Personal Loan Debt Consolidation: What to Compare
Learn how to compare a personal consolidation loan with existing debts using APR, fees, term, payment and total cost.
Consolidation does not erase debt
A consolidation loan replaces or combines obligations; it does not reduce principal unless another feature specifically does so. The benefit depends on the new rate, fees, term and your repayment behavior.
Compare APR and origination fees
A lower stated interest rate can be offset by an origination fee or other costs. Compare the amount you actually receive, required payment and total repayment rather than relying on the headline rate.
A longer term can lower payment but raise cost
Extending repayment can make the monthly payment easier to manage while increasing the number of months interest accrues. Model both the monthly-payment change and total interest.
Avoid rebuilding revolving balances
Consolidation can fail if paid-off credit cards are immediately used again. A repayment plan works best when the underlying spending and cash-flow issue is addressed at the same time.
Compare against the current payoff path
Estimate what happens if you keep the current debts and make the same total monthly payment. Then compare that outcome with the proposed consolidation loan, including all fees and the new term.
Educational information only. This article is not individualized financial, investment, tax or legal advice and is not a lender, issuer or investment offer. Review current disclosures from the relevant provider before making a decision.