Debt consolidation: when it makes sense

Debt consolidation means taking a cheaper loan to pay off more expensive debts, leaving you with a single payment.

When it works

It makes sense when the total cost of the new loan is lower than your current debts, such as high-rate credit cards.

Avoid starting over

It only works if you do not run up the freed credit lines again. Adjust your budget to avoid new debt.

Run the numbers

Add up what you owe today, estimate the new loan and compare the total repaid in both scenarios before deciding.