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If you’re repaying a variety of debts to different lenders, keeping track of them all and making payments on time each month can be time-consuming. And it isn’t just tough to keep track of — it’s also difficult to know which debts to prioritize to fast-track your debt repayment. After all, each of your cards or loans likely has a different interest rate, minimum payment, payment due date, and terms.

Consolidating, or combining, your debts into a single new loan or credit line could give your brain and your budget some breathing room. We’ll take a look at what it means to consolidate debt and how it works.

What Is Debt Consolidation?

Debt consolidation involves taking out one loan or line of credit — ideally with a lower interest rate — and using it to pay down other debts, whether that means car loans, credit cards, or another type of debt. After combining those existing loans into one, you have just one monthly payment and one interest rate.

💡 Quick Tip: Credit card interest rates average 20%-25%, compared to 12% for a personal loan. And with loan repayment terms of two to seven years, a loan could let you pay down your debt faster. With a SoFi personal loan to consolidate credit card debt, who needs credit card rate caps?

Common Ways to Consolidate Debt

Your options to consolidate debt depend on your overall financial situation and which types of debts you want to consolidate. Here are some common approaches.

Balance Transfer

If you’re able to qualify for a credit card that has a lower annual percentage rate (APR) than your current cards, a balance transfer credit card can be a smart financial strategy to consolidate debt as long as you use it responsibly.

Some credit cards have zero- or low-interest promotional rates specifically for balance transfers. Promotional rates typically apply for a limited time only, but if you pay off the transferred balance in full before that period ends, you’ll reap the benefit of paying less — or even zero — interest.

However, there are caveats to keep in mind. Credit card issuers generally charge a balance transfer fee, often 2% to 5% of the amount transferred. And if you use the credit card for new purchases, in many cases the card’s purchase APR, not the promotional rate, will apply to those purchases.

At the end of the promotional period, the card’s APR will revert to its regular rate. If a balance remains at that time, it’ll be subject to the new, regular rate. Making late payments or missing payments entirely will typically trigger a penalty rate, which will apply to both the balance transfer amount and regular purchases made with the credit card.

Home Equity Loan

If you own a home and have equity in it, you might consider a home equity loan for consolidating debt. Home equity is the home’s current market value minus the amount remaining on your mortgage. For example, if your home is worth $300,000 and you owe $125,000 on the mortgage, you have $175,000 worth of equity in your home.

Another key term lenders use in home equity loan determinations is loan-to-value (LTV) ratio. Typically expressed as a percentage, the LTV represents the other side of the scale to equity: Instead of how much you own, it’s how much you owe. That percentage is calculated by dividing the home’s appraised value by your remaining mortgage balance.

Lenders typically like to see applicants whose LTV is no higher than 80%. In the above example, the LTV would be 42%.

If you qualify for a home equity loan, you’ll typically be able to tap into up to 85% of your equity. After the home equity loan closes, you’ll receive the loan proceeds in one lump sum, which you can use to pay down your other debts.

A home equity loan is considered a second mortgage, a secured loan using your home as collateral. Since there’s a risk of losing your home if you default on the loan, this option should be considered carefully.

Personal Loan

If you don’t have home equity to tap into, or you prefer not to put your home up as collateral, a personal loan is another option to consider.

There are many types of personal loans, but most are unsecured loans, which means no collateral is required to secure the loan. They can have fixed or variable interest rates, but the vast majority have fixed rates.

Generally, personal loans offer lower interest rates than credit cards, so consolidating credit card debt into a fixed-rate personal loan may result in savings over the life of the loan. Also, since personal loans are installment loans, there’s a payment end date, unlike the revolving nature of credit cards.

There are many personal loan lenders, and the application process tends to be fairly simple. A loan comparison site can help you see what types of interest rates and loan terms you may be able to qualify for.

When you apply for a personal loan, the lender will do a hard inquiry into your credit report, which may temporarily lower your credit score by a few points. If you’re approved, the lender will send you the loan proceeds in one lump sum, which you can use to pay down your other debts. You’ll then be responsible for paying the monthly personal loan payment.

One drawback to using a personal loan for debt consolidation is that some lenders charge an origination fee, which reduces the amount you receive without affecting the amount you’ll have to repay. There may also be other fees, such as late fees or prepayment penalties. It’s important to make sure you’re aware of any fees and penalties before signing the loan agreement.

