Debt consolidation: good idea or bad idea?
Combining several loans into one can simplify your budgeting, but it is not a universal solution. Here is how to assess whether debt consolidation genuinely suits your situation.
What is debt consolidation?
Debt consolidation involves combining several existing loans (personal, auto, revolving credit…) into a single new loan, with one monthly payment and typically a longer repayment term.
The potential benefits
- A single monthly payment to track, instead of several due dates
- A possible reduction in the total monthly amount repaid
- Better visibility over your budget
- A rate that is sometimes renegotiated more favourably
Points of caution
Extending the repayment term to lower the monthly payment generally increases the total cost of the loan over time. Consolidation should therefore be seen as a budgeting tool, not a way to borrow more.
When does consolidation make sense?
It is particularly useful when several payments become difficult to manage at once, or when the combined weight of your loans is too heavy for your monthly budget. It makes less sense if a single, one-off loan already covers your need.
How do you assess whether it is the right solution for you?
Compare your current total monthly payment with the one offered after consolidation, but also the total cost over the full term of the new loan. A personalised simulation remains the best way to get clarity before committing.
Frequently asked questions
Does consolidation always increase the total cost of credit?
In most cases, extending the term to lower the monthly payment increases the total cost, even with a renegotiated rate. This is a trade-off to weigh against your priority: a lower payment or the lowest total cost.
Can I include a mortgage in a consolidation?
Some consolidation loans include a mortgage component, depending on the lender and your situation. This requires a specific review.
Is consolidation available if I have a poor credit history?
Every application is reviewed individually by the lender; a difficult credit history can make access to consolidation harder.
Ready to apply? Discover the loan types suited to your project:
