What debt consolidation really does
Consolidation means rolling several debts, often credit cards and small loans, into one new loan with a single monthly payment. The pitch is simple: one payment instead of five, usually at a lower rate than the cards you are carrying. This calculator puts that pitch to the test by comparing your current situation with the new loan side by side, so you can see whether it actually saves money or just reshuffles it.
It looks at two things that matter most. First, the monthly payment: does the new loan cost less each month than you pay now? Second, the total interest: over the full life of both paths, which one hands the lender less of your money? A deal can win on one and lose on the other, which is exactly the trap to watch for.
Two examples
Say you owe 15,000 across cards averaging 22% APR and you pay 450 a month. Left alone, that clears in about 52 months and costs you a painful amount in interest. Consolidate into a 48-month loan at 11% and the payment drops to roughly 388 a month, you finish a few months sooner, and you save several thousand in interest. That is consolidation working the way it should.
Now stretch that same 11% loan over 72 months instead of 48. The monthly payment falls further, which feels great, but you are paying interest for two extra years. Drag the term out far enough and a lower rate can still cost you more overall than the high-rate cards would have. Lower monthly, higher total: the classic long-term trap.
When consolidation is worth it
- The new rate is genuinely lower than the blended rate on what you owe now.
- You keep the term as short as you can afford, so a lower rate is not cancelled out by more months of interest.
- You stop adding new debt to the cards you just cleared. Consolidation fixes the maths, not the habit.
The mistakes that undo the savings
The biggest one is chasing the lowest monthly payment by stretching the term, which quietly raises the total cost. The second is ignoring fees: some consolidation loans charge an origination fee, and some balance transfers charge a percentage upfront, both of which eat into the saving. And a consolidation loan only helps if the old accounts stay paid off. Run those cards back up and you now owe the loan plus fresh card debt.
Frequently asked questions
Does consolidation lower what I owe?
No. It does not erase debt, it repackages it. The gain comes from a lower interest rate and one simpler payment, not a smaller balance.
What rate should I put in for my current debts?
Use a rough blended average of the cards and loans you want to combine. If most of it sits on a high-rate card, lean toward that card's APR.
Why can a lower rate still cost more?
Because a longer term means more months of interest. If the new loan runs much longer than your current payoff, the total can rise even though the rate fell. Keep the term tight.
Are fees included?
No. Add any origination fee or balance-transfer fee on top. A 3 to 5% upfront fee can wipe out a small interest saving, so factor it in.
Will it hurt my credit score?
Applying adds a hard check and a new account, which can dip your score briefly. Paying the loan reliably and keeping the old cards at zero usually helps over time. This tool does the maths only, not credit advice.