Debt Consolidation Calculator

Compare the benefits of consolidating multiple debts into a single loan. See potential savings in monthly payments, total interest, and time to become debt-free.

Current Debts

Comparison Results

Add your debts and consolidation terms to see if consolidation makes sense for you.

How to Use the Debt Consolidation Calculator

List Your Debts: Enter each debt's name, balance, interest rate, and minimum payment
Add More Debts: Use "Add Another Debt" to include all your high-interest debts
Enter Consolidation Terms: Input the new loan's interest rate, term, and any fees
Compare Results: Review monthly savings, interest savings, and payoff time differences
Analyze Break-even: See how long it takes to recover any consolidation fees
Make Decision: Use the recommendation and detailed comparison to decide

What is Debt Consolidation?

How It Works

Debt consolidation involves taking out a new loan to pay off multiple existing debts. Instead of managing several payments with different rates and due dates, you have one monthly payment.

1.Apply for a consolidation loan

2.Use loan proceeds to pay off existing debts

3.Make single monthly payment on new loan

Potential Benefits

✓Lower Interest Rate: Potentially reduce your average rate

✓Simplified Payments: One payment instead of many

✓Fixed Payment: Predictable monthly amount

✓Faster Payoff: Clear timeline to debt freedom

✓Improved Credit: Better credit utilization ratio

Types of Debt Consolidation

Personal Loans

Best for: Good credit borrowers with unsecured debt

•Fixed interest rates and payments

•Unsecured (no collateral required)

•Terms typically 2-7 years

•Interest rates: 6%-36%

Balance Transfer Cards

Best for: Credit card debt with promotional rates

•0% APR promotional periods (12-21 months)

•Balance transfer fees (3%-5%)

•Requires discipline to pay off during promo

•High rates after promotional period

Home Equity Loans

Best for: Homeowners with significant equity

•Lower rates (secured by home)

•Tax-deductible interest (conditions apply)

•Risk of losing home if defaulted

•Closing costs and fees

401(k) Loans

Best for: Last resort with stable employment

•Low rates (prime + 1-2%)

•Pay interest to yourself

•Risk retirement savings growth

•Must repay if you leave job

When to Consider Debt Consolidation

Good Candidates

✓Multiple High-Rate Debts: Several credit cards or loans above 15% APR

✓Good Credit Score: 650+ to qualify for better rates

✓Stable Income: Reliable income to make payments

✓Discipline: Won't accumulate new debt

✓Management Issues: Struggling with multiple payments

Warning Signs

✗Poor Credit: May not qualify for better rates

✗Spending Problems: Haven't addressed root cause

✗Low-Rate Debt: Current rates already below 10%

✗Unaffordable Payments: New payment still too high

✗High Fees: Consolidation costs outweigh benefits

Pros and Cons of Debt Consolidation

Advantages

Simplified Finances

One payment, one due date, one balance to track

Potential Savings

Lower interest rates can save thousands

Fixed Terms

Know exactly when you'll be debt-free

Credit Improvement

Lower utilization can boost credit scores

Disadvantages

Qualification Requirements

Need good credit for best rates and terms

Fees and Costs

Origination fees, balance transfer fees

Temptation to Overspend

Paid-off cards may lead to new debt

Longer Repayment

Extended terms may increase total interest

Alternative Debt Payoff Strategies

Debt consolidation isn't the only way to tackle multiple debts. Consider these alternatives:

Debt Avalanche Method

Pay minimums on all debts, put extra money toward highest-rate debt first.

Pros: Minimizes total interest paid

Cons: May take longer to see progress

Best for: Disciplined borrowers focused on math

Debt Snowball Method

Pay minimums on all debts, put extra money toward smallest balance first.

Pros: Quick wins build motivation

Cons: May pay more total interest

Best for: Those who need psychological victories

Consider All Options

Compare debt consolidation with avalanche and snowball methods using our calculator. The best strategy depends on your specific situation, interest rates, and personal motivation style.

Frequently Asked Questions

Will debt consolidation hurt my credit score?

Initially, applying for new credit may cause a small temporary dip. However, consolidation often improves credit over time by reducing credit utilization and making payments more manageable, leading to better payment history.

Should I close my credit cards after paying them off?

Generally no. Keeping cards open maintains your credit history length and available credit, both positive factors for your credit score. However, if you can't resist using them, consider closing some accounts or removing cards from your wallet.

What if I can't qualify for a lower interest rate?

If you can't get a better rate, consolidation may not make financial sense. Focus on improving your credit score first, or consider the debt avalanche/snowball methods. Even simplifying payments without saving money might be worth it for some people.

How do I avoid accumulating new debt after consolidation?

Create and stick to a budget, build an emergency fund, remove temptation by not carrying cards, and address underlying spending habits. Consider automatic transfers to savings and using cash or debit cards for discretionary spending.

Are there tax implications for debt consolidation?

Generally no for standard consolidation. However, if any debt is forgiven or settled for less than owed, that amount may be taxable income. Home equity loan interest may be tax-deductible if used for home improvements. Consult a tax professional.

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