Debt consolidation loans: when they save money

Updated November 8, 2026

A debt consolidation loan is a personal loan used to pay off several debts, usually credit cards, so you're left with one fixed payment at one rate. It saves money when the loan's rate, including its fees, is well below what you pay now.

How it works

You apply for a personal loan for about the total you owe.
The lender pays you, or pays your creditors directly.
You repay the loan in fixed monthly payments over a set term, usually 2 to 7 years.

What it really costs

The rate depends mostly on your credit score and income. Borrowers with strong credit can get rates far below card rates; with weak credit the offer may be no better than your cards.
Origination fees of 0% to 10% are common, and are usually taken out of the money you receive. A $15,000 loan with a 5% fee pays out $14,250, so you need to borrow more to clear the same debts.
The term matters. A longer term lowers the payment but adds interest. A loan that costs less per month can still cost more in total.

Our debt consolidation calculator puts your current debts next to a loan offer, with the fee, the true APR and total interest.

When it's a good idea

Your credit is good enough for a rate well below your cards.
You can afford the new payment comfortably.
You've stopped adding to the cards.

When to look elsewhere

The offered rate, after fees, is close to what you pay now.
You're already behind on payments. A debt management plan may get lower rates without a new loan.
You'd be tempted to run the cards back up. Then you'd have the loan and new card debt.

Other ways to consolidate

A balance transfer card with a 0% intro rate can be cheaper for balances you can clear within the intro period. Home equity loans have low rates but put your home at risk, and the interest is generally not tax-deductible when the money pays off other debts.