Managing multiple revolving credit lines with varying due dates and high APRs leads to compounding interest expense. Debt consolidation merges fragmented obligations into a single, predictable monthly payment.
The Mathematical Advantage of Amortization
Revolving credit cards utilize daily compounding interest with minimum payment formulas that prioritize interest over principal. An amortized fixed-rate installment loan guarantees that a consistent portion of every monthly payment reduces principal balances.
| Repayment Method | Typical APR | Monthly Payment Structure | Payoff Horizon |
|---|---|---|---|
| Credit Card Minimums | 24.99% – 29.99% | Floating (2%–3% of Balance) | 12 – 18 Years |
| Fixed Consolidation Loan | 8.99% – 18.99% | Fixed Equal Installments | 36 – 60 Months |