Debt Consolidation
Combining multiple debts into a single new loan, ideally at a lower overall rate.
Debt consolidation replaces several debts — often high-interest credit cards — with one new loan, one payment, and (ideally) a lower interest rate. It can simplify repayment and reduce total interest paid, but it doesn't reduce what's owed, and it only helps if the new rate is genuinely lower and the freed-up credit isn't immediately used to rack up new debt.
Worked Example
Three credit card balances totaling $15,000 at an average 22% APR, consolidated into one personal loan at 11% APR, can cut monthly interest roughly in half — assuming no new balances get added to the paid-off cards.
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