For informational purposes only. Not financial, investment, or tax advice. Results are estimates based on the inputs provided. Consult a qualified financial professional before making financial decisions.
Calculator tool
How this calculator works
Use the explanation to understand the formula, assumptions, and practical limits behind the calculator result.
What This Comparison Measures
Debt consolidation only helps mathematically when the new loan changes the payoff path in your favor. This calculator keeps the monthly payment the same and compares two scenarios:
- Your current total debt at the current average rate
- The same debt moved to a consolidation loan at the new rate
It estimates total interest and months to payoff for both paths, then shows the difference.
When a Lower Rate Helps
If the new rate is lower and the payment is high enough to reduce principal each month, consolidation can save both interest and time. A lower payment by itself is not proof of savings; if the term stretches much longer, total interest can still rise.
| Scenario | Balance | Rate | Monthly payment | Result |
|---|---|---|---|---|
| Current debt | 20,000 | 22% | 500 | Higher interest, longer payoff |
| Consolidated debt | 20,000 | 10% | 500 | Lower interest, faster payoff |
The Minimum-Payment Trap
If the monthly payment is less than or equal to the monthly interest charge, the balance does not amortize. In that case the calculator may show Never for payoff time. That is not a display error; it means the payment assumption is too low for the entered rate.
What Consolidation Does Not Fix
Consolidation does not erase debt, remove spending risk, or guarantee a better outcome. Compare origination fees, transfer fees, collateral risk, promotional-rate expiry, and whether old credit-card balances will build back up after the transfer.
Frequently asked questions
When does debt consolidation usually make sense?
It is most useful when the new loan has a clearly lower all-in cost, the monthly payment still fits your budget, and you can avoid adding new balances after consolidation. Compare the APR, fees, payoff time, and total interest together instead of looking only at the monthly payment.
Does a lower monthly payment always mean I save money?
No. A lower payment often comes from stretching repayment over more months. That can improve cash flow while still increasing total interest. Use the calculator to compare interest saved and months saved, not just payment size.
Why does the calculator sometimes show that debt never pays off?
That happens when the entered payment is too small to beat the monthly interest charge. If interest added each month is at least as large as the payment, principal never falls. Raise the payment, lower the rate, or both.
Should I use home equity to consolidate unsecured debt?
Only after understanding the tradeoff. A home-equity product can have a lower rate, but it turns unsecured debt into debt secured by your home. If repayment fails, the consequence is much more serious than with an unsecured personal loan.
