Get out of debt
Debt consolidation: the fine print
The short answer
One loan can look cheaper while costing you more.
- An origination fee means you receive less than you borrow.
- A 0% promo rate expires. When it does, the leftover balance jumps to a higher rate.
- A lower monthly payment can hide a longer term and more total interest.
- Paying off your cards frees them up to run back up.
- The catch: the biggest risk is a lower payment that stretches the term, so you pay more interest overall.
The fine print that costs people money
Consolidation can simplify your bills and lower your rate. But a few details decide whether it saves you money or costs you more. Check each one before you sign.
- The origination fee comes off the top. Borrow $10,000 at a 5% fee and you get $9,500 in hand, but you owe $10,000. The fee is a cost, so count it.
- The promo rate ends. A 0% balance-transfer window is temporary. Know the exact date it ends and the rate that kicks in on whatever balance is left.
- A lower payment can cost more. Stretching a balance over more years lowers the monthly. It can also raise the total interest you pay. Compare the total cost, not the monthly.
- The old cards are still open. Consolidating pays off the cards but leaves them open. Run them back up and you owe the loan plus new balances.
- "Debt relief" isn't consolidation. Some ads use the word "consolidation" for a settlement program that damages your credit. Read which product it actually is.
⚠ The catch
Always compare the total cost of the new loan against the total you'd pay now. Not the monthly payment.
Run the numbers with the real cost of consolidation and an APR calculator before you commit.