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Debt Consolidation

Breaking Down the Math: When Consolidation Saves You the Most

Written by Lauren Hamer, CFEI®
Senior Content Writer
November 25, 2025 | 7 min read
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For many people, consolidating debt can be a smart move—but only if the numbers add up. Understanding how interest rates, fees, and repayment terms affect your total costs helps you decide whether a consolidation loan will actually save you money and ease monthly payments. Let’s break down the math to help you determine if debt consolidation is the right move for you.

Debt consolidation: A tool, not a shortcut

 

High-income ≠ high liquidity

Even with a strong salary, many professionals find themselves stretched from month to month. Multiple credit cards, personal loans, and high-interest balances can leave cash tied up in payments before you even think about investing, saving, or planning for the future.

Add demanding careers, family responsibilities, and everyday expenses, and even six-figure earners can feel like they’re juggling too much. This prompts many to wonder if consolidation could be a smart way to regain financial control.

 

Consolidation can be strategic—when the numbers work

Debt consolidation for high earners is more than simplifying monthly payments. When done correctly, it reduces overall interest costs and frees up cash flow over time.

This is why personal loan math matters: comparing the APR, repayment terms, and consolidation interest savings can help you determine whether a single loan will truly save you money.

The core concepts: What actually affects your savings

Use these cost factors to determine whether consolidating your debt into a personal loan makes sense.

 

APR vs. interest rate

Your interest rate reflects the cost of borrowing, but it doesn’t tell the whole story. APR (annual percentage rate) also includes fees associated with the loan, making it the most accurate metric for comparing loans. When evaluating whether debt consolidation saves you money, always compare APRs rather than just the interest rates themselves.

 

Weighted average interest rate

If you carry multiple debts, a weighted average interest rate helps you understand your true borrowing cost. A weighted average interest rate is an average that is adjusted to reflect the contribution of each loan to the total debt.

Example:

  • Credit Card 1: 60% of total debt at 21% APR
  • Credit Card 2: 40% of total debt at 13% APR

 

Weighted average APR: (0.6 x 21%) + (0.4 x 13%) = 17.4%

Use this number as a baseline to see if a consolidation loan offers real savings.

 

The term on the loan

Longer terms typically allow for a lower monthly payment as you spread the payment over a longer period. This allows you to start allocating more money each month to other priorities.

However, lower monthly payments don’t always mean lower costs. Extending the term also increases the total interest paid. Consolidation is about finding a balance that lowers interest while maintaining enough cash flow to support other financial goals.

How consolidation works

 

Before consolidation

Consider this example of high-interest debt before consolidating:

  • Credit Card 1: $20,000 at 22% APR
  • Credit Card 2: $10,000 at 18% APR
  • Business Line of Credit: $15,000 at 14% APR
  • Monthly payments: $1,165
  • Total interest over 5 years: $46,390

 

After consolidation with personal loan

Here is the potential consolidation interest and monthly savings if you consolidate into a single personal loan:

  • Consolidation loan: $45,000 with 10.5% APR and a 5-year term
  • New monthly payment: $967
  • Total interest over 5 years: $13,033

 

Total saved by consolidating:

  • $33,357 in total interest
  • Improved cash flow of $198 per month

 

Result: Liquidity + long-term savings

This approach not only cuts interest costs but also frees up cash to invest, contribute to retirement, or handle unexpected expenses—without increasing total debt. The fixed payment is also affordable, giving you peace of mind.

Sample scenarios: When consolidation makes sense 

Debt consolidation can serve different goals depending on your situation. Here are a few common examples where it often delivers real savings and simplicity:

 

Multiple high-interest credit cards with revolving balances

If you’re carrying several credit cards with APRs over 20%, consolidating them into one fixed-rate personal loan could substantially reduce interest costs.

The average personal loan interest rate for a 24-month loan is around 11%, according to the Federal Reserve. Average credit card APRs hover around 21%.

A lower, predictable rate helps you save thousands over time while making repayment easier to manage.

 

Multiple personal loans or other debts

Managing several personal loans, auto loans, or installment balances can feel like a second job. Consolidating them into one low-rate loan streamlines repayment and may reduce your total monthly payment—giving you consistent breathing room in your budget.

