Debt Consolidation Calculator
Trading Several Interest Rates for One
Debt consolidation replaces multiple balances — often at different, high interest rates — with a single new loan at one rate and one fixed monthly payment. Whether that actually saves money depends on comparing two full payoff simulations: the current debt paid at its existing rate and payment, against the proposed consolidation loan paid on its own fixed schedule.
The Formula
New consolidation loan: M = P × [r(1+r)n] ÷ [(1+r)n − 1]
Interest Savings = Current Total Interest − New Total Interest
The current debt side is simulated the same way a credit card payoff is — interest charged on the remaining balance each month, then the payment applied — while the new loan side uses the standard fixed-term amortization formula.
When Consolidation Helps — and When It Doesn't
- Rate matters more than payment size — consolidating at a genuinely lower average rate saves interest even if the new fixed payment is similar to before.
- Term length matters — a longer consolidation term can lower the monthly payment but stretch out total interest paid if the rate improvement is small.
- Multiple high-rate balances — consolidation is most valuable when it replaces several higher-rate debts (credit cards, personal loans) with one meaningfully lower rate.
Example: $15,000 Debt at 22% → 11% Consolidation
| Scenario | Payoff Time | Total Interest |
|---|---|---|
| Current (22% avg rate, $450/mo) | 52 months | $8,394.15 |
| Consolidated (11%, 4-year term) | 48 months | $3,608.78 |
In this example the new loan (payment $387.68/month) saves roughly $4,785 in total interest while also lowering the monthly payment.
How to Use This Calculator
- Enter your Total Debt and Current Average Interest Rate across all balances.
- Enter your Current Total Monthly Payment across those balances.
- Enter the New Consolidation Loan Rate and Term being offered.
- Select Calculate to compare payoff time and total interest between the two paths.
Related Calculations
Consolidating a single credit card balance specifically? Try the Credit Card Payoff Calculator, or use the Debt Payoff Calculator for one fixed-rate debt.