Debt consolidation loans bundle multiple debts — credit cards, medical bills, other personal loans — into a single new loan with one monthly payment, ideally at a more manageable rate or term.
How the process works
After you're approved, the lender funds the new loan. You then use those funds to pay off your existing balances and begin making one fixed monthly payment to the new lender.
Why borrowers consider it
A single monthly payment is easier to budget for. If your new APR is lower than the weighted average of your previous debts, you may also reduce total interest paid.
What to watch for
If the new loan has a longer term, you may pay more total interest even with a lower rate. Origination fees can also reduce the net benefit.
Example scenario
If you have $20,000 in credit card debt at an average 22% APR and consolidate into a 60-month loan at 13.99% APR, your monthly payment may drop substantially and you may reduce total interest paid — depending on fees and term.
This article is for educational purposes only and does not constitute financial, legal, or credit advice. Loan approval, rates, and terms are determined by participating lenders and are subject to eligibility, underwriting, and applicable law. Not all applicants will qualify.