Is Debt Consolidation a Good Idea? Pros, Cons, and When It Makes Sense

A debt consolidation loan can make your debt feel easier to manage. Instead of juggling several bills, you roll everything into one personal loan with one monthly payment. If the new loan comes with a lower interest rate or a clear payoff date, it can help you feel more organized and in control.

But consolidation doesn’t solve every financial issue. And it isn’t the right move for everyone.

Below, you’ll find the quick answer, a breakdown of the pros and cons, and clear guidance to help you decide if debt consolidation is a good idea for your situation.

Table of Contents

1. Is debt consolidation a good idea?
2. 1. Pro: Streamline your monthly payments
3. 2. Pro: You may qualify for a lower interest rate
4. 3. Pro: Get fixed terms and a predictable payoff date 
5. 4. Pro: Your credit score may increase
6. 5. Con: You may pay more interest over time
7. 6. Con: Some lenders charge origination fees
8. 7. Con: Consolidation won’t fix overspending habits
9. 8. Con: Your credit score may dip at first
10. Is it worth it?
11. When it’s a good idea (decision scenarios)
12. Where to get a debt consolidation loan
13. Should you consider debt relief instead?
14. FAQ

Is debt consolidation a good idea?

Debt consolidation can be a smart way to simplify your payments, lower your interest rate, and feel more in contro, but only when the numbers work in your favor.

If the new loan costs you more interest over time, or if overspending is the root issue, consolidation may not help.

Below, we’ve broken down all the pros and cons.

1. Pro: Streamline your monthly payments

The Consumer Financial Protection Bureau found that consumers pay more than $14 billion in credit card late fees each year. When you’re managing several bills, mistakes happen.

A consolidation loan replaces multiple due dates with one bill, helping you stay organized and avoid late fees and credit score damage.

2. Pro: You may qualify for a lower interest rate

Federal Reserve data shows:

• Average credit card APR: 21.39%
• Average personal loan APR: 11.14%

If you move high-interest credit card balances into a lower-rate personal loan, you can save money over time, especially if you avoid extending your repayment term.

3. Pro: Get fixed terms and a predictable payoff date 

Debt consolidation loans come with set repayment terms (often two to 10 years). That means:

• A stable monthly payment
• A clear end date
• An easier time planning your budget

This predictability can be reassuring when you’re trying to rebuild financial stability.

4. Pro: Your credit score may increase

A 2019 TransUnion study found that 68% of borrowers saw their score rise by at least 20 points after consolidating debt.

This often happens because:

• You pay off high-utilization credit cards
• Your credit mix improves
• Your payment history becomes more consistent

Since “amounts owed” makes up 30% of your credit score, paying off revolving debt can help.

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Here are the potential downsides.

5. Con: You may pay more interest over time

If you choose a longer term to reduce your monthly payment, you could end up paying more interest overall. Running the numbers is important.

Compare:

• Paying your existing debt off aggressively vs.
• Consolidating into a longer repayment schedule

Sometimes a lower monthly payment costs more long-term.

6. Con: Some lenders charge origination fees

Origination fees can reach up to 10% of your loan amount. These fees reduce the amount you receive or raise your APR.

Even if a lender advertises a low rate, high fees can make it more expensive. Always compare APRs, not just interest rates.

7. Con: Consolidation won’t fix overspending habits

Debt consolidation can give you breathing room, but it won’t fix what caused the debt. If you struggle with impulse spending, credit card dependence, or irregular budgeting, you’ll need a plan to stay out of debt going forward

8. Con: Your credit score may dip at first

When you apply for a consolidation loan, the lender performs a hard inquiry. This can drop your score by a few points temporarily.

Closing old accounts after you consolidate may also lower your score. However, these changes are usually short-lived, and many borrowers see their score climb soon after.

Is debt consolidation worth it?

Here’s a simple guide to help you decide:

When debt consolidation is a good idea (decision scenarios)

Many borrowers also use a personal loan for peace of mind. If a single payment would genuinely relieve stress, that’s a valid reason to consolidate.

You can also create your own payoff plan instead of consolidating. One option is the debt snowball, where you pay off your smallest balance first to build momentum, then roll that payment into the next debt. Another option is the avalanche method, which targets the highest-interest debt first to save more over time.

If you want support, consider working with an Accredited Financial Counselor (AFC); many offer low-cost or even free guidance. Borrowing from a trusted friend or family member is another possibility, but it can strain relationships, so approach it carefully.

Erin Kinkade, CFP®

Where to get a debt consolidation loan

When considering a debt consolidation loan, it’s important to choose a lender that aligns with your financial needs and credit profile.

See how several of the best personal loan lenders compare below, and read our best debt consolidation loans resource to learn more.

Should you consider debt relief instead?

Debt relief may be worth exploring if you:

• Are several payments behind
• Can’t qualify for a consolidation loan
• Don’t earn enough to manage regular payments
• Are overwhelmed by collection activity

Debt relief companies may negotiate to lower your balance or adjust your payment structure. But there are downsides, including credit score impact and fees.

If you’re deciding between the two, see our full comparison of debt relief vs. debt consolidation.

FAQ

Do debt consolidation loans hurt your credit?

A consolidation loan may temporarily lower your score due to a hard inquiry and account changes. Over time, your score often recovers if you make consistent payments and reduce your credit utilization.

Is it hard to get a debt consolidation loan?

It depends on your credit score, income, and debt-to-income ratio. Higher credit scores and steady income make approval easier.

How long does your credit take to recover after consolidation?

Recovery typically takes a few months to a year. Your payment history and credit utilization play the biggest roles.

How much debt is too much to consolidate?

Most lenders allow consolidation up to $50,000, or even $100,000, depending on your credit and income. The key is whether you can comfortably afford the monthly payment.