See what the math says about consolidating your debts — savings, payoff time, and clear analysis.
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Consolidation saves money when the new loan's APR is lower than the weighted average APR of your current debts, AND you commit to not running up the consolidated balances again. A shorter loan term also matters — a 7-year consolidation at a slightly lower rate can cost more in total than paying off the original debts.
Most consolidation loans require a minimum credit score of 620-660. The best rates go to borrowers with 700+. Below 620, consolidation is still possible but rates may exceed your current credit card APRs, defeating the purpose.
Balance transfer cards with 0% intro APR for 15-21 months can save more if you can pay off the balance before the promotional rate expires. They usually charge 3-5% transfer fees. For debt you cannot pay off within 21 months, a fixed-rate consolidation loan is typically better.
Short-term, a new loan application creates a small dip from the hard inquiry. Long-term, consolidation typically helps credit by lowering credit utilization and simplifying payments. The biggest risk is running up cleared credit cards again while still owing the consolidation loan.
Debt consolidation combines debts into one new loan, which you repay in full at a lower rate. Debt settlement negotiates with creditors to pay less than you owe, which significantly damages your credit and creates taxable income on the forgiven amount. They are very different tools.
Most personal loan consolidations have terms of 2-7 years. A 3-5 year term is the sweet spot for most borrowers: long enough for an affordable monthly payment, short enough to avoid paying excessive total interest.