How to use this calculator
- Enter the Total debt to consolidate, the Average current rate across those debts and your Current total monthly payment.
- Enter the Consolidation loan rate, the Consolidation loan term in months and the Loan fee as a percentage.
- Read Interest and fees saved and the New monthly payment.
- Check the rows below: if the current payoff time is shorter than the new term, a lower payment may cost you more overall.
How the comparison works
The calculator runs two scenarios. In the first, you keep paying your current total monthly payment against the debts at their average rate until they are gone, and it adds up the interest. In the second, a new loan pays everything off, you repay it in equal installments, and it adds up the interest plus the fee.
New payment = L · r(1 + r)^n / ((1 + r)^n − 1)- L = debt to consolidate plus the loan fee
- r = monthly rate of the new loan (annual rate ÷ 12 ÷ 100)
- n = number of months in the new loan
- Savings = interest on current debts − (interest on new loan + fee)
The loan fee (such as an origination fee) is added to the amount you borrow, so you pay interest on it too. The new payment uses the standard installment formula, and the result is the difference between the two total costs.
Example: $15,000 of card debt at 21%
Suppose you owe $15,000 at an average of 21% and pay $450 a month. You would be debt-free in 51 months after paying about $7,709 in interest. A 48-month consolidation loan at 11% with a 3% fee has a payment of $399.31, which is $50.69 less each month.
Interest on the new loan plus the fee comes to about $4,167, so you save roughly $3,542 overall. Both the payment and the total cost fall, which is the best case for consolidating.
The trap: a lower payment over a longer term
Stretching the same loan to 84 months drops the payment to $264.54, which feels like relief. But interest and fees climb to about $7,222, so you save only about $488 compared with doing nothing, and you owe money for much longer than the 51 months you were on track for.
If you want the breathing room, take it knowingly. If your goal is to save money, keep the term close to your current payoff time. Removing the fee in the example (0% instead of 3%) lifts the saving from $3,542 to about $4,101, which is why comparing fees across lenders matters.
How to use the result to decide
Consolidate when the new rate is clearly lower than your average rate, the fee is small and the term is not much longer than your current payoff time. Use the debt payoff calculator to test an avalanche or snowball plan as an alternative, and the balance transfer calculator if a 0% card offer is available.
Check the lender's APR rather than only the headline rate, since the fee changes the true cost. The APR calculator shows the effect.
Ways to get more out of consolidating
- Keep paying at least your old total payment if you can afford it; the loan then clears faster and costs less.
- Stop using the cards you paid off, otherwise you end up with the new loan and new card balances.
- Ask lenders to pre-qualify with a soft credit check so you can compare rates without damaging your score.
- Watch for prepayment penalties on the new loan, and for secured loans that put your home or car at risk.
Assumptions and limits
The current debts are treated as one balance at one average rate with a fixed monthly payment. Real cards have different rates, minimum payments that change as balances fall, and sometimes promotional periods. The fee is assumed to be a percentage added to the loan.
The tool does not include effects on your credit score, late fees, taxes or any changes in rate. Treat the output as a planning estimate and confirm exact terms with the lender or a nonprofit credit counselor.
Frequently asked questions
Does debt consolidation hurt your credit score?
A new loan usually triggers a hard inquiry and a new account, which can lower your score slightly at first. Paying off cards and making on-time payments can help over time.
Is a consolidation loan better than a balance transfer card?
A 0% transfer offer can be cheaper if you clear the balance before the promotion ends and the transfer fee is low. A fixed-rate loan is steadier when you need more than a year or two.
What interest rate makes consolidation worthwhile?
Look for a rate meaningfully below your average current rate after including the fee, with a term no longer than you would take anyway. The calculator shows the net result.
Can I consolidate debt with bad credit?
Often only at higher rates, which may erase the benefit. Compare the result with a debt management plan from a nonprofit credit counselor before you borrow.
Should I include the loan fee in the comparison?
Yes. An origination fee raises the amount you borrow and your total cost, so a loan with a lower rate but a high fee can lose to a loan with a slightly higher rate and no fee.