Where do these numbers come from?
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How the comparison works
For your current debts, the calculator simulates each balance month by month at its APR and payment until it reaches zero, and adds up the interest. For the new loan, it grosses up the balance for any origination fee (a 5% fee on $16,000 means borrowing $16,842 to net $16,000) and uses the standard loan payment formula.
Worked example
| Debt | Balance | APR | Payment | Payoff time | Interest |
|---|---|---|---|---|---|
| Card 1 | $8,000 | 24% | $250 | 4 yr 4 mo | $4,899 |
| Card 2 | $5,000 | 21% | $150 | 4 yr 3 mo | $2,570 |
| Card 3 | $3,000 | 28% | $100 | 4 yr 5 mo | $2,220 |
Total now: $500 a month and $9,688 in interest. A 48-month loan at 12% with no fee: $421.34 a month and $4,224 in interest, a saving of $5,464.
When consolidation does not help
- The new rate is not meaningfully lower once the origination fee is counted.
- The new term is much longer, so the lower payment hides more total interest.
- The paid-off cards get used again, the most common way consolidation backfires.
Other options
A 0% balance transfer can be cheaper for balances you can clear in the intro period. Nonprofit credit counseling agencies offer debt management plans that may lower card APRs without a new loan.
Example rates are for comparison only, not offers or current quotes. Your rate depends on credit, loan-to-value and lender.
Sources and assumptions
- Month-by-month simulation; interest compounds monthly at APR ÷ 12.
- FTC: how to get out of debt
Related
Frequently asked questions
Does debt consolidation save money?
Only if the new APR, including fees, is lower than what you pay now and you do not stretch the term so far that total interest rises.
Does debt consolidation hurt your credit?
A new application causes a hard inquiry and a new account, which can dip scores briefly. Lower card utilization can help over time.
What is a good rate for a debt consolidation loan?
One clearly below your current average APR. Compare total cost in this calculator rather than the rate alone.