🔗Debt Consolidation Calculator
Compare the cost of your current debts vs a consolidation loan. See if consolidating will save you money and time.
💳 Current Debts
Debt 1
Debt 2
Debt 3
🏦 Consolidation Loan Terms
Why Use This Calculator?
Single Payment Simplification
5 credit card payments ($125, $95, $180, $240, $160) = $800/month across 5 due dates. Consolidation = 1 payment $750/month, 1 due date. Eliminates missed payment risk, late fees ($40 each), and mental tracking burden. Simplicity reduces stress and payment errors.
Lower Interest Rate Savings
$25k debt at average 22% APR = $5,500 annual interest. Consolidate to 12% personal loan = $3,000 interest. Saves $2,500/year ($208/month). Over 4-year payoff: $10,000 total savings. Calculator shows if consolidation APR justifies switch.
Fixed Payment Predictability
Credit cards: Variable APR, fluctuating minimums, no payoff date. Consolidation loan: Fixed $650/month, 11% APR, 48-month term = exact payoff date. Budgeting certainty vs revolving debt uncertainty. Know exact month you'll be debt-free.
Credit Score Improvement Potential
$25k across 5 cards at 80% utilization = 680 credit score. Consolidate to personal loan = 0% credit card utilization = 740+ score boost (60-80 points). Lower utilization = 30% of FICO score. Consolidation can rapidly improve creditworthiness.
Faster Payoff Timeline
$25k at 22% APR, $800 minimums = 12 years payoff. Consolidate to 12% with same $800 payment = 4 years payoff. Saves 8 years of debt. Lower interest means more principal reduction per payment. Calculator projects exact payoff acceleration.
Break Revolving Debt Cycle
Credit cards = revolving, temptation to reuse. Personal loan = closed-end, can't reborrow. Consolidate + cut cards = forced discipline. Breaking revolving cycle prevents $25k from becoming $35k. Installment loan structure enforces payoff progress.
Step-by-Step Guide
List All Current Debts and Balances
Document every debt to consolidate. CC1: $6,500 at 24.99%, CC2: $4,200 at 21%, CC3: $8,300 at 19%, Personal loan: $5,000 at 16%, Medical: $1,000 at 0%. Total: $25,000. Include balance, APR, minimum payment for each. Need complete picture for consolidation analysis.
Example:
Example: 5 debts totaling $25,000 across 16-25% APR range
Calculate Current Weighted Average APR
Weight each APR by balance size. ($6,500×24.99% + $4,200×21% + $8,300×19% + $5,000×16% + $1,000×0%) ÷ $25,000 = 19.7% weighted average. Consolidation APR must beat 19.7% to save on interest. Weighted average more accurate than simple average.
Example:
Example: $25k total at 19.7% weighted average APR
Determine Total Current Monthly Payments
Sum all minimum payments. CC1 $150, CC2 $105, CC3 $200, Loan $180, Medical $50 = $685 total monthly. Consolidation payment should ideally match or slightly exceed this to maintain payoff speed. Lowering payment extends timeline significantly.
Example:
Example: $685 current total minimums across 5 debts
Research Consolidation Loan Options
Compare options: (1) Personal loan 10-14% (good credit 700+). (2) Balance transfer 0% for 12-18 months then 18-24%. (3) Home equity loan 7-10% (requires home, risky). (4) 401k loan 5-8% (dangerous for retirement). Best: Personal loan or balance transfer for most situations.
Example:
Example: Personal loan 12% APR, $25k, 48 months = $658/month
Calculate Consolidation Loan Payment and Term
$25k at 12% APR: 36 months = $830/month, 48 months = $658/month, 60 months = $556/month. Match payment to current $685 minimums suggests 48-month term. Longer term = lower payment BUT more total interest. Balance affordability vs total cost.
Example:
Example: $25k at 12% for 48 months = $658/month payment
Include Origination Fees in Cost Analysis
Personal loans charge 1-8% origination fee. $25k loan with 5% fee = $1,250 upfront cost. Adds to effective APR. $1,250 fee + $7,200 interest = $8,450 total cost. Compare to current debt cost: $15,000 interest over same period. Still $6,550 savings despite fee.
Example:
Example: 5% fee = $1,250 on $25k loan (factor into savings)
Compare Total Interest Paid
Current path: $25k at 19.7%, $685/month = 58 months, $14,800 interest. Consolidation: $25k at 12%, $658/month = 48 months, $6,584 interest. Saves $8,216 interest + 10 months time. Calculator shows side-by-side comparison for decision clarity.
Example:
Example: Save $8,216 interest + 10 months with consolidation
Evaluate Credit Score Impact
Before: $25k across 5 cards ($30k limits) = 83% utilization. After: $0 credit card balances = 0% utilization, +60-80 credit score points. BUT new loan = hard inquiry (-5 points) + new account (slight ding). Net: +50-70 points within 3-6 months typically.
Example:
Example: 83% utilization drops to 0% = 60-80 point score boost
Create Consolidation Implementation Plan
Step 1: Apply for consolidation loan (pre-qualify for soft pull). Step 2: Get approved, review terms. Step 3: Use funds to pay off all debts immediately. Step 4: Confirm $0 balances on all accounts. Step 5: Keep 1-2 cards open for utilization, cut rest. Step 6: Autopay consolidation loan.
