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Debt Consolidation Calculator

Estimate potential savings by consolidating multiple debts into a single, lower-interest loan.

Current Debts

Add all your existing loans/cards.

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New Loan Terms

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Calculate Your Savings

Enter your current debts and proposed loan details to see a comparison.

Understanding the Debt Consolidation Calculator

Debt consolidation is a financial strategy that involves rolling multiple high-interest debts into a single, new loan with a lower interest rate or a more manageable monthly payment. This process can help simplify your finances, reduce your total interest cost, and provide a clear path to becoming debt-free.

Guide

How to use the Debt Consolidation Calculator

  • 1List all your current obligations in the 'Current Debts' section, including the balance, APR, and current monthly payment.
  • 2Enter the terms of your proposed 'New Consolidation Loan', such as the new interest rate and repayment term.
  • 3Don't forget to include any 'Loan Fees' or origination costs charged by the new lender.
  • 4Click 'Compare Scenarios' to generate a side-by-side analysis of your current versus consolidated debt.
  • 5Compare the 'Monthly Savings' and 'Interest Savings' to see if the consolidation offer is beneficial in the long run.
Applications

Common Use Cases

Credit Card Refinancing: Move balance from cards with 20%+ APR to a personal loan with a much lower rate.
Financial Simplification: Consolidate several disparate monthly bills into one single automatic payment.
Cash Flow Management: Lower your monthly output to free up cash for other necessities, even if it slightly extends your debt-free date.
Total Interest Savings: Take advantage of an improved credit score to qualify for a loan that reduces your total borrowing cost.

The Maths Behind the Calculation

New Monthly Payment = [Loan Amount × r × (1 + r)^n] / [(1 + r)^n - 1]

This formula calculates the fixed monthly payment for the new loan. The calculator then compares the sum of these payments against your current interest and principal obligations to determine your total lifetime savings.

Knowledge Base

Frequently Asked Questions

Is debt consolidation a good idea?

It is a good idea if it either lowers your total interest cost or makes your monthly payments affordable enough to prevent default. Be wary of extending the term so far that you pay more in total interest despite a lower monthly payment.

Will consolidation ruin my credit score?

Initially, a new loan inquiry may cause a minor dip. However, consolidating your credit card balances reduces your 'credit utilization' ratio, which is one of the most important factors in building a high credit score.

What is an origination fee?

Many consolidation lenders charge a fee for processing the loan, typically between 1% and 6% of the loan amount. You should always include this fee in your calculations to see the true cost of the loan.

Can I consolidate if I have bad credit?

Yes, but you may not qualify for the best interest rates. In some cases, a debt management plan or credit counseling might be a better alternative than a traditional consolidation loan if your credit is very poor.

Regional Notice: United States

"Federal tax estimates are based on 2024 brackets. Consult a tax professional for official filing."