Debt Consolidation Loans: Compare the Full Repayment Cost

List what the new loan must actually pay off

For each existing account, record the current balance, rate, required payment, and any payoff details. A statement balance may differ from a payoff amount that includes interest through a later date.

Then check how the new lender delivers the money. If a hypothetical $6,000 loan has a $300 fee deducted from the proceeds, only $5,700 reaches the payoff process. You would still need another $300 to clear $6,000 of old debt. A fee financed into the balance works differently.

Sources: CFPB: What to know about consolidating credit card debt

Compare complete schedules on the same basis

The two invented schedules below both provide $6,000 and charge a separate $180 upfront fee. Assume fixed payments, no other charges, and every payment made on time. The fee is not already included in the scheduled payments.

The longer schedule lowers the monthly payment by $75 but costs $660 more in total. This does not make it automatically unsuitable; it makes the price of the lower payment visible. Actual comparisons also need the disclosed APR and any rate changes.

Sources: CFPB: What to know about consolidating credit card debt

Plan for the accounts that become available again

Paying off a card can leave available credit behind. If normal spending still exceeds available income, new card balances can build while the consolidation payment continues. Include both the new payment and ordinary living costs in the plan.

For example, adding $150 a month of unpaid new purchases creates $900 of additional principal in six months before interest. That debt would sit beside the consolidation loan. The payoff transfer alone does not solve the recurring cash gap.

Sources: CFPB: Improving cash flow

Check the product and the promises

A loan secured by a home changes what is at risk if payments fail. Also distinguish consolidation from debt settlement, which may involve attempts to negotiate reduced balances and instructions to stop paying creditors.

Ask about fees, collateral, rate changes, and early repayment. Consider whether existing creditors can offer a workable payment arrangement, and whether a nonprofit credit counselor can help evaluate the choices. Make the comparison before signing a new obligation.

1. Obtain the old accounts’ payoff details.
2. Confirm net loan proceeds and every fee.
3. Compare full repayment schedules.
4. Address the spending or income gap that could recreate the debt.

Sources: CFPB: Evaluating debt consolidation services