Debt consolidation is the strategy of combining multiple debts into one single loan. Instead of juggling five credit card payments at different rates, you take one consolidation loan to pay them all off — leaving you with just one monthly payment, ideally at a lower interest rate.
Example: You owe $5,000 on Card A (22% APR), $3,000 on Card B (19% APR), and $2,000 on Card C (24% APR). You take a $10,000 personal loan at 12% APR to pay off all three cards. You save money on interest and simplify your life with one payment.
Banks, credit unions, and online lenders all offer consolidation loans. Balance transfer credit cards (with 0% introductory APR) are another popular consolidation method. The key risk: if you consolidate debt but keep using your credit cards, you end up with even more debt than before.