Debt Consolidation: How It Works & When It Makes Sense
Debt consolidation rolls multiple debts into one loan, ideally at a lower rate. It makes sense when your new rate beats your weighted average existing rate.
Example: $15,000 at 24.99% APR consolidated into a personal loan at 14.5% saves approximately:
| Option | Monthly | Total Interest (5yr) |
|---|---|---|
| Credit card (24.99%) | $440.18 | $11,411 |
| Personal loan (14.5%) | $352.92 | $6,175 |
| Excellent credit (10.5%) | $322.41 | $4,345 |