Debt Consolidation Calculator

The current side: months = the number of payments of the current monthly amount that clear the total balance, rounded up, and the interest is the sum of the monthly charges over that schedule. The consolidated side: monthly payment = the standard amortising payment for the balance at the new rate over the new term, and the interest is the sum over the fixed schedule. Interest difference = current interest − consolidated interest; monthly difference = current payment − new monthly payment.

B

Total balance across all the debts being consolidated

r

Current weighted average rate: each balance times its rate, divided by the total balance

p

What you pay each month across all those debts today

R

The rate on the consolidation loan

N

The term of the consolidation loan, in months

M

The new monthly payment on the consolidation loan

I

Interest difference: positive if consolidating costs less, negative if it costs more

Use it on any offer, before the paperwork, and read the interest line before the payment line — in that order, every time. A consolidation offer can improve the monthly figure while worsening the total, and it does so in a way that never looks wrong: the payment genuinely falls, the relief is genuinely felt, and the extra cost arrives years later as a term that quietly refuses to end. The clearest way to see it in the table below is to compare the 12% row with the 18% row: the payment improves a great deal in both, while the interest saved collapses from 6,748.21 to 1,079.98. The other use is diagnostic, on your own numbers rather than an offer: if the current side will not return an answer at all, the monthly payment you are making does not cover the interest, and no consolidation can fix that — it can only move it somewhere with a lower rate. And one question this page answers that no lender will: what the current arrangement actually costs in total. 16,788.29 of interest on a 30,000 balance is the number to beat, and it is the number the offer should be measured against rather than the monthly payment.

1. 30,000 at a 22% weighted average, consolidated at 11% over 60 months

   1. Current side: 30,000 at 22% paying 900 a month clears in 52 months and costs 16,788.29 of interest
   2. New loan: 60 months at 11% on 30,000 gives a monthly payment of 652.27
   3. The new schedule runs the full 60 months and costs 9,136.45 of interest
   4. Statement saving: 900 − 652.27 = 247.73 a month
   5. Interest saving: 16,788.29 − 9,136.45 = 7,651.84
   6. The term is 8 months longer on paper, and it still finishes sooner in the sense that matters: the balance is cleared and the interest stops

   The version in the advertisement, and it is genuinely good: half the rate, a lower payment, and 7,651.84 less interest. Note the term arithmetic, because it is the part people get wrong in both directions. The current schedule is 52 months and the new loan is 60, which sounds like a longer commitment — and it is the reason the interest saving is not larger, since eight more months of a low rate is still eight more months of interest. What makes the deal work here is that the rate fell by half, which is far more than the term grew. The next example is what happens when it is not.

2. The same consolidation at 18% rather than 11%

   1. Only the new rate changes: 11% becomes 18%
   2. New monthly payment: 761.80, so the monthly relief is 138.20 rather than 247.73
   3. New total interest: 15,708.31
   4. Interest saving: 16,788.29 − 15,708.31 = 1,079.98
   5. The interest saving is a seventh of what it was, while the monthly relief is still more than half

   Four percentage points of rate, and the interest saving falls from 7,651.84 to 1,079.98 — a seventh of the benefit for the same amount of monthly relief. This is the case the advertisement does not show and this page exists to show: the payment improves a lot, the total barely improves, and if the offer carries a fee the fee could consume the entire 1,079.98. A useful rule of thumb comes out of the two examples together, and it is worth stating plainly: what decides a consolidation is the rate, and what quietly undoes it is the term. If the new term is much longer than the time you have left, the rate has to fall a long way to compensate.

