Debt Consolidation Calculator
Estimate the monthly savings from consolidating existing debts into a single fixed-rate loan. Computes the difference between your current total monthly payment and the new amortising payment on a consolidation loan at a given rate and term.
Last updated: May 2026
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About this calculator
Debt consolidation rolls multiple debts (typically high-rate credit cards) into a single new loan with one monthly payment, ideally at a lower interest rate. The calculator computes monthly savings as: savings = currentPayment − newMonthlyPayment, where newMonthlyPayment is computed via the standard amortising-loan formula M = P · [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1], with P = total current debt being consolidated, r = monthly rate (annual rate ÷ 12 as decimal), and n = loan term in months. A positive savings figure means consolidation reduces your monthly cash outflow; negative means the new payment is higher (usually because the term is shorter or the rate isn't low enough to compensate). Variables: currentDebt is the total balance you're consolidating (P); currentPayment is the sum of all your existing monthly debt payments being replaced; newRate is the consolidation loan's annual rate as a percentage; loanTerm is the consolidation loan's length in months. Edge cases: if newRate = 0% (uncommon but possible for promotional 0% APR), the formula reduces to P/n; very long loan terms (5+ years on credit-card-equivalent debt) often produce monthly savings but increase total interest paid because the rate, however lower, applies for longer. The headline trade-off: consolidation can reduce monthly payments and lifetime interest if the new rate is meaningfully lower than the weighted-average current rate; but if you extend the term significantly, you may pay more in total interest even at a lower rate. Always compare not just monthly payment but total cost (M · n) vs. the projected total cost of your current debts. Note this calculator returns only monthly savings; for total-cost comparison and break-even analysis use a more detailed consolidation tool.
How to use
Example 1 — Standard credit-card consolidation. You have $20,000 across three credit cards costing you $800/month in combined minimums (at average APRs around 22%). You're offered a personal loan at 12% APR over 60 months. Enter Current Debt = 20000, Current Payment = 800, New Rate = 12, Loan Term = 60. New monthly payment: r = 0.12/12 = 0.01, n = 60, (1.01)⁶⁰ ≈ 1.8167, M = 20000 · (0.01 · 1.8167) / (1.8167 − 1) = 20000 · 0.01817 / 0.8167 ≈ $444.89. Savings = 800 − 444.89 ≈ $355/month. ✓ Frees up $355/month for an emergency fund or accelerated payoff. Total cost: 60 × $444.89 ≈ $26,693 vs. projected ~$30,000+ if minimums on the cards. Example 2 — Extending term too far. Same $20,000 debt and $800/month current payment, but you stretch the consolidation loan to 96 months (8 years) at 9% APR. Enter 20000, 800, 9, 96. r = 0.0075, n = 96, (1.0075)⁹⁶ ≈ 2.0489, M = 20000 · (0.0075 · 2.0489) / 1.0489 ≈ $293. Savings = 800 − 293 ≈ $507/month. ✓ Much higher monthly savings — but total cost is 96 × $293 = $28,128, very close to the 60-month example despite lower rate. Beware extending term to chase lower payments; you save monthly cash flow but the interest saving evaporates.
Frequently asked questions
When does debt consolidation actually save money?
Consolidation saves money when (a) the new rate is meaningfully lower than your weighted-average current rate, and (b) you don't stretch the term so far that total interest paid increases. The rule of thumb: if your credit cards average 20%+ APR and you can consolidate at 8–12%, you typically save substantially even on a moderately longer term. Consolidating at the same or higher rate, or stretching from a 5-year average payoff to an 8-year consolidation, often costs more in total interest despite lower monthly payments. Always compare three numbers: current monthly payment, new monthly payment, and total cost (M × n) of each plan. The fee-free 0% balance-transfer card (with 12–18 month no-interest window) is a special case that almost always saves money if you can pay it off during the window; the 3% transfer fee is the only cost.
What are the different ways to consolidate debt?
The main options: (1) Personal loan from a bank or online lender (typical rates 7–25% based on credit; fixed term, fixed rate, single monthly payment). (2) Balance-transfer credit card with 0% APR promotional period (12–21 months no interest, then back to a regular APR; charges a 3–5% transfer fee). (3) Home equity loan or HELOC (lowest rates because secured by your home, but you risk losing the house if you default). (4) 401(k) loan (low rate but reduces retirement savings and triggers tax penalties if you leave the job). (5) Debt management plan through a non-profit credit counsellor (negotiated lower rates and a single monthly payment to the agency, which distributes to creditors). Each has trade-offs in rate, term, fees, collateral, and credit-score impact. For most credit-card debt, a personal loan or 0% balance transfer is the typical answer.
Does consolidation hurt my credit score?
Initially yes, slightly: applying for a new loan triggers a hard credit inquiry (typically 5–10 points off for a few months) and reduces your average account age. But if you use the consolidation properly, your credit score usually improves within 6–12 months because (a) paying off revolving credit-card balances dramatically lowers your credit utilisation ratio (which is 30% of your FICO score), and (b) on-time payments on the new loan build positive history. The catch: if you run up the credit cards again after paying them off with the consolidation loan, you end up with more total debt than before — a very common failure mode. Successful consolidation requires either closing the cards (with credit-score cost) or having the discipline not to use them. The score recovery and improvement is typically larger than the initial dip, especially for borrowers starting with high utilisation.
What are the most common mistakes people make with debt consolidation?
The first is consolidating without addressing the spending behaviour that created the debt — within 1–2 years, many borrowers run the cards back up and now have both the consolidation loan AND new card balances. The second is choosing a longer term to lower the monthly payment without checking total interest cost; you can save $200/month and still pay $5,000 more in interest. The third is using home equity to consolidate unsecured debt — you trade dischargeable-in-bankruptcy credit-card debt for non-dischargeable mortgage debt that puts your house at risk. The fourth is paying high origination fees (3–8%) that erase the rate-savings benefit, especially on short consolidation timelines. The fifth is ignoring the balance-transfer fee on 0% promotional cards (typically 3–5%); on a $10,000 transfer, $300–$500 is consumed by fees, which can exceed what you would have paid in interest at a moderate rate over 12–18 months. Finally, consolidating with a co-signer puts that person's credit at risk if you miss payments — generally avoid unless you have very high confidence in repayment.
When should I not use this calculator?
Skip it when the new rate is variable (most HELOCs) — the formula assumes a fixed rate, and over a 5–10 year horizon variable rates can swing 3–5 percentage points either direction, completely changing the math. Do not use it as the only deciding factor; consider credit-score impact, collateral risk (especially with secured loans), prepayment penalties, and your honest assessment of behavioural risk (will you re-run the cards?). It is the wrong tool for student-loan consolidation — federal student loans have different consolidation rules, weighted-average-rate formulas, and benefits (IDR, PSLF) that are lost when refinancing into a private loan. Avoid it for chapter 13 bankruptcy planning — that's a court-supervised process with different math entirely. Finally, do not use it for 0% balance-transfer cards without including the transfer fee in your total cost calculation; the headline "0% APR" is misleading without that fee included.