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How Debt Consolidation Works
Debt Consolidation Loan vs Balance Transfer
When Debt Consolidation Saves You Money
Risks and Pitfalls of Debt Consolidation
Frequently Asked Questions
Debt consolidation combines multiple debts (credit cards, personal loans, etc.) into a single loan with one monthly payment, ideally at a lower interest rate. This simplifies your finances and can save thousands in interest over time.
Savings depend on the rate difference and your balance. Consolidating $25,000 from 22% APR credit cards to a 10.5% personal loan can save $5,000–$10,000 in interest, depending on your payoff timeline.
Initially, a hard inquiry and new account may lower your score by a few points. However, consolidation often improves your score over time by reducing credit utilization and establishing a consistent payment history.
Most lenders require a credit score of 580+ (620+ for the best rates), a stable income, and a debt-to-income ratio below 50%. Better credit scores get significantly lower rates, which increases your savings from consolidation.