A consolidation loan replaces several debts with a single payment. It can lower your interest and simplify your finances, but it does nothing about the spending that created the balances.
1. Add up what you owe, and the rate on each
List every balance with its APR and minimum payment. A weighted average APR is the number your new loan has to beat, after fees.
2. Compare total cost, not the monthly payment
Stretching a loan to a longer term can shrink the payment and still cost more overall. Compare the total interest and fees to what you would pay by continuing as you are.
3. Choose direct payoff where you can
Some lenders pay your creditors directly. That removes the temptation to spend the proceeds and can lower your rate.
4. Plan for the freed-up credit
Paying off cards can free thousands in credit limit. Keep the accounts open and unused, or set a firm spending limit, so you do not end up owing both the loan and the cards.
5. Check the fine print
Look at origination fees, prepayment penalties and whether the lender reports to all three bureaus.
Put it into practice
Compare real offers by total cost, or test a payment first.
This guide is for general information and is not financial, legal or tax advice.