Learn the difference between loan consolidation and refinancing, and which is the best fit to reduce debt, save interest, or simplify payments.

One Loan Too Many? It’s Time to Simplify

If you’re juggling multiple loans, it may be time to streamline your finances. Two common solutions are loan consolidation and refinancing—but they serve different purposes.

Here’s how to choose the right one for your financial situation.

What Is Loan Consolidation?

Loan consolidation combines multiple loans into one. It simplifies your payments—one lender, one due date—but doesn’t necessarily save you money.

Common with federal student loans:

• Keeps access to loan forgiveness programs

• Interest rate = weighted average of previous rates

• Great for simplifying without losing federal protections

What Is Loan Refinancing?

Refinancing replaces one or more loans with a new one—usually with a better interest rate or term.

• Works for student loans, mortgages, and auto loans

• Best if your credit or income has improved

• Private refinancing may eliminate federal loan benefits

Which Should You Choose?

Key Considerations

• Fees: Watch for origination or early repayment fees

• Credit score: Refinancing often requires 670+

• Loan term: Shorter terms = less interest, but higher monthly payments

• Type of loan: Federal vs private determines options

Conclusion: Choose the Strategy That Fits Your Goals

If your goal is simplicity, consolidation works. If you’re aiming to save money or pay off debt faster, refinancing may be better. Either way, research carefully, understand the terms, and avoid high-pressure lenders.