rate alone.
Check total cost
Find the total of payments in the Truth in Lending disclosure.
Ask about direct pay
Some lenders pay card issuers directly, which removes temptation.
Confirm no prepay penalty
You should be free to pay the loan off early.
Protect the win
Keep cleared cards at $0 and set autopay on the new loan.
Watch for debt relief scams
The FTC warns about companies that promise to make debt disappear.
Fees before results
Under FTC rules, debt relief companies selling by phone generally cannot charge fees before they settle or reduce your debt.
"Stop paying your cards"
Advice to stop paying creditors can lead to late fees, collections and lawsuits.
Guarantees
No one can guarantee that creditors will accept less than you owe.
Debt consolidation questions, answered
What people ask before rolling their balances into one loan.
Will a debt consolidation loan hurt my credit?
There may be a small dip from the hard inquiry and new account. Paying down card balances usually lowers your credit utilization, which can help your score over time if you pay on time.
Should I close my credit cards after consolidating?
Closing cards can raise your utilization and shorten your credit history. Many people keep them open with no balance, but only if they will not use them to borrow again.
Is debt consolidation the same as debt settlement?
No. Consolidation replaces debts with a new loan you repay in full. Settlement tries to pay less than you owe and usually damages your credit.
What credit score do I need to consolidate debt?
It varies by lender. To get an APR low enough to save money, a score in the good range or higher usually helps.
Can I consolidate debt with bad credit?
Some lenders work with lower scores, but the APR may not be low enough to save money. Nonprofit credit counseling is another option.
See if consolidation could save you money
Check your options in a few minutes, then compare against what you pay now.