💡 Quick Tip: Swap high-interest debt for a lower-interest loan and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

Is Debt Consolidation Right for You?

Your financial situation is unique to you, but there are several things you’ll want to keep in mind when trying to decide if debt consolidation is right for you.

Debt Consolidation Might Be a Good Idea if…

•   You want to have only one monthly debt payment. It can be a challenge to manage multiple lenders, interest rates, and due dates.

•   You want to have a payment end date. A home equity loan or a personal loan could be useful for this reason because both are forms of installment debt.

•   You can qualify for a low- or zero-interest credit card. This could allow you to consolidate multiple debts on one new credit card and save on interest by paying down the balance before the promotional rate ends.

Debt Consolidation Might Not Be for You if…

•   You think you’ll be tempted to continue using the credit cards you paid down in the debt consolidation process. This can leave you further in debt.

•   You’ll incur fees (e.g., balance transfer fees or origination fees). If those fees are high, it might not make sense financially to consolidate the debts.

•   Consolidating your debts may actually cost you more in the long run. If your goal is to have smaller monthly payments, that generally means you’ll be making payments for a longer period and incurring more interest over the life of the loan.

Recommended: Getting Out of Debt With No Money Saved

Credit Card Debt Relief: How to Get It

Some people seek assistance with getting relief from debt burdens. Reputable credit counselors do exist, but there are also many programs that scam people who may already be overwhelmed and vulnerable.

Disreputable debt settlement companies may charge substantial fees upfront and often make bogus claims, such as guaranteeing that they’ll be able to make your debt go away or saying that there’s a government program to bail out those in credit card debt.

Even if a debt settlement company can eventually settle your debt, there may be negative consequences for your credit. A debt settlement program may require that you stop making payments to your creditors. But your debts may continue to accrue interest and fees, putting you further in debt. The lack of payments may also take a negative toll on your payment history, which is an important factor in the calculation of your credit score.

Recommended: Debt Settlement vs Credit Counseling: What’s the Difference?

Debt Relief: Is It a Good Idea?

What’s a good idea for some people may be a bad idea for others. Whether debt relief is a good idea for you and your financial situation will depend on factors that are unique to you. Working with a reputable credit counselor may be a good way to get assistance that will help you pay down your debt and create a solid financial plan for the future.

The Takeaway

Debt consolidation allows borrowers to combine a variety of debts, such as credit card debt, into a new loan. Ideally, this new loan will have a lower interest rate or more favorable terms to help streamline the repayment process.

Whether or not you agree that credit card interest rates should be capped, one thing is undeniable: Credit cards are keeping people in debt because the math is stacked against you. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. SoFi offers lower fixed rates and same-day funding for qualified applicants. See your rate in minutes.

FAQ

What is debt consolidation?

Debt consolidation is the process of combining multiple debts into a single loan or line of credit. This may help you simplify your financial situation. Ideally, the new loan or line of credit should have a lower interest rate than those you’re paying on your existing debts, so you also save money on interest.

What options exist for consolidating debt?

Common options for debt consolidation include balance transfers to a credit card with a low or zero interest rate (sometimes offered specifically for balance transfers), home equity loans, and personal loans. The most practical choice will depend on your financial situation, including what kinds of debts you have and how much equity you hold in your home.

What are the pros and cons of debt consolidation?

Consolidating multiple debts into one line of credit or loan may help you keep your finances organized and could save you money through a lower interest rate, as well as offering an end date for your debt payoff. However, fees may cancel out the potential savings, and spreading payments over a longer period could lead to your paying more interest overall.

Who qualifies for debt consolidation?

Whether you qualify for debt consolidation depends on how you plan to consolidate your debts. To secure a home equity loan, for example, you’ll probably need to have at least 20% equity in your home. To apply for a personal loan, you won’t need that collateral, but the lender will check your credit score.

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SOPL-Q126-021

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

The #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP^®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

•   Age you are now

•   Age you’d like to retire

•   Your income

•   Your expenses

•   Where you’d like to live after retirement (location and type of home)

•   The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). In 2025, you can contribute up to $23,500 in a 401(k), and in 2026, you can contribute up to $24,500.

One benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2025, and an extra $8,000 in 401(k) savings, and an extra $1,100 in IRA savings for 2026. (Note that in 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 to a 401(k), instead of $7,500 or $8,000.)

Also, under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

FAQ

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.