How This Comparison Actually Works
Debt consolidation replaces several separate debts — each with its own balance, rate, and payment — with one new loan. Whether that's a good deal depends entirely on the math, not just on having "one payment instead of many," so this tool simulates both sides in detail rather than using rough estimates.
How Each Existing Debt Is Simulated
For every debt you enter, the calculator applies standard declining-balance, monthly-compounding amortization: each month, interest accrues on the current balance (Balance × Annual Rate ÷ 12), your payment covers that interest first, and whatever's left reduces the principal. This repeats until the balance hits zero, and the simulation totals up every dollar of interest paid along the way. If a debt's payment doesn't even cover one month's interest, the balance would grow forever — the calculator detects this immediately and flags it rather than simulating an infinite loop. As a safety bound, no simulation runs past 600 months even if payoff is technically still occurring.
How the New Loan Is Calculated
The consolidation loan uses the standard fixed-payment loan formula — the same formula used for mortgages and auto loans — to compute a level monthly payment from the loan amount, rate, and term you enter. Its total interest is simply that payment multiplied by the number of months, minus the original loan amount.
When Consolidation Doesn't Actually Save Money
A lower monthly payment doesn't always mean lower total interest — stretching repayment over a longer term can reduce the payment while increasing the total interest paid, because interest has more months to accrue. This tool reports both numbers separately (interest saved and payment change) so you can see when a consolidation loan trades short-term relief for a higher total cost, or vice versa.
Frequently Asked Questions
Q: Why does one of my debts show "payment too low"?
A: This happens when your monthly payment is less than or equal to the interest accruing that month on the current balance. In that situation the balance cannot decrease — it would grow indefinitely — so a payoff date and total interest figure don't exist to calculate.
Q: Why default the new loan amount to the sum of my balances?
A: That's the natural minimum for actually clearing all of the listed debts. You can override it if your lender includes fees in the loan amount, or if you're only consolidating some of your debts.
Q: Does this include fees like origination charges or balance transfer fees?
A: No — this tool models principal, rate, and term only. If your consolidation loan or balance transfer carries an upfront fee, add it to the Loan Amount field to see its effect on total interest, since most such fees are financed into the loan itself.
Q: My existing debts have very different rates — should I only consolidate the high-rate ones?
A: Often yes. You can remove low-rate debts from the list (using Remove) and calculate savings only on the high-interest debts, since consolidating a low-rate loan into a higher-rate one would increase your interest cost.
Disclaimer: This calculator and guide are for educational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before making investment decisions. Past performance does not guarantee future results, and all investments carry risk.