Debt Consolidation Calculator
Add your current debts and compare them against a single consolidation loan. See exactly how much you could save each month and in total interest.
Loan Payment Formula
Monthly Payment
Total Interest
What Is Debt Consolidation?
Debt consolidation rolls multiple debts into a single loan with one monthly payment. The goal is to secure a lower interest rate, reduce your monthly outflow, and simplify your finances so you can pay everything off faster.
This strategy works best when your existing debts carry high interest rates, like credit cards at 18-25% APR, and you can qualify for a consolidation loan at a meaningfully lower rate.
One Payment
Replace juggling multiple due dates with a single monthly payment
Lower Interest
Potentially cut your overall interest rate and save thousands
Clear Timeline
Know your exact payoff date from day one
Pros and Cons of Consolidation
Debt consolidation is not a magic fix. It works well in the right situation but can backfire if the underlying spending habits do not change.
| Pros | Cons | Watch Out For |
|---|---|---|
| Lower monthly payment | May extend your payoff timeline | Longer terms can mean more total interest even at a lower rate |
| Single payment simplifies tracking | Requires good credit for best rates | Borrowers with poor credit may not qualify for rate improvement |
| Reduced interest rate | Origination fees add upfront cost | Some lenders charge 1-6% of the loan amount in fees |
| Fixed payoff date | Temptation to rack up new debt | Freed-up credit cards can lead to a worse situation if reused |
Types of Debt Consolidation
Personal Loan
An unsecured fixed-rate loan from a bank, credit union, or online lender. Rates typically range from 6% to 36% depending on your credit score. No collateral required, and terms usually run 2 to 7 years.
Balance Transfer Credit Card
Move high-interest balances to a card offering a 0% intro APR for 12-21 months. Great if you can pay off the balance before the promo period ends. Watch for a 3-5% transfer fee.
Home Equity Loan or HELOC
Borrow against your home equity at lower rates, often 5-8%. The risk is that your home serves as collateral, meaning missed payments could lead to foreclosure.
Student Loan Consolidation
Federal Direct Consolidation combines federal student loans into one loan with a weighted average rate. Private refinancing can lower rates but may sacrifice federal protections like income-driven repayment.
When Consolidation Makes Sense
Consolidation works best when a few conditions line up. If most of these apply to your situation, it is probably worth exploring.
You carry multiple debts at interest rates above 10-15%. You can qualify for a consolidation loan at a meaningfully lower rate. You have a steady income to handle the new monthly payment. You are committed to not running up new balances on the accounts you just paid off.
Good Fit
High-rate credit card debt totaling $5,000 or more, strong enough credit to qualify for a rate under 10%, and a plan to avoid new debt.
Proceed With Caution
If the consolidation loan term is significantly longer, run the numbers carefully. A lower monthly payment might feel better but could cost more in total interest over the life of the loan.
Probably Not the Right Move
If you cannot qualify for a rate lower than your current weighted average, or if your total debt is small enough to pay off in 6-12 months with focused effort, consolidation may just add fees and complexity.
Frequently Asked Questions
Does debt consolidation hurt my credit score?
There is usually a small, temporary dip from the hard inquiry when you apply. Over time, consolidation can help your score by reducing credit utilization on revolving accounts and establishing a positive payment history on the new loan. The key is making every payment on time.
How much can I realistically save with consolidation?
Savings depend on the rate difference and your total balance. Someone consolidating $20,000 in credit card debt from 22% APR to a 7% personal loan over 5 years could save roughly $12,000 in interest. Use the calculator above with your actual numbers to see your specific savings.
Should I close credit cards after consolidating?
Generally, no. Closing cards reduces your total available credit, which can raise your credit utilization ratio and lower your score. Instead, put the cards away or set a small recurring charge on each to keep them active without building new balances.
What credit score do I need for a good consolidation rate?
Scores of 670 and above typically qualify for competitive personal loan rates. Borrowers with scores above 720 often get the best offers, sometimes under 7%. If your score is below 600, you may still qualify but at rates that might not beat your current debts.
Is debt consolidation the same as debt settlement?
No. Consolidation means taking a new loan to pay off existing debts in full. Settlement means negotiating with creditors to accept less than you owe. Settlement can severely damage your credit and may have tax consequences since forgiven debt is often treated as taxable income.
Pro Tips
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