Debt Consolidation Calculator
Calculate if consolidating your debts into one loan saves money.
Compare total interest, monthly payments, and payoff time before and after consolidation.
Debt consolidation replaces multiple high-interest debts with a single loan at a lower interest rate. The key calculation is whether the new loan actually saves money after accounting for fees and the new term length.
The Core Comparison Formula:
Total cost of current debts = Sum of (Monthly payment × Remaining months) for each debt
Total cost of consolidation loan = Monthly payment × Loan term months + Origination fees
Net savings = Total current cost − Total consolidation cost
Monthly Payment Formula (consolidation loan):
M = P × [r(1+r)^n] / [(1+r)^n − 1]
Where:
- P = Principal (total debt consolidated)
- r = Monthly interest rate (annual rate / 12)
- n = Loan term in months
Worked Example:
Three existing debts:
- Credit card A: $5,000 at 22% APR, $200/month, 30 months left = $6,000 total
- Credit card B: $3,000 at 19% APR, $150/month, 24 months left = $3,600 total
- Personal loan: $8,000 at 14% APR, $280/month, 36 months left = $10,080 total
- Total current cost: $19,680
Consolidation loan: $16,000 at 9% APR over 48 months
- Monthly payment = $16,000 × [0.0075 × 1.0075^48] / [1.0075^48 − 1] = $398/month
- Total paid = $398 × 48 = $19,104
- Net savings = $19,680 − $19,104 = $576
Practical Tips:
- Savings shrink if you extend the term too long — a 7-year loan at 9% may cost more than a 3-year loan at 15%
- Avoid consolidating secured debt into unsecured debt or vice versa without understanding the implications
- Stop using the paid-off credit cards to avoid accumulating new debt on top of the consolidation loan