 

Large expense, like a home improvement project

When major expenses arise, such as a renovation or roof replacement, a consolidation loan can be a smarter alternative to dipping into emergency savings or using high-interest credit cards. A fixed-rate personal loan gives you predictable payments and protects your liquidity for true emergencies.

When consolidation may not save you money 

Consolidation isn’t always the right choice. For example, if your current debts have promotional 0% APR periods or low fixed rates under 8%, consolidating could actually increase your overall interest costs.

Likewise, if you plan to pay off your existing balances within a few months, the fees or extended terms of a new loan may outweigh any benefits. Opting for a consolidation loan in this scenario could result in paying more in interest than if you continued with your current repayment plan.

Remember, consolidation is most effective when paired with a plan to prevent new revolving debt. Without discipline, you risk undoing potential savings. It's essential to address underlying spending habits and create a budget to ensure that consolidation leads to long-term financial improvement.

Why high earners with good credit are ideal consolidation candidates

Consolidation only makes sense if the new loan terms help save you money and/or reduce stress. High earners and prime credit borrowers are good candidates for consolidation because:

  • Strong credit unlocks better terms: BHG’s prime borrowers often qualify for lower APRs and higher loan amounts1, which help them maximize consolidation interest savings.
  • Your income supports faster paydown—if cash flow improves: The potential monthly savings from consolidation can be reallocated to aggressively paying down the loan, funding retirement accounts, or investing elsewhere.
  • Your goals go beyond debt: For professionals with long-term financial ambitions, consolidation can reduce debt and act as a stepping stone to greater liquidity, flexibility, and wealth-building.

How BHG’s personal loan stacks up 

 

High loan amounts = full consolidation in one move

It’s not uncommon for higher earners to carry substantial debt across credit cards and other forms of financing. BHG Financial’s personal debt consolidation loan goes as high as $250,000.1 This allows prime borrowers to access their full requested amount or more to consolidate debt and cover big financial goals at once.

 

FYI:
In 2025, the Wall Street Journal named BHG Financial the best personal loan for large amounts because we offer one of the largest loan amounts in the industry—up to $250,000.1 

 

Flexible terms and fast funding

BHG offers some of the longest terms in the industry, up to 10 years,1,2 helping borrowers choose terms that balance monthly affordability with total cost savings. Prequalify in minutes3 with no impact to your credit score4, and once approved, receive funds in as few as five days.3

 

Personalized approach for professionals

Every borrower’s financial situation is unique. BHG evaluates your complete financial profile—including income, assets, and obligations—not just your credit score. This holistic approach ensures that your consolidation solution aligns with your cash flow, long-term planning, and retirement goals.

Final thought: When the numbers work, so does the strategy 

Consolidating debt is a smarter way to tidy up your finances and make your money work smarter. By understanding your interest rates, repayment terms, and total costs, you can free up cash flow, lower monthly stress, and even redirect funds toward investments or retirement.

Curious whether the numbers work in your favor? Prequalify for a BHG personal loan today—no impact to your credit score.4

Not all solutions, loan amounts, rates or terms are available in all states.

1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

2 Personal Loan Repayment Example: A $59,755 personal loan with a 7-year term and an APR of 17.2% would require 84 monthly payments of $1,228.

3  This is not a guaranteed offer of credit and is subject to credit approval. 

4 There is no impact on your credit for applying. For personal loans, a complete credit history, which will appear as an inquiry on your credit report, will be performed upon acceptance and funding of the loan and may impact your credit.

Consumer loans funded by Pinnacle Bank, a Tennessee bank, or County Bank. Equal Housing Lenders. 

For California Residents: BHG Financial loans made or arranged pursuant to California Financing Law license - Number 603G493.

 

 

 

If you’re feeling weighed down by credit card debt, you’re not alone. High interest rates can feel like an uphill battle, making it easy to fall behind and tough to catch up. 

Understanding how to pay off credit card debt is the first step toward taking control of your debt and reclaiming your financial well-being. Here are a few practical strategies to eliminate credit card debt.

