Debt Consolidation Calculator

Debt consolidation replaces multiple high-interest debts with a single loan at a lower interest rate. The key calculation is whether the new loan actually saves money after accounting for fees and the new term length.

The Core Comparison Formula:

Total cost of current debts = Sum of (Monthly payment × Remaining months) for each debt

Total cost of consolidation loan = Monthly payment × Loan term months + Origination fees

Net savings = Total current cost − Total consolidation cost

Monthly Payment Formula (consolidation loan):

M = P × [r(1+r)^n] / [(1+r)^n − 1]

Where:

• P = Principal (total debt consolidated)
• r = Monthly interest rate (annual rate / 12)
• n = Loan term in months

Worked Example:

Three existing debts. The months are not guessed, they come out of amortising each balance at its own rate and payment:

Consolidation loan: $16,000 at 9% APR over 48 months

• Monthly payment = $16,000 × [0.0075 × 1.0075⁴⁸] / [1.0075⁴⁸ − 1] = $398.16/month
• Total paid = $398.16 × 48 = $19,111.71, so interest of $3,111.71
• Net saving = $4,174 − $3,112 = $1,062

Enter those nine figures above with a 9% rate and a 4-year term, and the calculator returns exactly that.

But look at the second number before you celebrate. The monthly payment drops from $630 to $398.16, which is $231.84 a month back in your pocket, and the payoff date moves from month 35 to month 48. You are debt-free 13 months later. The saving is real here because the average rate falls from about 18% to 9%.

Now stretch the same $16,000 at the same 9% over seven years. The payment falls again, to $257.43, which feels better still. The interest climbs to $5,623.72, and the $1,062 saving becomes a $1,449.94 loss. Nothing changed except the term. A lower monthly payment is not a saving; it is sometimes the opposite, wearing a friendly disguise.

Practical Tips:

• Savings shrink if you extend the term too long. A 7-year loan at 9% can easily cost more than a 3-year loan at 15%.
• Origination fees of 1 to 8% come off the top and are not in the advertised APR comparison. Enter yours above.
• Avoid moving unsecured debt onto your house without understanding what you have just pledged.
• Stop using the paid-off cards. Consolidating and then re-borrowing leaves you with the original debt plus a loan.