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Debt Consolidation Calculator

Compare your current multiple debt payments against a consolidated loan to see monthly savings and total interest saved.

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What is Debt Consolidation?

Debt consolidation is a debt refinancing strategy that rolls multiple high-interest debts, such as credit card balances, personal loans, and store cards, into a single, consolidated loan. By combining your obligations into one loan with a lower interest rate, you can simplify your monthly payments, reduce your interest costs, and pay off your total debt faster.

Debt Consolidation Math & Formulas

To understand the financial benefit of debt consolidation, we compare the sum of your existing debts against the monthly payment of a consolidated personal loan. The monthly payment of the consolidated loan is calculated using the standard amortizing loan formula:

$$PMT = A \times \frac{r}{1 - (1 + r)^{-n}}$$

Where:

  • PMT is the new consolidated monthly payment.
  • A is the total consolidated loan amount (sum of all current balances).
  • r is the monthly interest rate of the consolidated loan (annual rate / 12).
  • n is the total number of payoff months (loan term in years * 12).

Evaluating the Savings

Our calculator measures two types of financial savings:

  • Monthly Savings: The difference between what you pay now in total across all credit cards and loans, compared to your new single monthly consolidated payment. A positive value improves your monthly cash flow.
  • Total Interest Savings: The total interest you would pay over the life of your existing debts if you continued making current payments, minus the total interest of the new consolidated loan. This is the true net benefit of consolidation.

Frequently Asked Questions

Will debt consolidation lower my credit score?

Initially, applying for a consolidation loan may cause a minor, temporary dip in your credit score due to a hard inquiry. Over time, however, consolidating can raise your score by reducing credit card utilization and establishing a consistent payment history.

What is the difference between debt consolidation and debt settlement?

Debt consolidation involves paying off your existing debts in full using a new loan with a lower interest rate. Debt settlement, on the other hand, involves negotiating with creditors to accept less than the full amount owed, which significantly damages your credit score.

Are there any fees associated with debt consolidation loans?

Some lenders charge origination fees ranging from 1% to 8% of the loan amount, which is typically deducted from the loan proceeds. Be sure to check for any origination fees or prepayment penalties.

Can I consolidate student loans with credit card debt?

Generally, private student loans can be consolidated with credit card debt using a general personal consolidation loan. However, consolidating federal student loans with consumer debt is not recommended, as you will lose federal protections and benefits.

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