Debt Consolidation
Combining multiple debts into a single loan or payment, typically to get a lower interest rate, simplify payments, or pay off debt faster. Common methods include personal loans, balance transfer credit cards, and home equity loans.
Related guides
- Full credit & FICO® glossary
Browse all defined terms by category.
- Personal Loan
An unsecured installment loan used for various purposes (debt consolidation, home improvement, emergencies). Approved based on your creditworthiness with no collateral required. Interest rates depend heavily on your credit score.
- Balance Transfer
Moving debt from one credit card to another, typically to take advantage of a lower interest rate or 0% APR promotional period. Balance transfer cards often charge a fee (usually 3–5% of the transferred amount). Completing a transfer can help pay down high-interest debt faster.
Frequently Asked Questions About Debt Consolidation
What does Debt Consolidation mean?
Combining multiple debts into a single loan or payment, typically to get a lower interest rate, simplify payments, or pay off debt faster. Common methods include personal loans, balance transfer credit cards, and home equity loans.
Is Debt Consolidation important for my FICO® score?
Understanding Debt Consolidation helps you manage your credit profile more effectively, which in turn supports a stronger FICO® score.