How to use the debt consolidation calculator
Enter each debt you want to consolidate with its remaining balance, the monthly payment you make on it and its interest rate. Then enter the consolidation loan: the amount, the interest rate, the term and the loan fee, as a percent of the loan or in dollars. The calculator compares the two ways of paying off the same debt by their APR, monthly payment, time to pay off and total cost, and shows how much you save or lose.
Is debt consolidation worth it?
Debt consolidation means taking one new loan to pay off several debts, usually credit cards. You then have a single payment, and if the new loan is cheaper, you pay less interest. The interest rate alone hides the fee: you pay interest on the full loan but receive only the amount after the fee. The APR counts the fee as part of the cost, so comparing the APR of your debts with the APR of the loan shows which way of borrowing is really cheaper.
How the comparison is calculated
- Current debts: the total of their monthly payments is paid every month, the highest interest rate first, until all are paid off. Their APR is the rate at which those payments are worth what you owe today.
- Consolidation loan: the payment is M = P × r ÷ (1 − (1 + r)−n) on the full loan amount. Its APR is the rate at which the payments are worth the amount you receive after the fee.
- Total cost: all the loan payments, plus any cash you add to clear the debts, or minus any cash left over.
Debt consolidation example
Three debts of $10,000, $7,500, $6,500, $24,000 in all at 17.99% to 19.99%, paid off with $630 a month, cost 18.92% APR and $12,963.17 of interest over 4 years and 11 months. A $25,000 loan at 12.55% for 5 years with a 5% fee costs 14.85% APR and $8,785.07 of interest at $563.08 a month. The fee leaves $23,750, so you add $250 of your own money to clear the debts, and you still pay $2,928.11 less in total.
Savings by loan rate
| Loan rate | APR with fee | Monthly payment | Total cost | Saved |
|---|---|---|---|---|
| 8% | 10.20% | $506.91 | $30,664.59 | $6,298.58 |
| 10% | 12.24% | $531.18 | $32,120.57 | $4,842.61 |
| 12.55% | 14.85% | $563.08 | $34,035.07 | $2,928.11 |
| 15% | 17.35% | $594.75 | $35,934.90 | $1,028.28 |
| 18% | 20.42% | $634.84 | $38,340.14 | −$1,376.97 |
For the example debts and a $25,000 loan over 5 years with a 5% fee, against $36,963.17 for the current debts. With this fee, consolidating saves money only at a loan rate below about 16.29%.
Savings by loan term
| Term | Monthly payment | Total interest | Total cost | Saved |
|---|---|---|---|---|
| 3 years | $836.94 | $5,129.85 | $30,379.85 | $6,583.32 |
| 4 years | $665.12 | $6,925.63 | $32,175.63 | $4,787.55 |
| 5 years | $563.08 | $8,785.07 | $34,035.07 | $2,928.11 |
| 7 years | $448.71 | $12,691.24 | $37,941.24 | −$978.07 |
At 12.55%, against $630 a month on the current debts. A longer term lowers the monthly payment but adds interest, so the saving shrinks, and over 7 years the loan costs more than the current debts.
Before you consolidate
- Look at the total, not only the payment. A longer term lowers the monthly payment but can raise the total interest.
- Check the fees. Origination fees on personal loans often run from 1% to 10%; balance transfer cards charge 3% to 5%.
- Close the gap. If the loan after fees is smaller than your debts, you need cash for the rest.
- Don't run the cards up again. Consolidation only helps if the paid-off cards stay paid off.
Related calculators
To plan the payoff of your current debts with extra payments, use the debt payoff calculator, or for cards only the credit cards payoff calculator. The APR calculator works out the real rate of any loan with fees, and the loan calculator shows the full schedule of the new loan.