Skip to content

Independent comparison site. Tora Mari is not a lender.

ToraMari

Debt consolidation: pros and cons

By Tora Mari Editorial Team · Updated October 12, 2026 · 6 min read

In short

Consolidating swaps many debts for one. It can make life simpler and sometimes cheaper, but a lower payment is not always a lower cost. Here's how to tell.

What debt consolidation is

Debt consolidation means taking out one new loan and using it to pay off several existing debts, most often credit card balances. Afterward you make one monthly payment on the new loan instead of several payments on the old accounts.

Potential benefits

  • One payment and one due date can make a budget easier to manage.
  • If your new APR is lower than the rates on the debts you are paying off, you may pay less interest, depending on the term.
  • A fixed term gives you a clear payoff date, unlike revolving card balances that can linger for years.
  • Moving card balances onto an installment loan can lower your credit utilization, which may help your credit score over time.

Potential drawbacks

  • Fees: an origination fee reduces the money you receive and raises the real cost of the loan.
  • A longer term can lower the monthly payment while increasing the total interest you pay, even at a lower rate.
  • It does not fix the habits that created the debt. If the paid-off cards fill up again, you can end up owing more than before.
  • Missed payments on the new loan can damage your credit and may bring late fees.
  • Secured consolidation, such as a loan backed by your home, puts that asset at risk if you cannot repay.

When it may make sense

Consolidation tends to help when the new APR is meaningfully lower than the blended rate on what you owe, the payment fits comfortably in your budget, and you have a plan to avoid adding new debt. The only fair way to test this is to compare total repayment, including fees, with what you would pay by staying the course. Our loan calculator can help you run both scenarios.

Alternatives to consider

  • Pay off debts yourself using the avalanche method (highest rate first) or the snowball method (smallest balance first).
  • A balance transfer card with an introductory low rate, keeping in mind that transfers often carry a fee and the promotional rate ends.
  • Nonprofit credit counseling. Agencies affiliated with the National Foundation for Credit Counseling can review your whole situation and may offer a debt management plan.
  • Talking to your creditors directly about a hardship plan or lower rate.

Questions to ask yourself first

  1. What is the total cost of the new loan, including fees, compared with my current debts?
  2. Can I afford the payment every month, including in a tight month?
  3. What will I do differently so the old balances do not return?
  4. Have I looked at at least one alternative?