When considering debt consolidation, what is one critical factor to analyze?

Analyzing interest rates and terms is critical when considering debt consolidation because these factors directly influence the overall cost of borrowing and the effectiveness of the consolidation strategy. When individuals consolidate their debts, they typically aim to lower their monthly payments and the total amount of interest paid over time. Understanding the interest rates on the new consolidated loan versus the rates of existing debts can determine if consolidation will genuinely result in long-term savings.

Additionally, the terms of the loan—such as the repayment period—affect monthly payment amounts and the total interest expense. A longer repayment term may initially lower monthly payments but can also increase the total interest paid over the life of the loan. Therefore, carefully evaluating these aspects enables individuals to make informed decisions about whether debt consolidation is a sound financial move that aligns with their overall financial goals.