How this calculator works
Debt consolidation combines multiple debts—credit cards, personal loans, medical bills—into a single loan with one monthly payment. This calculator compares what you're paying now against what you'd pay under a consolidation scenario, showing you the monthly payment difference and total interest savings (or cost).
You provide your current total debt, what you're paying monthly, and your average interest rate across all debts. Then you enter the terms you've been offered or are considering for the new consolidation loan: the interest rate and the repayment period in months. The calculator runs the numbers both ways and displays the comparison side by side.
The formula
Monthly Payment = P × [r(1 + r)^n] / [(1 + r)^n − 1]
where P is the principal (total debt), r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of months. Total interest paid is (monthly payment × n) − P. The difference between your current total interest and the new loan's total interest is your potential savings.
Worked example
Suppose you have $18,500 in debt across three credit cards and a personal loan.
Current situation:
- Total debt: $18,500
- Monthly payment: $450
- Average APR: 16%
First, we calculate how long you'd take to pay off at $450/month with 16% APR. Using the payment formula in reverse, that's roughly 50 months, costing about $22,500 total—so $4,000 in interest.
Consolidation offer:
- New loan amount: $18,500
- New rate: 9% p.a.
- New term: 60 months
Monthly rate: 9% ÷ 12 ÷ 100 = 0.0075
Monthly payment = 18,500 × [0.0075(1.0075)^60] / [(1.0075)^60 − 1] = 18,500 × [0.0075 × 1.5657] / [0.5657] = 18,500 × 0.02076 = $384
Total paid over 60 months: $384 × 60 = $23,040 Total interest: $23,040 − $18,500 = $4,540
In this scenario, your monthly payment drops by $66 (from $450 to $384), which improves cash flow. However, you pay an extra $540 in interest because the loan term is longer. If you stuck to paying $450/month on the consolidation loan, you'd finish in roughly 42 months and save money overall—but the calculator shows the standard fixed-payment scenario so you can make an informed choice.
Common mistakes to avoid
Forgetting to include all debts: If you leave out a credit card or loan, your current debt figure is too low and the comparison won't be accurate. List everything.
Underestimating your current APR: If you only have one credit card at 18% but another at 14%, your average isn't 16%—weight them by balance. This calculator assumes you enter a realistic blended rate.
Ignoring the loan term: A lower rate looks attractive until you realize the new term is 84 months instead of 48. The calculator reveals this trade-off clearly, but you have to read both the payment and the total interest columns.
Assuming consolidation is automatic savings: It saves money only if the rate drop or term reduction outweighs any longer repayment period. Use the numbers to decide, not just the promise of "one payment."
This calculator provides an estimate for comparison purposes. It does not account for origination fees, prepayment penalties, or changes in spending habits. Consult a financial advisor for personalized debt strategy advice.