 

Key considerations

  • If you have a significant amount of high-interest debt and a good credit score, a debt consolidation loan can be a viable option for paying off credit card debt. For smaller debts, a balance transfer card could help you tackle debt faster.
  • If not consolidating or using a balance transfer card, set a goal and a budget for repayment; targeting one debt at a time using the snowball or avalanche method can help reduce your balances methodically.
  • Gradually exceed monthly minimum payments whenever possible to decrease your total interest over time. Even small extra payments can make a big difference in your credit card debt over the long term.

 

Why is credit card debt hard to pay off?

U.S. credit card balances have surpassed $1.21 trillion, according to the Federal Reserve, driven partially by high APRs.

Credit card debt is difficult to overcome. Even if you don’t make additional purchases, the interest compounds. Only paying the minimum each month means you will carry the debt from month to month, increasing your debt as you accumulate interest charges.

For example, if you’ve amassed $50,000 in credit card debt on a card with a 23% APR, you could pay up to $11,500 per year in interest. Without a plan in place to address the debt proactively, it can become a significant burden. 

To start, pay as much as you can toward the debt. Some common ways to do this effectively and consistently include using the debt snowball or debt avalanche method. 

 

What is the debt snowball method?

If you have balances on multiple cards, one of the best strategies to eliminate credit card debt is the snowball method. With the debt snowball method, you pay off the card with the smallest balance first before moving on to the next largest one.

This method is a good choice if you can’t afford to make large monthly payments but want to proactively chip away at your debt. Once you pay off a card, you'll redirect the funds you were using for that payment to your next card balance. You'll continue to do this until you’ve tackled each debt.

Here’s how it looks in action, using the following credit card balances as an example:
 

  • Credit card 1: A $5,500 balance and an APR of 16%
  • Credit card 2: A $2,000 balance and an APR of 20%
  • Credit card 3: A $10,000 balance and an APR of 23%

 

Using the snowball method, you’d focus on the second card on this list first because it has the lowest balance ($2,000). Once cleared, you’d move on to the next highest card balance ($5,500) before addressing the third card with a $10,000 balance. 

Remember to make minimum payments on all other cards in the meantime; missing any minimum payment can hurt your credit score.

 

What is the debt avalanche method?

Attacking debt using the debt avalanche method involves paying off the account with the highest interest rate first, regardless of the balance. It can take a while to make progress on —especially if the balance on that card is excessive—but you’ll save money on interest in the long run. 

The avalanche method may be a better strategy for you if you can confidently afford a bigger payment and want to pay less in interest while you work to become debt-free. 

Here’s how debt avalanche looks in action, using the same credit card balances from above as an example:
 

  • Credit card 1: A $5,500 balance and an APR of 16%
  • Credit card 2: A $2,000 balance and an APR of 20%
  • Credit card 3: A $10,000 balance and an APR of 23%

 

Using the avalanche method, you’d tackle the third card first because it has the highest APR (23%). You’d focus on the second card next—APR of 20%—even though it has a lower balance, before moving on to the first card with the lowest APR. 

Again, it’s important to focus on making every payment on time to protect your credit score and avoid tacking on additional late fees. It can take a while to knock out the first debt, so patience and consistency is key.

 

How can debt consolidation help? 

Consolidating personal credit card debt FAQs

Consolidating personal credit card debt can simplify your finances by combining multiple debts into a single monthly payment with more manageable interest rates. In the long run, this can save you from spending more money than you anticipated or previously agreed to on in-terest payments in the future.

Personal debt consolidation can impact your credit score differently depending on the method chosen. For example, applying for a new loan or credit card for consolidation may result in a temporary dip in your credit score due to inquiries, changes in credit utilization, and your his-tory using credit-based financial products. However, making timely payments on the consoli-dated debt can positively affect your credit score by demonstrating responsible financial man-agement.**

Yes, personal debt consolidation can be applied to various types of debt, including personal loans, medical bills, and student loans, in addition to credit card debt. Consolidating multiple debts into a single payment can streamline your repayment process and make it easier to man-age your finances overall.

With highly specialized financing options for accomplished professionals, BHG Financial offers personal loans up to $200K1 to use as you need them. With repayment terms that last up to 10 years,1,2 you can fully bring your financial plan to action by consolidating your personal debts into a simple and affordable monthly payment to help you achieve financial peace of mind sooner rather than later.

Our payment estimator can help you see your personalized estimate quickly, and our dedicated concierge service team can serve your needs every step of the way.

