Debt Consolidation Calculator
A consolidation loan almost always lowers the monthly payment. Whether it lowers the total cost is a different question, and the two frequently disagree — so this answers both.
On this page
The trap this calculator is built around
Take four debts totalling $22,000 with combined minimum payments of $595 and roll them into a five-year loan at 12.5%. The payment drops to about $515. That feels like a saving of $80 a month, and it may be nothing of the kind.
Whether it is depends on the total. If the old debts would have cleared in three years and the new loan runs five, you are paying interest for two extra years on the same principal. The monthly figure improved and the total got worse.
The results panel reports both and flags the disagreement explicitly, because a lower payment presented on its own is the single most misleading number in consumer lending.
When consolidation genuinely helps
When the rate is meaningfully lower. Moving 24% card debt to a 12% loan halves the interest cost. That is real, and it is the main reason consolidation exists.
When the term does not stretch. A lower rate over the same or a shorter period is straightforwardly better.
When the cash flow is the binding constraint. If the current minimums are genuinely unaffordable, a lower payment has value even at a higher total cost. That is a legitimate reason to consolidate — it is just worth doing with the number in front of you.
When one payment is what makes it manageable. Four due dates become one. Not an arithmetic argument, but a real one.
The fee that eats the saving
Personal loans commonly carry an origination fee of 1% to 8%, deducted from the amount advanced. On a $22,000 consolidation a 5% fee is $1,100 — which either has to be borrowed as well or found in cash.
The calculator shows how many months of the lower payment it takes to recover the fees. If that break-even is a substantial share of the term, the fee is doing a lot of the work the lower rate was supposed to do. And a fee financed into the loan is paid for with interest as well.
A worked example
Four debts: $8,200 at 24.99% with a $205 minimum, $5,100 at 21.49% with a $130 minimum, $2,300 at 27.99% with a $70 minimum, and a $6,400 personal loan at 14.25% with a $190 minimum. Total $22,000, combined payments $595. Against a five-year consolidation at 12.5% with a 4% origination fee financed into the loan.
On minimum payments alone the existing debts run about eight years and cost roughly $12,700 in interest. The consolidation borrows $22,880 including the fee, pays about $515 a month, clears in five years, and costs roughly $8,000 in interest plus the $880 fee.
So this one works on both measures: $80 a month lower and about $3,800 cheaper overall, three years sooner. It works because the rate gap is large and the term is shorter than the minimum-payment path — both conditions, not either.
Stretch the same loan to seven years and the payment falls to about $410, which looks better still. The total interest rises to roughly $11,500, and most of the advantage disappears.
The risk that is not in the arithmetic
Cards paid off by a consolidation loan stay open with zero balances, and the payment that used to service them is now free. The failure mode is well documented: the cards get used again, and the borrower ends up with the loan and the card debt together.
Nothing on this page can model that. It is worth being honest with yourself about before signing, and it is the reason many advisers pair a consolidation with closing or freezing the accounts.
The other risk is secured borrowing. Using home equity to clear card debt gets a much lower rate by putting the house behind it. That converts an unsecured debt into one that can cost you the property, and no interest saving prices that.
What this does not model
- Extra payments on the existing debts. Current debts are run on minimums alone. The avalanche calculator often beats consolidation with no fees at all.
- Balance transfer cards. A 0% promotional period is a different instrument with its own fee and expiry.
- Whether you qualify. The rate you are offered depends on credit and income.
- Credit score effects. Consolidating changes utilisation and the mix of accounts, in both directions.
- Secured versus unsecured. The calculator treats a loan as a loan; the risk difference is yours to weigh.
See the APR calculator for what the origination fee does to the real rate of the new loan.
Frequently asked questions
Does debt consolidation save money?
Only when the new rate is low enough and the term short enough to beat what you were paying. A lower monthly payment on its own proves nothing.
The results panel reports the total cost on both paths and says explicitly when the payment falls while the total rises.
Will consolidating hurt my credit score?
There is usually a small dip from the hard enquiry and the new account. Against that, paying off cards drops your utilisation sharply, which is a large positive factor.
On balance it is often neutral to positive after a few months, provided the cards stay paid off.
Should I use a home equity loan to consolidate?
The rate will be much lower because the house is securing it. That is precisely the problem: unsecured debt becomes debt that can cost you your home.
It can be the right answer for someone with stable income and genuine discipline. It is a serious decision and the interest saving is not the only thing on the scale.
What is a typical origination fee?
Personal loan origination fees commonly run from 1% to 8% of the amount borrowed, usually deducted from what is advanced. Some lenders charge none.
It is large enough to change the answer, which is why it has its own field here and why the APR calculator exists.
Is a balance transfer card better than a consolidation loan?
It can be, if you will genuinely clear the balance within the promotional period. Transfer fees are typically 3% to 5%, and the rate afterwards is usually high.
A consolidation loan has a fixed end date, which suits people who want the decision made once rather than revisited when the promotion expires.
Can I consolidate without taking a loan?
Yes — the avalanche and snowball methods clear the same debts with no new borrowing and no fees, and frequently beat a consolidation loan outright.
A non-profit credit counselling agency can also arrange a debt management plan, which can reduce rates without a new loan at all.
Related calculators
This calculator is provided for general educational and estimation purposes only and is not financial or debt advice. Consolidating does not reduce what you owe. Using a secured loan to clear unsecured debt puts an asset at risk, and that trade is not modelled here. A non-profit credit counselling agency can advise on options this calculator does not cover.