Debt Consolidation Calculator 2025 – Loan Comparison & Savings

Introduction

Debt consolidation combines multiple debts into one loan with (hopefully) a lower interest rate. Done right, it saves thousands in interest and simplifies payments. Done wrong, it extends debt and costs more. The Debt Consolidation Calculator shows if consolidation makes financial sense.

When Consolidation Makes Sense

✅ Good Reasons:

• Credit cards at 18-25% → personal loan at 8-12%
• Multiple payments → single payment (easier to manage)
• Variable rates → fixed rate (predictability)
• Credit score improved since taking original loans

❌ Bad Reasons:

• Just to lower monthly payment (extends timeline, more interest)
• To free up credit cards to spend more (debt cycle continues)
• Fees outweigh savings

Consolidation Options

Personal Loan (8-15% APR)

Pros: Fixed rate, fixed term, predictable Cons: Origination fee (1-5%), credit check required

Balance Transfer Credit Card (0% intro for 12-21 months)

Pros: 0% interest period, can save $1,000s Cons: 3-5% transfer fee, reverts to 18-25% after promo

Home Equity Loan/HELOC (6-10% APR)

Pros: Lowest rate, tax-deductible interest Cons: Risk losing home if you default

401(k) Loan

Pros: No credit check, low rate Cons: Opportunity cost, must repay if you leave job

Savings Calculation

Example: Credit Card Consolidation

Current Debt:

• Card 1: $8,000 @ 22% ($240/month minimum)
• Card 2: $5,000 @ 19% ($150/month minimum)
• Card 3: $4,000 @ 24% ($120/month minimum)
• Total: $17,000 @ avg 21.7% ($510/month)

Timeline: 5.5 years paying minimums Total Interest: $16,300

Consolidation Loan:

• Amount: $17,000
• Rate: 10%
• Term: 48 months -** Monthly:** $431
• Total Interest: $3,700

Savings: $16,300 - $3,700 = $12,600 Time Saved: 1.5 years

Balance Transfer Strategy

Scenario: $12,000 credit card debt @ 20%

Option 1: Pay Minimums

• Monthly: $360
• Payoff: 6 years
• Interest: $13,800

Option 2: Balance Transfer

• 0% for 18 months
• 3% fee: $360
• Pay $700/month for 18 months
• Payoff: 18 months
• Interest: $360 (just the fee)

Savings: $13,440 + 4.5 years

Key: Must pay off during 0% period or you're back to 20�%+.

Common Mistakes

Mistake 1: Only Looking at Monthly Payment

Lower payment often = longer term = more interest.

Example:

• Current: $500/month, payoff in 3 years
• Consolidation: $350/month, payoff in 7 years
• You pay MORE interest despite lower payment

Mistake 2: Running Up Cards Again

Consolidate $20k → credit cards at $0 → spend another $10k → now $30k total debt.

Fix: Close or freeze cards after consolidation.

Mistake 3: Ignoring Fees

Example:

• Balance transfer: 3% fee on $10k = $300
• If you only save $200 in interest, you LOST money

Mistake 4: Using Home Equity for Unsecured Debt

Converting unsecured credit card debt → secured home equity debt = risking foreclosure.

FAQ

Q: Will debt consolidation hurt my credit? A: Short-term, yes (hard inquiry + new account). Long-term, helps if you pay on time and reduce utilization.

Q: Should I consolidate student loans? A: Federal student loans have protections (forbearance, income-driven plans). Don't consolidate federal → private unless you're certain.

Q: What credit score do I need? A: 650+ for decent personal loan rates. 700+ for best rates and balance transfer cards.

Q: Can I consolidate after consolidating? A: Yes, but each refi is a hard inquiry. Don't do it frequently.

Related Calculators

• Credit Card Payoff: /calculator/05-credit-card-payoff-calculator
• Debt Snowball vs Avalanche: /calculator/03-debt-snowball-vs-avalanche

Conclusion

Debt consolidation is a tool, not a solution. It works if you lower your rate AND commit to not accumulating new debt. Use the Debt Consolidation Calculator to run the numbers—if you're not saving at least $1,000 in interest after fees, it's not worth it.