The Promise vs. the Reality
Debt consolidation sounds like a magic fix — combine all your debts into one loan, get a lower rate, make one payment. In practice, it works well in specific situations and poorly in others. The difference comes down to math, behavior, and timing.
When Consolidation Saves Money
Consolidation works when the new loan's interest rate is meaningfully lower than the weighted average of your existing debts. If you're carrying three credit cards at 19%, 22%, and 24%, and you qualify for a consolidation loan at 10%, the interest savings are substantial.
The Consolidation Calculator on DebtCalc models this precisely. Enter each existing debt with its balance, rate, and minimum payment. Then enter the consolidation offer terms. The calculator shows total interest under both scenarios and the monthly payment difference.
When It Doesn't
Consolidation fails when the rate isn't low enough to matter, when fees eat the savings, or when the term is extended so much that you pay more total interest despite the lower rate. A 10% consolidation loan over seven years can cost more than 22% cards paid off aggressively in two years.
The bigger risk is behavioral. After consolidating, the credit cards are empty again. Without discipline to stop using them, you end up with both the consolidation payment and new card balances.