Direct answer
Consolidation helps only when the replacement's fees, rate path, term, repayment behavior, and new risks produce a better overall scenario than keeping the current debts.
What this calculation tells you
A consolidation comparison estimates the difference between two repayment cash-flow paths.
It cannot guarantee approval, prevent new borrowing, or value legal and collateral consequences.
Where it is used
Households
Simplify several repayments.
Credit counselling
Compare scenarios on consistent assumptions.
Loan shopping
Put fees and terms beside quoted rates.
Cash-flow management
Assess payment relief versus total cost.
When this guide helps
- Several high-rate debts exist.
- A lender offers one replacement loan.
- Monthly relief is needed.
- A secured consolidation product is proposed.
Build the keep-current baseline
Project every existing balance with its actual rate, fee, minimum rule, and planned payment rather than comparing the new loan with today's balance alone.
Model the complete replacement
Include origination charges, settlement fees, introductory periods, variable rates, insurance, penalties, and the amount actually received or used to clear debts.
Assess non-numeric consequences
Collateral, guarantors, legal protections, account closure, and the risk of rebuilding card balances require separate consideration.
Common mistakes
Before relying on debt consolidation: when is the comparison actually fair?, test the stated assumptions and keep its decision boundary visible.
- Comparing monthly payments without matching payoff dates.
- Ignoring fees financed into the new balance.
- Treating an estimate as approval or advice.
Worked case: rate savings versus fee
Current debts are 10,000 at 18% and 5,000 at 10%. A 15,000 consolidation quote is 12% with a 450 fee.
Current simple annual interest basis is 2,300; new basis is 1,800, a 500 difference. Fee-only break-even is about 450/500 x 12 = 10.8 months before amortization effects.
The fee could be recovered after roughly eleven months under this simplified held-balance comparison.
Use full payment schedules for the real decision; balances decline and terms may differ.
Reproduce this worked caseOpen Debt Consolidation Calculator
Worked case: longer term lowers payment
Suppose consolidation reduces monthly payment by extending the term.
A lower payment may increase the number of charged months even at a lower rate.
Payment relief and total cost can move in opposite directions.
Do not approve a comparison from payment alone; include payoff date and total paid.
Reproduce this worked caseOpen Debt Consolidation Calculator
debt consolidation: compare assumptions, not just answers
Credit access, collateral, variable rates, penalties and behavior after clearing revolving balances can materially change outcomes.
| Scenario | Changed assumption | Result |
|---|---|---|
| Rate/fee screen | 12% plus 450 fee | ≈10.8-month simple break-even |
| Longer term | Lower payment | Total cost may rise |
debt consolidation: calculation checklist
- All current debts listed
- Fees financed or paid labelled
- Terms matched
- Total paid and payoff date compared
- No approval claim
Practical questions
Frequently asked questions
Is a lower interest rate enough?
No. Fees, term length, rate variability, and repayment behavior determine the overall result.
Should credit cards be closed after consolidation?
That depends on contracts, credit access needs, scoring systems, and behavior; the calculator cannot decide it.
What if the new loan is secured?
The consequence of default may become more serious, so cost savings must not be considered in isolation.
Further reading
Authoritative sources
Use these primary and professional resources to check definitions, conventions, or requirements that may extend beyond this guide.