Debt Consolidation Calculator
Enter up to four debts and see whether a consolidation loan actually beats paying them off yourself — and which payoff order costs least.
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Consolidation is not automatically cheaper
Debt consolidation replaces several debts with one. That is all it does. Whether it saves money depends on two numbers: the rate on the new loan, and the term you spread the balance over. Get the first wrong and you pay more interest. Get the second wrong and you can pay more interest even when the rate is lower.
On the four debts used here — 48,000 dollars in total at rates between 6 and 24 percent — the weighted average rate is 11.79 percent. A consolidation loan at 11 percent beats that on rate, but only by 0.79 of a point. Spread over five years, the loan costs 14,618 dollars in interest. Paying the same debts off yourself, with the same 1,190 dollars a month, costs 11,285. The consolidation loan is the more expensive option despite the lower rate.
The reason is the term. Paying them yourself clears the balance in 50 months because the extra money attacks one debt at a time and each cleared debt frees its minimum for the next. The loan takes 60 months and charges interest on the whole balance for every one of them. A lower rate on a longer term is not a saving, it is a repackaging.
Where consolidation does win is when the rate gap is wide. Someone with 28 percent card debt and a credit score good enough for a 12 percent loan has a genuine arbitrage. Someone with a 12 percent weighted average looking at an 11 percent loan has almost nothing, and should check the term before signing anything.
How the comparison is calculated
The weighted average rate is what the consolidation loan has to beat. Both routes are then simulated month by month with the same monthly budget.
| Symbol | Meaning |
|---|---|
Weighted rate |
The true average rate across your debts, weighted by balance |
Monthly budget |
Your minimum payments plus whatever extra you can add |
Avalanche |
Extra money goes to the highest rate first, which always costs least |
Snowball |
Extra money goes to the smallest balance first, which clears a debt sooner |
The two payoff orders only differ when you have extra money to direct. Paying nothing but minimums means every debt receives exactly its minimum and the order is irrelevant — which is why the extra field matters more than it looks.
Worked example: 48,000 dollars across four debts
Rates from 6 to 24 percent, a weighted average of 11.79 percent, 1,190 dollars a month available, and an 11 percent consolidation loan over 5 years.
| Figure | Result |
|---|---|
| Total debt | $48,000.00 |
| Minimum payments | $990.00 |
| Extra available each month | $200.00 |
| Total monthly budget | $1,190.00 |
| Weighted average rate | 11.79% |
| Consolidation loan rate | 11.00% |
| Paying them yourself: avalanche | 50 months, $11,285.34 |
| Paying them yourself: snowball | 51 months, $11,790.19 |
| Ordering by rate saves | $504.85 |
| Consolidation loan | 60 months, $14,618.18 |
| Monthly payment on the loan | $1,043.64 |
| Cheaper route | Paying them yourself |
| Saved against minimums alone | $7,168.79 |
The consolidation loan has the lower rate and still costs 3,333 dollars more, because it stretches the debt over 60 months rather than clearing it in 50. The 1,190 dollars a month does the work either way; what matters is whether that money reduces a balance or services one. Ordering by rate rather than by size saves 505 dollars for no extra effort at all.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Getting consolidation right, or deciding against it
Check the term before the rate
A lower rate over a longer term can cost more than the debts you replaced. On this example an 11 percent loan beat an 11.79 percent weighted average and still cost 3,333 dollars more, purely because of the extra ten months. Ask what the total interest will be, not the rate.
Order your own payments by rate, not by size
It costs nothing and saves real money. Clearing the highest rate first saved 505 dollars here over paying the smallest balance first. The snowball's advantage is motivational, not financial — and motivation is worth something, but you should know which you are buying.
Do not consolidate and then reuse the cards
This is how consolidation fails. The balances move to a loan, the cards have room again, and within a year there is a loan and a card balance. If you consolidate, close the accounts or remove them from your wallet before the first payment is due.
Watch what the loan is secured on
An unsecured consolidation loan leaves your assets alone if things go wrong. A home equity loan or a balance transfer secured on property does not. A lower rate secured on your house is a different risk, not just a cheaper product.
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Frequently asked questions
Does debt consolidation save money?
Only if the new rate and term together cost less than your current debts. On the example on this page an 11 percent loan replaced an 11.79 percent weighted average and cost 3,333 dollars more, because it stretched the balance over 60 months instead of clearing it in 50.
What is a weighted average interest rate?
The single rate that reflects what you actually pay across all your debts, weighted by how much you owe on each. A large balance at a low rate pulls the average down; a small balance at a high rate barely moves it. It is the number a consolidation loan has to beat.
Is avalanche or snowball better?
Avalanche, always, on cost — it clears the highest rate first and saved 505 dollars in the example here. Snowball clears the smallest balance first, which gives you a cleared account sooner and some people find that keeps them going. If the cost difference is small, pick the one you will actually finish.
Should I consolidate credit cards with a personal loan?
It can work if the loan rate is well below your card rates — a gap of ten points or more is meaningful. Below that, check the term, because a modest rate improvement spread over extra years often costs more in total. Run both sides through this calculator before deciding.
Will consolidating hurt my credit score?
There is usually a small drop from the credit inquiry and the new account, and it recovers. The larger effect is on your credit utilisation: moving card balances into an instalment loan lowers utilisation, which usually helps. Closing the cards entirely can hurt, because it reduces your available credit.