Debt Consolidation Calculator
Compare paying off several debts separately against consolidating them into a single new loan — see the real difference in payment, time and total interest.
How to use this calculator
- 1List each current debt — balance, interest rate, and minimum payment — one per line.
- 2Enter the rate and term you have been offered (or are considering) for a consolidation loan.
How the calculation works
Consolidated payment = Annuity(Σ balances, new rate, new term). Compared against each debt amortised separately at its own rate.- Σ balances
- The sum of every existing debt, becoming the new loan's principal
- Debt free
- For the current-debts scenario, the month the last debt clears — not the average
Consolidation only saves money if the new rate is low enough (or the term short enough) to offset combining everything into one payoff clock — a lower rate with a much longer term can still cost more in total interest, which is why both total interest and payoff time are compared, not just the monthly payment.
Worked example
Three debts totalling $16,000, consolidated at 12% over 4 years
- 1.Total balance: $5,000 + $3,000 + $8,000 = $16,000.
- 2.Combined current minimum payments: $150 + $100 + $200 = $450.
- 3.New consolidated payment on $16,000 at 12% over 4 years is $421.34 — lower than the combined minimums.
Result: Lower monthly payment; compare total interest for the full picture
What debt consolidation actually does
Consolidation does not erase debt — it restructures it. Several existing balances, often at different interest rates and with different due dates, are paid off using one new loan, leaving a single balance, a single rate and a single monthly payment in their place. Whether that is an improvement depends entirely on whether the new loan's rate and term genuinely beat the blended cost of what it replaces, not on the fact that the paperwork gets simpler.
The common ways to consolidate
Several different products get called "consolidation," and they carry very different levels of risk.
- Personal loan — an unsecured, fixed-rate, fixed-term loan from a bank, credit union or online lender — the most direct match to what this calculator models.
- Balance-transfer credit card — moves existing card balances onto a new card, often with a 0% introductory rate for a limited period, after which the rate reverts to a standard (often high) card rate. A transfer fee, typically a percentage of the amount moved, usually applies upfront.
- Home equity loan or HELOC — borrows against equity in a home, usually at a lower rate than unsecured debt — but it converts unsecured debt into debt secured by the house, meaning a default risks foreclosure in a way credit card default does not.
- 401(k) loan — borrowing against a retirement account balance. It skips a credit check, but leaving the job with the loan outstanding can trigger the balance becoming due immediately, and the borrowed amount is out of the market and not growing while the loan is outstanding.
- Nonprofit debt management plan — a credit counseling agency negotiates lower rates directly with existing creditors on the borrower's behalf rather than issuing a new loan — the debts stay in place, but with better terms and one combined payment routed through the agency.
When consolidation actually saves money
The comparison always comes down to the same two numbers: rate and term. A lower rate saves money at any given term; a longer term can lower the monthly payment while quietly increasing total interest, even at a lower rate, simply because interest has more months to accrue. That is why comparing total interest — not just the new monthly payment against the old combined minimums — is the number that actually settles whether consolidation helped.
The risk consolidation does not fix
Consolidation addresses the cost of debt, not the reason it accumulated. A common and expensive pattern is paying off credit cards with a consolidation loan, then gradually running the newly available credit back up — leaving the borrower with both the original card balances and the new loan payment. Fees matter too: origination fees on personal loans and balance-transfer fees (commonly a percentage of the amount moved) both add real cost that is easy to overlook when comparing headline rates. And any option that trades unsecured debt for secured debt — a HELOC or a 401(k) loan — puts a home or a retirement account on the line for what used to be a purely financial, non-collateralized problem.
What this assumes, and where it stops
Assumptions
- Every existing debt is paid at exactly its stated minimum, with no extra payments.
- The consolidation loan has no origination fee — add one to your total cost manually if yours does.
Limitations
- Does not model balance transfer promotional rates, which usually apply for a limited introductory period before reverting to a standard rate.
- A consolidation loan does not address spending habits that created the debt — many people who consolidate without changing behaviour end up with the new loan plus newly re-accumulated card debt.
Common questions
Is debt consolidation always a good idea?
Only when the new loan's total cost (rate × term) is genuinely lower than continuing to pay the existing debts, and when it does not simply free up credit that gets spent again. Compare the total interest here, not just the monthly payment — a lower payment stretched over a much longer term can cost more overall.
What is the debt avalanche method, and would it beat consolidation?
It means paying the minimum on every debt except the highest-rate one, which gets every spare dollar until it is gone, then rolling that payment onto the next-highest rate. Done consistently, it usually clears debt faster and cheaper than either the minimums-only baseline or a consolidation loan — but it takes more discipline than a single fixed payment.
Sources
- Should you consolidate your debt? — US Consumer Financial Protection Bureau
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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