How this calculator works
Your debts as they are: each one keeps its APR and payment until it's paid off. The loan: big enough to clear them all after the origination fee comes out of the proceeds (loan = total ÷ (1 − fee)), paid back in equal monthly payments over the term. The verdict compares total interest plus fees, because a lower monthly payment over a longer term can still cost more.
- Loan amount = total debt ÷ (1 − origination fee %), because the fee usually comes out of the money you receive.
- Loan payment = L × r × (1 + r)^n ÷ ((1 + r)^n − 1), where r = APR ÷ 12 and n = months.
- Loan cost = payment × months − loan amount (interest) + the fee. Your debts as they are run month by month at their own APR and payment until each one is paid off.
Worked example
With these inputs: balance $5,000; apr 24.99%; monthly payment $200; balance $3,000; apr 21.99%; monthly payment $120; loan apr 12%; term 36; origination fee 5%.
The result is consolidating saves $1,115.20, with new monthly payment $279.70 and payments today $320.00. Look at the total, not just the payment. The cards you pay off still have their limits, so the plan only works if their balances stay at zero.
A lower payment isn't always a saving
Stretching the same debt over more months lowers the payment and raises the total interest. In the example, a 60-month loan at 24% cuts the payment to $242.26 but costs $3,351.01 more than keeping the cards as they are. The verdict at the top compares totals so a long term can't hide that.
The origination fee counts too. A 5% fee on an $8,421.05 loan is $421.05, paid on day one. A loan with no fee but a slightly higher APR can come out cheaper; the APR table under the result shows the cost at other rates.
When consolidating helps
It works best when the loan's APR is clearly below your cards' rates, the term is no longer than it would take to pay the cards off, and you stop adding to the cards once they're paid off. The CFPB notes that consolidation can lower your costs but doesn't erase the debt, and that some offers come with fees or promotional rates that change.
If your payment today doesn't even cover the interest on a debt, the calculator says so. In that case the loan's fixed payment at least ends the debt on a set date, and the snowball and avalanche calculator shows what extra payments could do without a new loan.
Sources
Frequently asked questions
How do I calculate debt consolidation savings?
Add up the interest you'd pay on each debt at its current payment, then compare it with the loan's total interest plus its origination fee. The difference is your saving, or your extra cost if it's negative.
Does a debt consolidation loan lower my payment?
Usually, because the term is fixed and often longer. In the example it goes from $320 to $279.70 a month. A longer term can lower the payment while raising the total cost.
How does an origination fee work?
Most lenders take it out of the loan, so to receive enough to pay off $8,000 with a 5% fee you need to borrow about $8,421. The calculator adds the fee to the loan for you.
Is a balance transfer better than a consolidation loan?
A 0% balance transfer can be cheaper if you can pay the balance off before the promotion ends. Compare both with the balance transfer calculator.
Will consolidating hurt my credit?
Applying adds a hard inquiry, and a new loan changes your account mix. Paying the cards to zero lowers your credit utilization. This calculator only estimates costs; it can't predict a score.