 

Debt consolidation involves combining multiple credit card debts into one new account or loan and using it to pay off your existing debts. In many cases, consolidation can save you money because the new product may come with a lower interest rate than the ones attached to your cards. Consolidating debt also simplifies the repayment process because you only need to manage one monthly payment.

Some of the most effective credit card consolidation strategies include using a debt consolidation loan or a balance transfer credit card. The best way to pay off credit card debt will depend on the amount of debt you have, your credit history, and your income level.

If you have a significant amount of high-interest debt and a respectable credit score, a lower-rate personal loan for debt consolidation can be a viable option. Debt consolidation loans, like the ones offered by BHG Financial, have flexible repayment terms1 that help keep your monthly payments low.

 

Do balance transfers help pay off debt faster?

Transferring your balance from one credit card to another can help you pay your debt faster, as long as the new card comes with a lower rate. If you transfer your balances to a new card with a lower APR, you can allocate a greater portion of your future payments to paying down the principal instead of the interest.

That said, there are a few things to know about the timing of balance transfer credit cards:

  • You can apply for a balance transfer card in a matter of minutes, but the actual transfer can take anywhere from a few days to several weeks, depending on the credit card company. During that time, you’ll still have to make any payments you owe to your original card company.
  • Make sure you understand how long the introductory rate lasts, whether there’s a transfer fee, and what the regular rate will be after the promotional period. Introductory rates typically run for a period of six to 18 months, and if you can’t pay off your balance in full, the new rate may be higher than the rate on your old card. 

If you worry it may take longer than the intro period to pay off your debt, consider transferring your balance to a debt consolidation loan. BHG offers fixed, affordable payments with terms up to 10 years.1,2 Plus, dedicated loan specialists provide a concierge loan experience, guiding you through the loan process. 

 

 

Balance transfer vs personal loan chart


Source: Bankrate, Investopedia - Accessed on 3/14/25
1 Terms subject to credit approval upon completion of an application. Loan sizes, interest rates, and loan terms vary based on the applicant's credit profile.

 

How to pay off credit card debt FAQ

 

Should I pay off my credit card debt or save first?

It usually makes sense to pay off your debts before saving money, especially if you have high-interest debt. This is because the high interest rates on your accounts will often cost more than the money you can save. For this reason, any money you can afford to save is better allocated to paying off your high-interest debt so that it doesn’t continue to compound. 

 

How can negotiating with creditors reduce my debt?

If card issuers are willing to consider negotiating your credit card debt, you may be able to set up a payment plan, pay off the cards for less than what you owe, or agree to a forbearance. However, there are definite drawbacks to negotiation, as these solutions negatively impact your credit score.

 

Can I pay off credit card debt without hurting my credit score?

Absolutely! Any moves you make to pay your monthly balances on time can help build a solid payment history and, in turn, improve your credit score. Plus, reducing your credit card balances will lower your credit utilization ratio.

 

Are debt relief programs worth it?

Debt relief (debt settlement) programs offered by for-profit companies should be viewed as a last resort, and only after you’ve exhausted options for consolidation. Debt relief companies can fast-track getting out of debt, but they often charge high upfront fees, and the process could hurt your credit score. Watch for scams and make sure you understand the potential fees before handing over your finances to a debt relief company.

 

What if I can't afford minimum payments?

Many creditors are willing to work with you if you cannot afford to pay the monthly minimum payment. Call the company as soon as possible to see what you can work out. If getting a debt consolidation loan isn’t an option for securing a lower minimum payment, you can contact a credit counseling agency, which will help you organize a debt management plan to pay down your debts. Debt relief programs could be considered as a last resort, as they come with drawbacks and can charge exorbitant upfront fees.

 

How BHG can help you pay off debt faster

At BHG Financial, we believe financing should fit seamlessly into your life and goals. That’s why we offer personal loans tailored to your needs, with amounts up to $200,0001 and flexible terms of up to 10 years.1,2 Consolidate your high-interest debt with a BHG loan designed to help you move forward confidently. 
 
Plus, you’ll enjoy dedicated, U.S.-based concierge service that works around your schedule—because your time is valuable. Ready to see what’s possible? Use our quick and easy payment estimator to get your personalized loan estimate in just seconds.