Debt consolidation is when you take multiple debts and combine them into a single payment under a lower interest rate. This makes the debt easier to pay off, and it can help you get out of debt faster, since more money goes toward the principal.
I recommend consolidating high-interest debt, like credit cards, with a 0% balance transfer card or a lower-interest personal loan, depending on which option you can qualify for.
Learn more about these two types of consolidation and how to choose the best one.
💡 Did you know: The average rate on a credit card was 22.15% in the second quarter of 2026, while the average APR on a two-year personal loan from a bank was 11.86% in May 2026 . This gap can represent hundreds or even thousands of dollars in savings.
Here are the two main ways to consolidate your debt
Both of these options roll multiple debts into one, ideally with less interest than you’re paying now. The best choice depends on your credit score and the type of debt you have.
1. Get a 0% interest balance transfer credit card
If you want to pay off credit card debt and you have a good credit score (a 690 score or higher), you could apply for a 0% balance transfer credit card.
With this card, you move all your existing credit card balances onto it, then pay off the new balance with no interest during the promotional period. This period can last 15 to 21 months, depending on the card you choose. After that, your APR rises to the ongoing rate, and you’ll be charged interest on your balance going forward.
The new card allows you to more effectively pay down the core debt because you’re not wasting any money on interest. You can even apply the savings in interest back to the core debt, which will shorten the payoff period further.
One cost to keep in mind, though, is the balance transfer fee. This fee ranges from 3% to 5% of the amount transferred and will slightly reduce your savings.
2. Take out a fixed-rate debt consolidation loan
If you have multiple types of debt (so not just credit cards) or if you have at least fair credit (a 630 score or higher), you could apply for a debt consolidation loan.
With a debt consolidation loan, you use the money from the loan to pay off all your debts in one fell swoop. You then pay back the loan in monthly installments over a set term, usually one to seven years.
Debt consolidation loans come with fixed interest, ranging from 6% to 36% APR, so you’ll pay the same amount each month. This makes debt repayment easier to budget for. The APR may include an origination fee of 1% to 10% of the loan amount, which is deducted from the loan proceeds.
Though you can get a debt consolidation loan with bad credit (a 629 score or lower), you may not qualify for a lower rate than your current debts. In that case, it’s probably not worth taking out a loan. See what other options you have in the “alternatives” section below.
Compare balance transfer cards and debt consolidation loans
Balance transfer card | Debt consolidation loan | |
|---|---|---|
Best for: | Credit card debt only. | Any unsecured debt, including credit cards. |
How it works: | Transfer your credit card balances to the new card, then pay the card off before the promotional period ends. | Use the money from the loan to pay off your debts, then pay back the loan in fixed monthly installments. |
Cost: | No interest during the promotional period, but some cards charge a balance transfer fee (3% to 5% of the amount transferred). | Rates on debt consolidation loans range from 6% to 36% APR and may include an origination fee (1% to 10% of the loan amount). |
How to qualify: | You’ll need good or excellent credit to qualify. | You can qualify with good or bad credit. |
Timeline: | It’s best to pay off your debt during the card’s promotional period, typically lasting 15 to 21 months. | Debt consolidation loans have fixed terms, typically one to seven years. |
🤓Nerdy Tip
There are other ways to consolidate credit card debt, like taking out a home equity loan or borrowing from your retirement savings with a 401(k) loan. But these options involve more risk — to your home or to your retirement — so it’s best to go with one of the options above.Debt consolidation calculator
Use this free calculator to plug in your debts and see what savings you may qualify for.
Over the past 30 days, NerdWallet users with good credit pre-qualified for a debt consolidation loan at an average APR of 19.21%.
When to consider debt consolidation
Consolidation works best when all of the following are true:
- Your total monthly debt payments are no more than 50% of your gross monthly income.
- You can qualify for a 0% balance transfer card or a consolidation loan that has a lower interest rate than your current debts.
- You can commit to consistent monthly payments until the debt is gone.
- If you choose a balance transfer card, you can pay off the balance before the 0% promotional period ends.
- If you choose a debt consolidation loan, you can pay it off within one to seven years.
Benefits of debt consolidation
You’ll save time and money: If you combine your debts under a lower interest rate, less of your money goes toward interest. That means you’re actually tackling the principal debt. This helps you get out of debt faster, especially if you apply any savings in interest back to the root debt.
You’ll no longer have a bunch of individual debts: If you’re overwhelmed by different due dates, interest rates and minimum payments, consolidation solves that problem. Whether you choose a balance transfer card or a consolidation loan, you have only one debt to manage.
