Debt consolidation
Replacing several debts with one, ideally at a lower rate and with a single payment.
It can genuinely help — a lower average rate, and one payment date rather than five, which reduces missed payments and the fees that follow.
It does not reduce what you owe. The balance is identical the day after.
Three things decide whether it is worth doing. Is the rate lower after fees? Is the term longer, quietly raising total interest while lowering the monthly figure? And is the new debt secured against your home?
The common failure is behavioural rather than financial: the cards are cleared, nothing about the underlying month has changed, and a year later there is a consolidation loan and card balances.
Words on this page
- Expense ratio — The percentage of your money a fund charges each year, taken automatically whether it performs or not.
- The invisible leak — Investment fees — small, automatic, charged every year, and almost never noticed.
- Interest — The price of using someone else's money — paid by borrowers, earned by lenders.
Related terms
Covered properly in Learn.