How does the calculator compare consolidating with staying put?
For your current debts, the calculator runs each one forward at its own rate and current monthly payment until it is paid off, and adds up the interest across all of them. If any payment does not cover that debt's monthly interest, the debt never pays off and the comparison cannot be made, which the calculator flags with a dash.
For the consolidation loan, the amount is the total of your balances. The calculator finds the level monthly payment that repays that amount at the consolidation rate over the term you enter, using the standard amortization formula, and totals the interest on it.
Monthly savings is your current total payment minus the new payment. Interest saved is current total interest minus the new loan's interest. The two can point in opposite directions: a long term can produce a big monthly saving and a negative interest saving at the same time.
Loan amount = Σ balances New payment = A × r(1 + r)^n ÷ ((1 + r)^n − 1) New loan interest = New payment × n − A Interest saved = Σ interest on current debts − New loan interest
- A
- consolidation loan amount, the sum of the balances
- r
- consolidation rate ÷ 12
- n
- term in months
Example: four debts into one 13.9% loan
Scenario: Suppose you have Card 1 ($6,200 at 24.99%, paying $190), Card 2 ($3,900 at 21.49%, $120), a store card ($1,400 at 29.99%, $55) and an older personal loan ($4,500 at 17.9%, $160). You are offered a 4-year consolidation loan at 13.9%.
- Loan amount and current paymentBalances total $16,000; current payments total $525 a month
- Interest on current debtsAt current payments: $4,291.12 + $1,997.55 + $852.69 + $1,377.86 = $8,519.22, with the last debt gone in 56 months
- New payment$16,000 at 13.9% ÷ 12 over 48 months = $436.42 a month
- Monthly savings$525 − $436.42 = $88.58
- New loan interest$436.42 × 48 − $16,000 = $4,948.16
- Interest saved$8,519.22 − $4,948.16 = $3,571.06
The 4-year loan lowers the monthly payment by $88.58 and saves $3,571.06 in interest, finishing in 48 months instead of 56.
If the lender deducted a 5% origination fee, you would need to borrow about $16,842.11 to clear all four debts, and fee plus interest would total $6,050.72, cutting the saving to $2,468.50.
When does a consolidation comparison help most?
You have a loan offer in hand
Enter the offered rate and term against your actual debts. The interest-saved result tells you whether the offer beats what you are already doing, not just whether it lowers your payment.
Choosing between terms
Lenders often offer several terms at once. Running each one shows the trade-off between monthly relief and total cost, so you can choose deliberately.
Your card payments are barely moving the balances
If current payments are close to the monthly interest, your debts may take years or never pay off. A fixed-term loan forces an end date, which can be valuable even when the savings are modest.
Juggling many due dates
One payment instead of four reduces the chance of missing a due date. The calculator helps confirm that the convenience is not costing you more than it is worth.
What mistakes make consolidation backfire?
Choosing the longest term for the lowest payment
A longer term means more months of interest. As the table shows, a long enough term can make consolidation cost more than keeping your current debts, even at a much lower rate.
Running the cards back up
Once cards show zero balances, spending on them again is easy. That is how people end up with a consolidation loan and new card debt at the same time, which is worse than where they started.
Comparing interest rate instead of APR
A loan's APR includes certain fees, such as origination charges, so it is the better number to compare with your current rates. A low headline rate with a large fee can be a worse deal.
Including low-rate debt
Folding a debt that already has a lower rate than the new loan into consolidation raises its cost. Consolidate the expensive balances and leave cheaper ones alone.
Ignoring the impact on cash reserves
Some people use savings to cover fees or close the gap on a partial approval. Keeping an emergency cushion reduces the chance that a surprise bill goes back on a card.
How does the loan term change whether consolidation pays off?
The term is the lever that most often turns a good consolidation into a costly one. The rate is the same 13.9% in every row of the table below; only the term changes. Short terms raise the payment but save the most interest. Long terms ease the monthly budget but keep interest accruing for longer.
Here, a 3-year term actually costs slightly more each month than the current payments, but saves the most. By 7 years, the monthly saving is large, yet total interest is $593.42 higher than paying the current debts as you are now.
| Term | New monthly payment | Monthly savings | Loan interest | Interest saved |
|---|---|---|---|---|
| 3 years | $546.07 | −$21.07 | $3,658.52 | $4,860.70 |
| 4 years | $436.42 | $88.58 | $4,948.16 | $3,571.06 |
| 5 years | $371.46 | $153.54 | $6,287.60 | $2,231.62 |
| 6 years | $328.84 | $196.16 | $7,676.48 | $842.74 |
| 7 years | $298.96 | $226.04 | $9,112.64 | −$593.42 |
Terms used on this page
- Debt Consolidation
- Debt consolidation means combining several debts into one new loan or account, ideally with a lower interest rate and a single monthly payment. Common tools include personal loans, balance transfer cards and home equity loans. It saves money only if the new rate and fees are lower and you avoid running the old balances back up.
