economy
How much can you save with debt consolidation in 2026?
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TL;DR
- High-rate credit card debt can lead to significant interest payments due to compounding rates, often around 21% APR.
- Debt consolidation involves rolling high-rate balances into a lower-rate personal loan, averaging around 12% APR.
- Savings can be substantial: consolidating $5,000 at 21% into a 12% loan over 60 months can save over $1,440 in interest and lower monthly payments by $24.
- For a $25,000 balance, consolidating from 21% to 12% could save over $7,200 in interest over five years.
- Eligibility for lower personal loan rates depends on credit score; lower scores may result in higher rates, reducing savings.
- Alternative debt relief strategies include debt management plans (often with lower interest rates negotiated by credit counselors) and debt settlement (negotiating a lump-sum payoff for less than the full amount owed).
- The effectiveness of debt consolidation increases with higher balances and a larger interest rate differential.