Debt Consolidation Calculator
A consolidation loan almost always lowers the monthly payment. Whether it lowers the cost is a different question, and the answer depends entirely on the term.
New payment
$343.68per month
- Total owed
- $15,000.00
- Blended rate now
- 22.29%
- Paying now
- $375.00 a month
- New payment
- $343.68 a month
- Interest if you consolidate
- $5,170.60
- Interest as you are
- $12,688.75
- Clear as you are
- 6 years 2 months
- Clear consolidated
- 5 years
- Consolidating saves $7,518.14 in interest at these terms.
- Compare the total interest, not the monthly payment. A consolidation that halves what you pay each month by doubling the term usually costs more overall, and the lower payment is what makes it feel like a saving.
- It also does nothing about the reason the debts built up. Clearing cards with a loan and then using the cards again is the common failure, and it leaves you with both.
About debt consolidation
Consolidation replaces several debts with one loan at one rate. Done well it is a genuine saving and a simpler life; done badly it lowers the payment by stretching the term and costs more than doing nothing.
The test is total interest, never the monthly payment. On $15,000 across three cards at a blended 22.29%, paying the current minimums would take six years and two months and cost $12,689 in interest. Consolidating at 12% over five years with a 3% fee costs $5,171 — a saving of $7,518, and a year sooner. That is a good consolidation.
Now stretch the same loan to ten years and the payment drops further while the total interest climbs. The monthly figure improves and the deal gets worse. This is the shape of most consolidation offers that are marketed on the payment, and it is why the interest comparison is the one on this page.
The other half is behavioural and no calculator addresses it. Clearing cards with a loan and then using the cards again leaves you with both, which is the common way this goes wrong. The cards need closing or freezing at the same time, or the consolidation has simply created capacity.
What it works out
- Up to four existing debts and their blended rate
- Total interest either way, which is the real comparison
- How long each route takes
- Any origination fee on the new loan
The formula
Blended rate = Σ(Balance × Rate) ÷ Σ(Balance) then compare total interest either way
The blended rate is a balance-weighted average, not a plain one. Three debts of $4,800 at 22%, $3,200 at 19% and $7,000 at 24% blend to 22.29% — closer to the 24% than a simple average would be, because the largest balance carries the highest rate.
The comparison is then between two amortizations. Keeping the current payments of $375 a month against the blended rate takes six years and two months and costs $12,689 in interest. A five-year loan at 12% on $15,000 plus a 3% fee costs $5,171 and finishes a year sooner.
$7,518 saved, and it comes from the rate rather than from any rescheduling — the new term is shorter, not longer, which is what makes this a real saving instead of a rearrangement.
Change the new term to ten years and watch what happens: the payment drops and the total interest climbs. That is the version most people are sold, and the monthly figure is what makes it look attractive.
- Blended rate
- The balance-weighted average of what you are paying now.
- Current payments
- What you are actually paying each month across all the debts.
- New rate and term
- The offer. The term matters as much as the rate.
- Fee
- Origination on the new loan, added to what you borrow.
A worked example
Three cards — $4,800 at 22%, $3,200 at 19% and $7,000 at 24% — consolidated into a five-year loan at 12% with a 3% fee.
That works out to $343.68 per month.
- Total owed
- $15,000.00
- Blended rate now
- 22.29%
- Paying now
- $375.00 a month
- New payment
- $343.68 a month
- Interest if you consolidate
- $5,170.60
- Interest as you are
- $12,688.75
- Clear as you are
- 6 years 2 months
- Clear consolidated
- 5 years
Questions
Does debt consolidation save money?
Only if the total interest falls. On these figures it saves $7,518 and finishes a year sooner, because the rate drops sharply and the term is shorter. A consolidation that lowers the payment by extending the term usually costs more.
Should I compare the payment or the interest?
The interest, always. The payment can be lowered by stretching the term indefinitely, which makes any offer look good and most of them cost more.
Will consolidating hurt my credit score?
A little at first — a hard search and a new account with no history. Over time it often helps, since paying down card balances improves utilisation, which is a large part of most scores.
Should I close the cards after consolidating?
Freeze them at minimum. Clearing cards with a loan and then using the cards again is the standard way this goes wrong, and it leaves you with both debts. Closing them entirely can nudge your score down by reducing available credit, so stopping using them is usually enough.
What rate do I need for this to be worth it?
Enough below the blended rate to cover any fee and still leave a gap. There is no fixed threshold — run your own figures, because the term you are offered affects the answer as much as the rate.
Is a balance transfer better than a consolidation loan?
It can be much better if you can clear the balance within the promotional period, since the rate is often zero. It is much worse if you cannot, because the rate afterwards is a card rate. The transfer fee counts either way.
Is a home equity loan a good way to consolidate?
The rate is lower because the debt is secured on your home, which is exactly the problem. You would be converting unsecured debt into debt that can cost you the house. The saving is real and so is the risk.