Debt Consolidation Loans: Real vs Predatory

How to tell if a consolidation loan actually saves you money — or just rearranges the problem at a higher cost.

Real consolidation saves money. Fake consolidation makes money — for them.

What real consolidation looks like

You have multiple debts at high interest rates (20%+ credit cards)
You qualify for a personal loan at a significantly lower rate (10-15%)
You use the loan to pay off the cards
You now have one payment, lower rate, fixed payoff date
The math: total interest paid is measurably less

What predatory consolidation looks like

A company offers to "consolidate" your debt
The rate is equal to or higher than what you're already paying
They extend the term (lower monthly payment but MORE total interest)
They charge high origination fees (3-8%)
They don't actually pay off your original debts — they just give you a new loan

⚠️ The term trap: A lower monthly payment does NOT mean you're saving money. A $10,000 debt at 20% over 3 years costs $3,300 in interest. The same debt at 15% over 7 years costs $5,900 in interest. The monthly payment dropped, but you paid $2,600 MORE. Always compare total cost, not monthly payment.

How to check if consolidation makes sense

Add up total interest you'll pay on current debts (use our Debt Payoff Calculator)
Calculate total interest on the consolidation offer (use our Loan Comparison Calculator)
If the consolidation total is lower AND the term isn't dramatically longer, it's a real deal
If the consolidation total is higher or similar, it's just rearranging deck chairs

For a deeper dive into debt payoff strategies, visit DebtHelping.com.