The formula
How it works
See whether rolling several debts into one consolidation loan saves money. The calculator compares the monthly payment and total interest at your current rate with a single lower-rate loan.
FAQ
How does consolidation save money?
By replacing high-rate debts — especially credit cards — with a single loan at a lower rate. Less of each payment goes to interest, so you pay off the balance faster and cheaper, with just one payment to manage.
When is consolidation not worth it?
If the new rate is not much lower, if fees eat up the savings, or if a longer term means you pay more interest overall despite the lower rate. Always compare the total cost, not just the monthly payment.
Does the loan term affect how much I save?
Yes — a longer term lowers the monthly payment but usually increases total interest, while a shorter term raises the payment but cuts interest, so it is worth testing a few term lengths in the calculator.
What debts are typically rolled into a consolidation loan?
Credit cards, store cards, and other high-rate unsecured debts are the most common candidates, since they usually carry the highest average rate you are trying to replace.
Does this calculator include fees or closing costs?
No — it compares payments and interest based on the balance, rates, and term you enter, so add any origination or balance-transfer fees separately when judging the real savings.
What if my consolidation loan rate is variable?
Enter your best estimate of the average rate over the term — if the rate can rise, the actual savings could be smaller than shown, so it is wise to check the numbers again if your rate changes.
Will consolidating improve my credit score?
It can help over time by lowering credit-card utilization and simplifying payments, but applying for a new loan causes a temporary dip from the hard inquiry and a new account.
About the debt consolidation calculator
This calculator shows whether combining several debts into a single consolidation loan will save you money. Consolidation swaps a mix of high-interest debts — often credit cards — for one loan at a lower rate, simplifying your payments and, ideally, cutting the interest. By comparing your current situation with a consolidation loan side by side, this tool reveals the monthly saving and the total interest you would avoid.
How to use it
Enter your total debt balance, the average interest rate you are paying now, the rate on the consolidation loan you are considering, and the loan term. The calculator compares the monthly payment and total interest of both, showing the monthly saving and the interest saved overall. For example, moving $25,000 of debt from a 20% average rate to an 11% loan over 5 years can save a meaningful amount each month and thousands in interest.
The formula
Both payments use the amortization formula, , where is the balance, is the monthly rate and is the number of payments. The calculator runs it once at your current average rate and once at the consolidation rate, over the same term, and the differences in the monthly payment and the total interest are your savings.
Where it is used
People struggling with multiple high-interest debts use it to decide whether a consolidation loan or balance transfer is worthwhile before applying. Financial counsellors use the same comparison when advising on debt strategies. The key is to compare the full cost over the term — a lower monthly payment stretched over more years can cost more in the end, so the total interest is the number to watch.