Calculator Panel
Calculation Ready
Enter your values above and click Calculate.
What This Calculator Does
This calculator compares the monthly payments and total interest of your current multiple debts against a single consolidated loan, displaying your monthly and lifetime savings.
How to Use This Calculator
Enter up to 3 of your current debts (balances, interest rates, and payments), along with the proposed consolidation loan's interest rate and term, then click Calculate.
How the Calculation Works
The underlying math engine processes your inputs using exact formulas. This systematic approach ensures professional, institutional-grade calculation precision:
Mathematical Formula
Formula Legend:
- · New Balance = Sum of all existing debt balances to be consolidated.
- · r_new = Consolidated loan monthly interest rate (New APR / 12).
- · N_new = New consolidation loan term in months.
Practical Example
Suppose you consolidate three credit card balances totaling $10,000 with a weighted average APR of 18.0% and total monthly payments of $450, into a 3-year personal loan at 10.0% APR:
Step-by-Step Mathematical Walkthrough:
- 1 Current total monthly payment: $450.
- 2 Calculate consolidated loan payment: $10,000 * (0.008333 / (1 - (1.008333)^-36)) = $322.67 per month.
- 3 Calculate monthly savings: $450 - $322.67 = $127.33 savings per month.
- 4 Compare total interest: consolidated interest is $1,616.12, whereas credit card interest over a typical payoff timeline could exceed $4,500.
Important Assumptions & Notes
- The consolidation loan completely pays off the selected debts.
- No fees (like origination fees) are included in the loan balance.
Common Mistakes or Considerations
- Consolidating debt to lower monthly payments while extending the loan term so much that your total interest costs actually increase.
- Continuing to charge new balances onto your credit cards after consolidating them, resulting in double the debt.
Frequently Asked Questions
What is debt consolidation?
The process of combining multiple separate debts into a single, new loan—typically with a lower interest rate and a single, simplified monthly payment.
Does debt consolidation save you money?
Yes, if the consolidation loan's interest rate is lower than the weighted average rate of your current debts, and you do not excessively extend the payoff term.
What is the main danger of debt consolidation?
Freeing up credit card balances can create the illusion of having no debt. If you do not address spending habits, you may charge up the cards again, doubling your total debt.
Will debt consolidation hurt my credit score?
Temporarily, a hard inquiry and opening a new loan account may cause a minor credit score dip. However, over time, paying off your revolving credit cards will lower utilization and significantly raise your score.