Debt Consolidation
Definition
Combining multiple debts (credit cards, personal loans) into a single new loan, often at a lower interest rate. You get one payment instead of many. Doesn't reduce what you owe, just simplifies and potentially saves on interest.
Why It Matters
Multiple high-interest debts are harder to pay off mentally and financially. A consolidation loan at lower interest accelerates your payoff and saves thousands. But only if you don't go back into debt.
Example
Owe $8,000 across three credit cards at 18-22% APR. Consolidate into a personal loan at 10% APR. Monthly payment drops from $400 to $300. You save $3,000+ in interest and pay off faster.