3. Consolidated at 11% but over 24 months instead of 60

   1. Same rate as the first example, but the term is 24 months instead of 60
   2. New monthly payment: 1,398.24, which is 498.24 more than the 900 being paid today
   3. New total interest: 3,557.61
   4. Interest saving: 16,788.29 − 3,557.61 = 13,230.68
   5. The term shortens by 28 months

   A negative monthly difference, and the reason this page does not take absolute values: the payment goes up by 498.24 and the interest falls by 13,230.68, which is the best outcome on the page by a wide margin. Compare it with the first example — the same half-rate reduction, the same balance, and the saving nearly doubles because 24 months of interest is much less than 60. The trade is entirely about cash flow: whether 1,398.24 a month is available is a question about your budget, and it is the only thing standing between this and the best answer here.

The current side of this page is three numbers standing in for however many debts you actually have, and that simplification has a cost. A weighted average rate is a fair summary when the balances are being repaid together and the payment is fixed, which is the case being modelled, but it hides the fact that the real schedule clears the small high-rate balances first and the large low-rate one last — so the true current interest can differ from the figure here, usually by a little and occasionally by more. The weighted average itself is yours to compute and yours to get right: multiply each balance by its rate, add, divide by the total. Entering the arithmetic mean of the rates instead will make every figure on the page wrong while leaving it entirely plausible. Fees are absent, and they matter more here than anywhere else in this subcategory: origination fees, balance transfer fees of a few percent, annual fees and closing costs are typically rolled into the new balance, so the amount you owe the day after consolidating is larger than the day before. This page does not model that, which means the interest saving it reports is the optimistic version. The rate on the new loan is treated as fixed for the whole term, while a variable rate can rise; the current rate is treated as fixed too, and most card rates are variable. Nothing models the behaviour change that makes consolidation work or fail — a cleared card is an available card, and borrowers who consolidate and then run the balances up again end up with both debts. Finally, this is arithmetic and not advice, and it says nothing about credit counselling, debt management plans or insolvency, all of which change the picture in ways no interest calculation can express.

Does consolidating debt actually save money?

Only if the rate falls by more than the term grows. On 30,000 at a 22% weighted average, a 60 month loan at 11% saves 7,651.84 of interest; the same loan at 18% saves only 1,079.98. The monthly payment falls in both cases, which is why the payment is the wrong figure to judge an offer by.

How do I work out my weighted average rate?

Multiply each balance by its rate, add those products up, and divide by the total balance. Three debts of 15,000 at 22%, 10,000 at 15% and 5,000 at 6% give (330,000 + 150,000 + 30,000) ÷ 30,000 = 17% — not the 14.3% you would get by averaging the three rates. Entering the wrong one moves every number on this page.

Why is the interest saving so much smaller than the monthly saving suggests?

Because a longer term is paid back with more months of interest, and that offsets a lower rate for a long time. In the 18% example the payment improves by 138.20 a month while the interest only improves by 1,079.98 in total. Compare the two examples: the rate is what buys the saving, and the term is what quietly takes it back.

Can a consolidation make things worse?

Yes, and the way it happens is quiet. If the new rate is not far below the current one and the term is much longer, the monthly relief is real and the total cost rises — this page would show a negative interest difference, and it prints it rather than hiding it. Fees make it worse still, because they are usually rolled into the new balance.

What does a negative number in the monthly difference mean?

It means the new payment is higher than what you pay now. That is not a bad sign on its own: the third example above has a monthly difference of −498.24 and an interest saving of 13,230.68, which is the best outcome on the page. It just means the trade is cash flow now against interest later, and only you can price that.

What is missing from this comparison?

Fees, mainly — origination fees and balance transfer fees are typically added to the new balance, so you owe slightly more the day after than the day before, and the saving here is the optimistic version. Your existing debts are also compressed into one balance, one rate and one payment, which flattens debts with very different rates.

• G.19 Consumer Credit: the monthly series on credit card interest rates and revolving balances, which is where the rate side of both comparisons comes from — Board of Governors of the Federal Reserve System (United States)
• 12 CFR 1026.7 — Periodic statement (Regulation Z): what a creditor must disclose about repayment, including the minimum payment and the minimum payment warning that a consolidation is measured against — Electronic Code of Federal Regulations, Office of the Federal Register (United States)