Debt consolidation: when it helps and when it hurts

What debt consolidation is

Debt consolidation combines several debts — usually credit cards — into one new payment, ideally at a lower interest rate. Common options are a personal consolidation loan, a 0% balance transfer credit card, a home equity loan, or a nonprofit debt management plan.

When consolidation makes sense

• The new APR is clearly lower than the average APR on your current debts.
• Fees (origination or 3–5% transfer fees) cost less than the interest you'll save.
• You can pay the new balance off within the promo period or loan term.
• You've stopped adding new charges to the cards you paid off.

Red flags

• A lower monthly payment that only comes from a much longer term — you may pay more interest overall.
• Turning unsecured card debt into debt secured by your home.
• Anyone charging large upfront fees before doing any work.

How to compare offers

List each debt's balance and APR, then calculate total interest under your current plan versus the consolidation offer, including fees. Choose the option with the lowest total cost you can realistically pay on time. Our Interest Exit Plan coaching walks through this math with your real numbers.