Calculate potential savings from consolidating multiple debts into a single, lower-rate loan. Compare your current interest costs to what you'd pay with a consolidated loan to see if consolidation makes financial sense.
This calculator compares two amortisation paths: your current debts at their existing APRs versus a single consolidated loan at a new APR. It runs each scenario to payoff and computes total interest, total paid, and months to debt-free. The difference is your potential savings.
Inputs include your total current debt balance, current weighted-average APR, the consolidation loan APR, and your monthly payment amount. The calculator assumes both scenarios receive the same monthly payment, isolating the effect of the rate change. In practice, consolidation loans often have fixed terms (36 or 60 months), so the payment may differ; adjust the payment field to match the loan's required payment for a realistic comparison.
Origination fees (1–8%) are common on personal consolidation loans. To account for them, add the fee amount to the consolidation balance before entering it, or mentally reduce the displayed savings by the fee amount. A $20,000 loan with a 5% fee means you effectively borrow $21,000.
Consolidating without addressing spending habits. Paying off credit cards with a consolidation loan frees up those credit lines. Without behaviour change, many people run up the cards again—ending up with the consolidation loan plus new card debt. Before consolidating, commit to not charging on cleared cards.
Extending the loan term to lower payments. A 60-month loan has lower monthly payments than a 36-month loan, but you pay interest for two extra years. Compare total interest at different terms, not just the monthly amount. Sometimes a higher payment on a shorter term saves thousands.
Ignoring secured vs. unsecured risk. A home-equity loan offers low rates but converts unsecured credit-card debt into debt secured by your house. If you default, you risk foreclosure. Only use secured consolidation if you are highly confident in your ability to repay.
Not shopping for rates. The first offer is rarely the best. Get quotes from at least three lenders—credit unions, online lenders, and your existing bank. Rate differences of even 2 percentage points save hundreds over the loan's life.
Example 1 — Credit cards to personal loan. Total debt: $14,000, current weighted APR: 22%, consolidation APR: 10%, payment: $400/month. Current path: 49 months, $5,500 interest. Consolidated path: 41 months, $2,300 interest. Net savings: roughly $3,200 before fees. With a 3% origination fee ($420), net savings are about $2,780.
Example 2 — Small rate reduction. Total debt: $8,000, current APR: 16%, consolidation APR: 12%, payment: $250/month. Current path: 39 months, $1,700 interest. Consolidated: 36 months, $1,200 interest. Savings: roughly $500. After a 2% fee ($160), net savings drop to $340. Consolidation helps here but the benefit is modest—DIY payoff may be simpler.
Example 3 — Large debt, significant rate drop. Total debt: $35,000, current APR: 21%, consolidation APR: 8%, payment: $800/month. Current: 67 months, $18,600 interest. Consolidated: 51 months, $5,800 interest. Savings: approximately $12,800—substantial enough to clearly justify consolidation even with a 5% origination fee ($1,750).
Educational tool only — not financial advice. Examples use hypothetical numbers for illustration. Actual results depend on your specific balances, rates, and payment consistency. Consult a qualified financial professional for personalized guidance.