What is debt consolidation?

What is debt consolidation?

Hand holding credit card over medical bill

Debt consolidation requires getting lower interest debt to pay higher interest debts. Debt consolidation typically requires a good credit score and regular income to qualify for low-interest loans. 

How debt consolidation generally works:

  • Combine all the high-interest, unsecured debt you have, such as credit card debt.
  • Apply for low interest debt, such as a bank loan or credit card with a low introductory interest rate.
  • Pay off high interest debt with your low interest debt.
  • Repay the new low interest debt.

If you transfer the debt to a low introductory rate credit card, it is important to pay off as much of the debt as possible before the introductory period ends.

Last revised by staff
February 28, 2025