Debt Consolidation Calculator

Multiple debts with high interest rates? Consolidating them into a single lower-rate loan can reduce your monthly payment and save thousands in interest. This calculator shows whether consolidation makes sense for your situation.

What Is Debt Consolidation?

Debt consolidation combines multiple debts into one new loan with a single monthly payment. The goal is a lower interest rate, a simplified payment schedule, or both. Common consolidation methods: personal loans, balance transfer cards, home equity loans, and debt management plans.

How to Use This Calculator

1. Enter all your current debts: balance, interest rate, and monthly payment for each.
2. Enter the proposed consolidation loan details: total amount, new interest rate, and term.
3. Click Calculate to compare total interest under current payments vs. the consolidation loan.

Example Comparison

Current debts: $3,000 at 24%, $5,000 at 19%, $7,000 at 15% | Total: $15,000 | Combined monthly payment: $700

Consolidation loan: $15,000 at 10% for 36 months | Monthly payment: $484

• Current total interest (if paid on current schedule): ≈ $5,200
• Consolidation total interest: ≈ $2,424
• Savings: ~$2,776 in interest | $216/month lower payment

When Consolidation Makes Sense

• Your consolidation rate is significantly lower than your average current rate.
• You qualify for a personal loan or balance transfer with good credit.
• You want a clear payoff date with a fixed monthly payment.
• You're committed to not accumulating new high-rate debt.

Common Mistakes to Avoid

• Consolidating and then re-using the freed-up credit — This leaves you with both the consolidation loan AND new balances. Your debt situation worsens significantly.
• Extending the term too long — A lower monthly payment over 5 years vs. 2 years may cost more total interest even at a lower rate. Always compare total cost.
• Using home equity to consolidate unsecured debt — You convert unsecured credit card debt (lender has no recourse if you default) into secured debt (you could lose your home). Think carefully about this trade-off.
• Not checking the origination fee — Personal loan origination fees (1%–8%) can offset interest savings, especially on short-term loans. Factor these into the comparison.

Frequently Asked Questions

Does debt consolidation hurt your credit score?

Applying for a new loan causes a hard inquiry (small temporary drop). But paying off revolving balances reduces utilization (significant boost). Net effect on credit is usually neutral to positive if you don't accumulate new debt.

What credit score do I need for a debt consolidation loan?

620–640 is typically the minimum for most lenders. The best rates (6%–10%) require 720+. Below 620, a debt management plan (DMP) through a nonprofit credit counseling agency may be a better option.

Is debt consolidation the same as debt settlement?

No. Consolidation restructures debt into a new loan at full balance. Settlement negotiates a reduced payoff amount but severely damages credit (missed payments, settled account notation) and may have tax consequences on forgiven amounts.

How does a balance transfer card work for consolidation?

Move high-rate balances to a 0% APR card. Pay no interest during the promotional period (typically 12–21 months). Transfer fee is usually 3%–5%. Requires discipline to pay off before the rate jumps to standard APR.

Conclusion

Debt consolidation can be a powerful tool when used correctly. Run this calculator to verify the actual savings for your specific situation — then only consolidate if the numbers genuinely work and you're committed to not adding new debt.

Related: Debt Payoff Calculator | Credit Card Payoff Calculator | Personal Loan Calculator | Home Equity Loan Calculator