- APR (Annual Percentage Rate)
- APR is the yearly cost of borrowing expressed as a single percentage that includes the interest rate plus certain required fees, such as origination charges. Because lenders must calculate it the same way under federal Truth in Lending rules, APR lets you compare loan offers on an even footing.
- Loan Term
- The loan term is the length of time you have to repay a loan, usually stated in months for consumer loans. A longer term lowers the monthly payment but increases the total interest you pay, because the balance stays outstanding longer. A shorter term costs more each month and less overall.
- Credit Utilization
- Credit utilization is the share of your available revolving credit that you are currently using, shown as a percentage. It is calculated by dividing your card balances by your credit limits, both per card and across all cards. Lower utilization generally helps credit scores, and it is one of the factors you can change quickly.
- Amortization
- Amortization is the process of paying off a loan with equal, regular payments that each cover the interest due for the period plus a slice of principal. Early payments are mostly interest; later ones are mostly principal. By the final payment the balance reaches exactly zero, which is how most car, personal and student loans work.
Debt Consolidation Calculator: common questions
Does debt consolidation hurt your credit?
There is often a small, short-term dip from the loan application and the new account. Over time, consolidation can help: paying off cards lowers credit utilization, and a fixed installment loan paid on time builds positive history. Running the cards back up would reverse those gains. Keeping the old card accounts open can help preserve your available credit and account history.
What is a good rate for a debt consolidation loan?
One that is meaningfully lower than the rates on the debts you are paying off, after fees. There is no universal number, since offers depend on credit, income and existing debt. Use the calculator with each offer's APR to see whether it actually lowers total interest. Lenders may show estimated rates with a soft credit check, which lets you compare offers without affecting your score.
Can consolidating debt cost more than not consolidating?
Yes. If the term is long enough, total interest on the new loan can exceed what your current debts would have cost, even at a lower rate. In this page's example, a 7-year term costs $593.42 more than staying put. A negative interest-saved result is the warning sign. Choosing the shortest term with a comfortable payment is the usual way to avoid this.
Should I consolidate if my monthly payment goes up?
It can still be worth it. A higher payment on a shorter term often saves the most interest and gets you out of debt sooner. The question is whether the payment fits your budget comfortably, with room for savings and irregular expenses. Leave enough room in the budget so an unexpected bill does not end up on the cards you just cleared.
What fees come with a debt consolidation loan?
The most common is an origination fee, a percentage of the loan often deducted from the funds you receive. Some loans have late fees, and a few have prepayment penalties. Compare APRs, which include origination fees, and read the loan agreement before signing. An origination fee deducted from the proceeds may mean borrowing a bit more to cover every balance in full.
What happens if I miss a payment on a consolidation loan?
You will likely owe a late fee, and a payment 30 or more days past due can be reported to the credit bureaus, which can lower your score for years. Repeated missed payments can lead to default and collection activity. If a payment is going to be hard to make, contact the lender before the due date and ask about hardship options, and consider setting up automatic payments so a busy month does not turn into a missed one.
Should I close my credit cards after consolidating?
Not necessarily. Keeping them open preserves available credit, which helps utilization, and keeps account history. If having them open makes new spending likely, some people close the newest or the ones with annual fees, or simply store the cards away. Whatever you decide, avoid carrying new balances on them while the consolidation loan is being repaid.
Can I consolidate debt with bad credit?
It may be possible, but rates are likely to be higher, and a loan priced near your current rates may not save anything. Running the offer here shows whether it helps. A nonprofit credit counseling agency can also explain other options, such as a debt management plan. Be wary of any offer that requires large upfront fees or promises approval regardless of credit.
What debts can I include in a consolidation loan?
Most unsecured debts can be included: credit cards, store cards, medical bills and other personal loans. Federal student loans have their own consolidation program with different rules and are usually best kept separate. Include only debts with rates above the new loan's. Some lenders pay your creditors directly, while others deposit the funds with you to pay them yourself.
Does the calculator include origination fees?
No. It assumes the loan amount equals your balances and charges no fee. To account for one, enter a loan amount large enough to cover the fee, or compare on APR. In the example, a 5% fee would cut the $3,571.06 saving to $2,468.50. Comparing offers by APR, which folds the fee into the rate, is the quickest way to rank them before running the numbers here.
Sources
- Credit cards — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Credit reports and scores — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Debt collection — Consumer Financial Protection Bureau. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations, last checked October 17, 2026. See our methodology.