How debt consolidation works
Debt consolidation means replacing several high-interest debts — usually credit cards — with one new loan at a lower, fixed rate. The goal is a simpler payment and less money lost to interest.
- 1
You take one new loan
A personal loan gives you a lump sum at a fixed interest rate and a fixed term — typically 2 to 5 years.
- 2
It pays off your cards
The loan funds pay your existing balances. Some lenders can pay your creditors directly, so the balances are cleared for you.
- 3
You make one fixed payment
Instead of juggling several cards with rising balances, you have a single predictable monthly payment and a known payoff date.
It often helps when…
- Your card APRs are far higher than a loan rate you’d qualify for
- You’re making payments but balances aren’t shrinking
- You want one fixed payment and a real payoff date
- You can avoid running the cards back up
Be careful when…
- The loan’s total cost (with fees) isn’t actually lower
- A longer term lowers the payment but raises total interest
- You’re likely to keep adding new card debt
- You’re facing hardship that may need a different solution
See the difference for your own debt
The calculator shows your payoff timeline today versus with a consolidation loan.
Open the payoff calculator