What is debt consolidation?

Debt consolidation is the process of combining multiple unsecured debts—such as credit card bills, personal loans, and medical debt—into a single, new loan. The goal is often to secure a lower interest rate, reduce the monthly payment amount, or simplify finances by managing just one payment instead of many.

How does this debt consolidation calculator work?

Our calculator works by first analyzing your current debts. You'll enter the balance, interest rate, and monthly payment for each. It then calculates your total debt, weighted average interest rate, and total monthly payments. Next, you'll input the terms for a potential consolidation loan (interest rate and loan term). The tool then compares your current situation to the consolidated scenario, showing you the difference in monthly payments, total interest paid, and how much faster you could be debt-free.

Is debt consolidation a good idea?

Debt consolidation can be a very good idea if you can secure a new loan with a lower interest rate than the average rate of your existing debts. It can save you a significant amount of money in interest and potentially lower your monthly payments, freeing up cash flow. However, it's important to be disciplined and avoid accumulating new debt on the cards you've paid off. Use this calculator to see the numbers for your specific situation.

Will debt consolidation hurt my credit score?

Debt consolidation can have a temporary impact on your credit score. Applying for a new loan creates a hard inquiry, which can dip your score slightly. Closing old credit accounts might also reduce your average account age. However, over the long term, making consistent, on-time payments on your new loan and lowering your credit utilization ratio can significantly improve your credit score.

Debt Consolidation Calculator

Simplify your finances, lower your interest rate, and see your potential savings.

1. Enter Your Current Debts

2. Enter Your New Consolidation Loan

Loan Amount ($)

New Interest Rate (%)

New Loan Term (Years)

Your Financial Summary

Before Consolidation

Total Debt: $0.00

0.00%

Total Monthly Payments: $0.00

Enter your debt and loan information, then click "Calculate Savings" to see your results.

Detailed Comparison

Payoff Comparison

Amortization Schedules

Month	Payment	Interest	Principal	Balance

How to Use This Debt Consolidation Calculator

Getting a clear picture of your finances is the first step toward becoming debt-free. This tool is designed to be simple yet powerful. Follow these steps to see your potential savings:

List Your Current Debts: In the first section, use the "Add Another Debt" button to create a row for each of your outstanding debts (e.g., credit cards, store cards, personal loans). For each one, accurately enter the total balance you owe, its annual interest rate (APR), and the minimum monthly payment you are currently making.
Define Your Consolidation Loan: In the second section, enter the terms of a potential consolidation loan. The Loan Amount is automatically filled by adding up all your debts. You just need to enter the New Interest Rate you expect to qualify for and the New Loan Term in years (e.g., 3, 5, or 7 years).
Analyze Your Custom Results: Click "Calculate Savings." The summary box will update instantly to show you a side-by-side comparison. Pay close attention to the Monthly Savings, which shows immediate cash flow benefits, and the Total Interest Savings, which shows the long-term financial advantage. The chart and amortization tables provide a deeper, month-by-month look at your journey out of debt.

Understanding Debt Consolidation

Debt consolidation is a financial strategy where you take out one new, larger loan to pay off multiple smaller loans. The primary goal is to simplify your finances into a single monthly payment and, ideally, secure a lower overall interest rate than the average of your existing debts. This can significantly reduce the total amount of interest you pay and help you get out of debt faster.

Pros and Cons of Debt Consolidation

Consolidating your debt can be a powerful move, but it is important to understand both the benefits and potential drawbacks.

Pro - Simplicity: Instead of juggling multiple due dates, minimum payments, and interest rates, you only have one payment to manage each month.
Pro - Lower Interest Rate: If your credit is good, you can often secure a personal loan with a much lower interest rate than high-interest credit cards, saving you thousands.
Pro - Fixed Repayment Schedule: Unlike credit cards with variable payments, a consolidation loan has a fixed term. You know exactly when you will be debt-free.
Con - Requires Discipline: Once you pay off your credit cards with the loan, you must avoid running up new balances on those same cards. Otherwise, you could end up with even more debt.
Con - Potential for Higher Total Cost: If you choose a very long loan term, you could end up paying more in total interest over time, even if your monthly payment is lower. Our calculator helps you see this tradeoff clearly.

How Debt Consolidation Affects Your Credit Score

The impact of debt consolidation on your credit score is multifaceted. Initially, you might see a small, temporary dip because applying for a new loan creates a "hard inquiry" on your credit report. However, the long-term effects are often positive:

It can lower your credit utilization ratio—the amount of revolving credit you're using compared to your total limits. This is a major factor in credit scoring models.
Making consistent, on-time payments on the new loan will build a positive payment history.
Having a fixed installment loan can diversify your credit mix, which is also seen as a positive.

Frequently Asked Questions (FAQ)

What is a weighted average interest rate?

The "Weighted Average Interest Rate" shown in our summary is the true average interest rate you are paying right now. It is calculated by giving more weight to debts with larger balances. For example, a $10,000 debt at 20% interest impacts your average far more than a $1,000 debt at 10%. This is the single most important number to beat with your new consolidation loan's interest rate.

What types of debt can I consolidate?

Typically, you can consolidate unsecured debts. These are debts not backed by collateral. Common examples include credit card debt, store cards, personal loans, payday loans, and medical bills. Secured debts like mortgages or auto loans are generally not included in a standard debt consolidation loan.

Is this calculator's result a guarantee?

No. This calculator is a financial modeling tool designed to illustrate the mathematical outcome of debt consolidation based on the numbers you provide. The actual interest rate and loan terms you may be offered by a lender depend on your credit score, income, and other financial factors. Use this tool as an educational starting point to see if consolidation is a strategy worth pursuing.