Debt Consolidation Calculator

The calculation is based on comparing two financial paths: continuing to pay multiple separate debts versus securing a single consolidation loan. First, the tool aggregates your total outstanding balances (TotalDebt = Debt1 + Debt2 + ... + Debt6) and sums your current monthly payments. Next, it calculates the monthly payment for the new consolidation loan using standard amortization math: P = L [ c(1 + c)^n ] / [ (1 + c)^n - 1 ], where L is the loan amount, c is the monthly interest rate, and n is the total number of months. Finally, it factors in any upfront or rolled-in loan origination fees (ConFee) to reveal your true net interest savings and cash flow changes.

Imagine you have three separate debts. Debt 1 is a credit card balance of $5,000 at 22% APR with a $180 monthly payment. Debt 2 is a store card balance of $3,000 at 26% APR with a $120 monthly payment. Debt 3 is a personal loan balance of $10,000 at 12% APR with a $250 monthly payment. Your total debt is $18,000, and your combined current monthly payments equal $550. You decide to apply for a debt consolidation loan of $18,000 with a 4-year (48-month) term at an 11% fixed APR, plus a 3% upfront origination fee ($540). Using the amortization formula, your new monthly payment on a $18,540 total financed amount (including the fee) comes out to approximately $479 over 48 months. By switching, your monthly cash flow improves by $71, and you drastically cut down the exorbitant 22% to 26% interest bleeding from your credit cards.

Avoid running up new balances on your freshly paid-off credit cards, as this can easily double your financial trouble. Always check whether your consolidation loan carries prepayment penalties or hefty origination fees that might wipe out your projected interest savings. Finally, aim for a consolidation loan APR that is significantly lower than your weighted average current debt APR to ensure the math genuinely works in your favor.