"Debt Consolidation Loans: How to Combine High-Interest Credit Cards"

Consolidating multiple revolving credit card balances into a single fixed-rate personal loan can save thousands of dollars in compounding interest and shorten repayment timelines.

Key Takeaways

• Credit card interest rates frequently exceed 22%–28% APR, compounding daily on remaining balances.
• Fixed-rate personal loans offer structured 24-to-60-month payback schedules with interest rates as low as 7%–12% for good credit.
• Consolidating lowers credit utilization ratios on revolving cards, providing an immediate boost to credit scores.

1. Comparing Daily Compounding Credit Cards vs Fixed Amortization

Revolving credit cards charge compound daily interest on remaining balances. If you only pay minimum monthly amounts, debt can take decades to liquidate.

Fixed personal loan amortization equation: Monthly Payment = P × [r(1+r)^n] ÷ [(1+r)^n - 1]

Where P is debt principal, r is monthly interest rate, and n is total payback months.

[!NOTE] Use the Online Tool: Calculate monthly personal loan payments, total interest costs, and payoff timelines. - Open Calculator

2. Evaluating Origination Fees & True Annual Percentage Rates

When comparing personal loan offers, look beyond headline interest rates to the total Annual Percentage Rate (APR), which includes upfront lender origination fees (typically 1% to 6% of the loan amount).

[!NOTE] Use the Online Tool: Determine your net take-home pay to evaluate comfortable debt payoff budgets. - Open Calculator

Frequently Asked Questions

Does applying for a debt consolidation loan hurt my credit score?

Lenders perform a hard credit inquiry causing a temporary 3 to 5 point dip, but paying off revolving credit card balances quickly raises your score significantly.