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Should I consolidate my debts?

Only if the new rate is genuinely lower once fees are counted, and only if what created the debt has changed. Consolidation moves debt; it does not reduce it. The common failure is clearing the cards, feeling relieved, using them again, and arriving a year later with both the loan and the cards.

What it does and does not do

Consolidation replaces several debts with one. That is all it does.

It can genuinely help by lowering the average rate, and by turning several payment dates into one, which reduces the chance of a missed payment and the fees that follow.

It does not reduce what you owe. The balance is the same the day after as the day before.

The three questions

Is the new rate lower, after everything? Compare total cost against total cost, not monthly payment against monthly payment. Include arrangement fees, balance transfer fees, and any insurance bundled in. A slightly lower rate with a 4% fee may be worse than what you have.

Is the term longer? This is where most consolidation quietly costs more. A lower monthly payment usually means a longer term, and a longer term at a lower rate can still mean more total interest. If the monthly figure drops a lot, find out why before you sign.

Would the debt be secured? Some consolidation loans are secured against your home. This is the one to be careful about. You are converting unsecured debt, where the worst case is bad, into secured debt, where the worst case is losing where you live. A lower rate is not obviously worth that trade, and it is the reason these products are marketed so heavily.

The failure mode

Someone consolidates 8,000 of card debt into a loan at a better rate. Sensible. The cards now show zero.

Nothing about the month that created the debt has changed — the income, the commitments, the absence of a buffer. So within a few months the cards start being used again, because they are available and there is still no slack.

Eighteen months later there is a consolidation loan and card balances, and the total is higher than where it started.

This is not carelessness. It is what happens when you treat a symptom without touching the cause. The cards were full because there was no buffer, and consolidation does not create one.

If you do consolidate

Close or physically remove the cleared accounts. Not necessarily close them — that can affect borrowing capacity in some countries — but get them out of your wallet and out of your saved payment details. Available credit gets used.

Build a small buffer first, or alongside. One month of essential spending. This is what stops the cards refilling, and without it the consolidation is very likely to be temporary.

Keep the payment the same if you can. If consolidation cuts your monthly payment from 400 to 280, paying 400 anyway clears the loan far sooner and captures the rate improvement instead of spending it.

Alternatives worth checking first

Ask your existing lenders for a lower rate. People rarely do. It sometimes works, costs nothing, and involves no new product.

A zero-percent balance transfer, if you can realistically clear the balance inside the promotional period. Cheaper than most consolidation loans — but know the end date and the rate that follows it.

Free debt advice, which exists in most countries and is genuinely free. If consolidation is being considered because payments are unmanageable rather than merely annoying, that is the call to make first — there are arrangements available that commercial products will never mention.