Quick answer: A debt consolidation loan can make sense when its APR is lower than your credit card APRs, the payment fits your budget, and you stop adding new balances to the cards you pay off.
Debt consolidation uses one new loan to pay off multiple debts, usually credit cards. Instead of juggling several minimum payments, you get one fixed monthly payment, one payoff date, and a set interest rate.
The biggest benefit is interest savings. Credit cards often carry variable APRs near or above 20%, while qualified borrowers may receive a lower fixed-rate personal loan.
When consolidation works best
- Your new APR is meaningfully lower than your current weighted average APR.
- You can afford the fixed monthly payment.
- You avoid new card spending after consolidation.
- The origination fee does not erase the interest savings.
- The term is not so long that total interest rises.
Common mistake: only chasing a lower payment
A lower payment is useful, but it can be misleading. A five-year loan may lower your monthly payment while keeping you in debt much longer. Always compare total interest and payoff date.
How to calculate savings
Add your current balances, APRs, and monthly payments. Then compare them against the new personal loan payment, origination fee, total interest, and payoff time.
Run your consolidation numbers
Use the personal loan calculator to compare payment, interest, fees, and payoff schedule.
Calculate personal loan