Debt consolidation loans: compare cost and payments

What would you like to check?

How does a consolidation loan work?

You borrow money to pay off chosen debts. The lender may pay those creditors, or send the money to you so you can pay them. You then repay the new loan. Any debt left out still needs its own payment.

1. Get a payoff amount and date for each debt. A statement balance may leave out new interest.
2. Check how much loan cash reaches the creditors after fees.
3. Compare the new payment, full cost, and payoff date with keeping the debts.
4. Keep paying old bills until each creditor confirms the payoff.

Debt consolidation does not erase what you owe. It changes how you repay it. If you use paid-off cards again, you can owe both the loan and new card bills.

What could it cost?

This made-up example starts with two card debts. One is $6,000 at 24% APR, with a $200 monthly payment. The other is $4,000 at 20% APR, with a $150 payment. You add no new charges. Each payment stays fixed until that debt is paid.

The new loan has a 12% fixed interest rate, 36 monthly payments, and a 5% fee taken out. It must send $10,000 after that fee to pay both cards in full.

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Here, the new loan saves $2,002.50 in full borrowing cost. Its payment is $349.62. Check that amount against the $350 due on the cards now. A lower rate alone does not tell you whether the new payment fits.

If the lender approved only $10,000 and took a 5% fee, just $9,500 would reach the cards. The old debt would not be fully paid. Confirm payoff amounts and cash after fees before you accept a loan.

Example only, not an offer. The model holds rates and payments fixed, with no new charges, late fees, or payment changes. It does not move a paid-off card’s payment to the other card. Totals use unrounded payments; the final payment can vary by cents. The new rate is an interest rate, not a disclosed APR. Read the method and limits.

Can a smaller payment cost more?

Yes. A longer loan spreads the debt over more months. That may lower the monthly bill while raising the total interest. A low starting rate may also change later. Read the written terms.

Decide what you need to improve. You may need room in this month’s budget, a lower full cost, or an earlier payoff date. Those results can differ. Do not call a lower payment a saving until you have checked the total.

When might it help?

A loan may help when it covers the debts you want to pay, has a full cost you accept, and leaves a payment you can make. Check rent, food, travel, other debts, and costs that do not come up each month.

If bills often exceed your pay, the new loan will not remove that gap. You may need changes to bill dates, payment terms, or other costs as well. Check what consolidation would leave unpaid.

What else can you compare?

• A balance-transfer card. Check its fee, limit, and the rate after the offer ends.
• A debt management plan. A credit counselor may help you arrange repayment terms. Ask about fees and which debts can join.
• Help from your current creditors. Ask about more time or a lower payment. Get any change in writing.

Debt settlement works differently. It seeks an agreement to pay less. Stopping payments can bring serious risks, and creditors do not have to agree.

What should the offer show?

• Cash available after fees and where it will go.
• The interest rate, disclosed APR, monthly payment, and total repayment.
• The number of payments and whether the rate can change.
• Any late fee, early-payoff fee, or item pledged as security.
• The first due date and how you will confirm each old payoff.

APR shows yearly borrowing cost as a percent, including interest and certain fees. Read it alongside the dollar totals. If a key term is missing, ask before you sign.

What happens once the money is sent?

Check each old account. Save proof that it was paid, and look for leftover interest or charges. Set up the new payment only after you confirm its amount and date. Keep enough in the payment account for your other bills.

If the new payment may be late, contact the lender before it is due. Ask what help is available and what it costs. Use the payoff and payment checklist.

Common questions

Check the cash for each payoff

Work out the loan needed after fees or check whether a fee leaves a debt unpaid.

Sources and method

Sources checked August 28, 2026. See our editorial policy for how we check the work.

Related help

• How consolidation works
• Payment, fees, and payoff time
• What can change in the file
• When consolidation fits
• What can go wrong
• Balance transfer or loan
• Consolidation or settlement
• Loan or debt management
• Keep the paid balances from returning
• Understand the loan itself
• Compare debt-consolidation paths