Example:
Example: Get loan → Pay all debts → Close/freeze cards → Autopay
Commit to Not Reusing Paid-Off Credit Cards
Fatal mistake: Consolidate $25k debt, then charge another $10k on freed credit cards = $35k total debt (worse than start). Must cut cards or lock away. Cash/debit only during payoff. Can't consolidate debt then create more - defeats entire purpose. Behavior change required.
Example:
Example: Cut cards after consolidation to prevent reaccumulation
Expert Tips & Strategies
Only Consolidate If APR Drops 5+ Percentage Points
Consolidating 19.7% to 17% APR = minimal $500 savings over 4 years (not worth hassle/fees). But 19.7% to 12% = $8,000+ savings (absolutely worth it). Need significant APR reduction to justify. Rule: 5+ point drop or don't consolidate. Small reductions waste effort.
Cut Up Credit Cards After Consolidation
80% of consolidators reaccumulate debt within 2 years by reusing cards. Consolidate $25k, keep cards open, charge $15k = $40k total debt disaster. Cut cards or freeze in ice. Cash-only until loan paid off. Can't fix debt problem while keeping temptation available.
Match or Exceed Current Payment Amount
$685 current payments → $556 consolidation payment seems great but extends timeline 24+ months. Match $685 for same timeframe at lower interest = maximize savings. Lowering payment wastes consolidation benefit by stretching loan longer. Pay what you're paying now, just to ONE loan.
Avoid Home Equity Loans for Unsecured Debt
Trading unsecured credit card debt for secured home equity loan = huge risk. Miss payments on credit card = credit damage. Miss on HELOC = lose house. Never secure unsecured debt with home. Personal loan keeps risk appropriate. Home should never back credit card debt.
Never Borrow From 401k for Debt Consolidation
$25k 401k loan seems cheap (5% interest) but: (1) Money not growing (miss 10% returns = $2,500/year loss). (2) Leave job = immediate full repayment or 10% penalty + taxes. (3) Paying loan with after-tax money. True cost 15-20% when accounting for lost growth. Last resort only.
Shop Multiple Lenders for Best Rate
Rate shopping within 14-day window = single credit inquiry. Check 5-7 lenders: SoFi, Marcus, LightStream, local credit unions. Rates vary 8-18% for same credit score. $25k at 10% vs 14% = $2,000 difference. 2 hours shopping saves $2,000 = $1,000/hour return.
Use Balance Transfer for Short-Term 0% Option
$25k balance transfer to 0% for 18 months with 3% fee ($750). Pay $1,400/month = paid off during promo, total cost $750 vs $8,000 interest staying put. Must have discipline to pay aggressively. Perfect for motivated payoff but risky if can't eliminate during promo.
Consider Debt Management Plan If Can't Qualify
Credit score too low for consolidation loan? Nonprofit credit counseling offers Debt Management Plan (DMP). Lower rates (8-12%), single payment, no new loan needed. Cons: Closes cards, shows on credit report. Better than 22% APR debt spiral. Last option before bankruptcy.
Common Mistakes to Avoid
✓ Better approach: Consolidating $25k then charging $10k more = $35k total debt (40% worse). 80% of people reaccumulate debt within 2 years by not cutting cards. Must cut cards or freeze them. Consolidation without behavior change = temporary relief, permanent disaster. Address spending problem simultaneously.
✓ Better approach: Consolidating to lower payment from $685 to $400 = extending debt 5+ years longer. Low payment feels good but costs $10k extra interest over time. Match or exceed current payment to maximize consolidation benefit. Don't sacrifice long-term savings for short-term cash flow relief.
✓ Better approach: Celebrating 12% APR vs 22% but missing 6% origination fee ($1,500 on $25k). Fee adds to total cost. Some lenders: 12% + 6% fee worse than 14% no-fee loan. Always calculate: Total Interest + Fees = True Total Cost. Don't focus only on APR.
✓ Better approach: Taking HELOC to consolidate credit cards = trading unsecured for secured debt. Miss credit card payment = credit damage. Miss HELOC = foreclose on home. Never risk home for credit card debt. Home equity should fund home improvements/education, not past consumption. Keep risk proportional.
✓ Better approach: $25k debt from overspending. Consolidate but continue overspending = reaccumulate debt + still paying consolidation loan. Must fix spending habits: Budget, cut expenses, increase income. Consolidation treats symptom (high interest), not disease (overspending). Fix both simultaneously.
✓ Better approach: Keeping 5 cards open with $0 balances = temptation. Keep 1-2 for credit score (utilization), close rest or lock away. Having 5 available cards makes reaccumulation too easy. Reduce temptation by limiting access. Can always rebuild credit later - first achieve debt freedom.
✓ Better approach: $25k total includes $5k medical at 0% interest. Don't consolidate 0% debt into 12% loan. Pay medical separately with minimums, consolidate only high-interest credit cards. Including 0% debt in consolidation wastes money paying interest on previously interest-free balance.
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Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.