EyeOnWhat this type of product does
A consolidation loan pays off existing debts and replaces them with a single payment, usually at a fixed rate over a fixed term. The potential benefits are a lower overall interest cost, one payment date instead of several, and a clear end date.
Lending rules, rate advertising and product availability differ by country. Nothing here recommends a loan. The comparison method below works with any set of offers in front of you.
The numbers to line up side by side
Compare the total repayable, not just the rate: a lower rate over a much longer term can cost more in absolute terms than the debts it replaces. Write down what each current debt would cost if repaid on its present schedule, then compare that with the loan's total repayable.
Check the rate you are actually offered rather than the advertised representative one — in many countries the advertised rate need only apply to a fraction of applicants. Origination or arrangement fees reduce the money that actually reaches your debts, which changes the arithmetic again.
Details that often hide in the small print
Watch whether the loan is secured against your home or other property; a lower rate on a secured loan is compensation for putting the asset at risk if payments are missed. Check for early-repayment charges if you might clear the loan sooner.
Also check whether the lender pays your creditors directly or pays you, and what happens if a creditor declines settlement. And be honest about the cards: consolidation that leaves credit cards empty and usable is a known path to owing the same amount twice.
A simple way to decide
The decisive question is behavioural as much as financial: will the paid-off cards stay unused while the loan runs? If not, cut the spending path first, because the loan alone changes only the shape of the debt, not its direction.
Model the two futures — loan versus current path — with the loan comparison calculator, and look at the debt-free date as well as the payment. A plan that ends a few months later but at a genuinely lower total cost can still be the better trade.