You’ll have a clear finish line: Consolidation reveals a light at the end of the tunnel. If you take out a debt consolidation loan with a three-year term, you know you’ll be debt-free in three years. Compare that with making minimum payments on credit cards, which could mean months or years before they’re paid off.
Risks of debt consolidation
You’ll need to keep up with payments: Consolidating debt doesn’t make it go away — it just moves it somewhere else. You'll still need to make regular payments on your debt to pay it off on time and avoid late fees.
You could go further into debt: Consolidation frees up your credit cards, so it may be tempting to run up new balances. This will only increase your debt and leave you worse off than before. You’ll have to be diligent about not overspending and keeping debt manageable.
Does debt consolidation affect your credit?
Debt consolidation can affect your credit score in a few ways.
When you apply for a balance transfer card or a consolidation loan, you'll undergo a hard credit pull. This temporarily knocks a few points off your credit score and is normal when applying for new credit.
Missing payments, like on a debt consolidation loan, could hurt your score. The same is true of running up your credit card balances again or closing your credit cards.
But if you avoid these behaviors and pay off your debt in full, consolidation should help your credit.
Can you consolidate debt if you have bad credit?
You can consolidate debt if you have bad credit, though your options may be more limited.
Debt consolidation loans are available even if you have bad credit, especially from credit unions and online lenders. But pay close attention to the rate you get. If the rate is close to your existing debts, it’s probably not worth applying, unless you’re looking for a simpler way to pay off debt by combining your payments into one.
» COMPARE: Best debt consolidation loans for bad credit
Most online lenders let you pre-qualify for loan before formally submitting your application. It’s especially important to take advantage of pre-qualification if you have bad credit, so you can know your rate without the hard credit pull.
Alternatives for when debt consolidation isn't worth it
Consolidation isn’t the only way to get out of debt. If you can’t qualify for a low enough interest rate, there are other smart payoff strategies that don't rely on credit.
Use the debt snowball or debt avalanche method
If your debt feels manageable, and you’d save only a small amount by consolidating, don’t bother. You can likely pay it off yourself with the debt snowball or debt avalanche methods.
The debt snowball method is when you pay off your smallest debt first, then your second-smallest and so on. This builds momentum through quick wins at the outset.
The debt avalanche method is when you pay off your highest-interest debt first, then your second-highest and so on. You then apply the savings in interest to each consecutive debt. This builds momentum as the savings increases.
Enroll in a debt management plan
If you’d like help tackling your debt, nonprofit credit counseling agencies offer debt management plans for a small monthly fee, ranging from about $25 to $30.
When you enroll in a debt management plan, a credit counselor will work with your creditors to lower interest, then combine your debts into one payment, similar to consolidation. You’ll then pay off the debt over three to five years.
Debt management plans are available no matter your credit score. Note that you’ll need to close your credit cards once you enroll, which may cause a temporary hit to your credit score.
Consider debt settlement last
If those options don't work, you may consider settlement, which is when you settle the debt for less than you owe. It’s risky, though, because it damages your credit score, and there’s no guarantee your creditors will agree to a settlement offer.
You can first try to settle the debts on your own by calling your creditors and negotiating down the debt. But many people choose to hire a third-party debt settlement company, which negotiates on your behalf.
If the company is successful in negotiating down the debt, you’ll pay a settlement fee of 15% to 25% of the enrolled amount. You’ll also have to stop making payments on your debt in the meantime, which can lead to a lawsuit. I recommend settlement only as a last resort.
» MORE: How does debt settlement work?
Frequently Asked Questions
Is debt consolidation a good idea?
Debt consolidation is a good idea if you can qualify for a lower interest rate than what you’re currently paying across your existing debts. You’ll also need to be financially able to make the monthly payment on your balance transfer card or consolidation loan for the duration of the promotional period or loan term.
Does debt consolidation hurt your credit?
Debt consolidation may initially cause your score to drop. That’s because applying for a balance transfer credit card or debt consolidation loan requires a hard credit pull, which knocks a few points off your score. This is temporary. If you use the card or loan to successfully pay off your debts, consolidation can actually help your credit score over the long run.
What debts can you consolidate?
You can consolidate most unsecured debts, meaning debts that don’t have collateral tied to them, unlike a car loan or mortgage. Examples of unsecured debts include credit cards, personal loans, medical bills and payday loans.
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- 1.Federal Reserve. Consumer Credit - G.19.
