Debt Consolidation Calculator

Calculate the benefits of consolidating multiple debts into a single loan. Essential for debt management and interest savings.

How to Use Debt Consolidation Calculator

1. 1.**Add current debts** with balance, APR, and monthly payment
2. 2.**Enter new loan APR** for consolidation loan
3. 3.**Enter new loan term** in years
4. 4.**Click "Calculate Consolidation"** to see savings

Features

• •**Multiple Debts**: Add all your current debts
• •**Interest Savings**: Compare current vs. consolidated rates
• •**Payment Reduction**: See monthly payment savings
• •**Total Savings**: Calculate long-term interest savings

Debt Consolidation Benefits

• •**Lower Interest Rate**: Often reduces overall APR
• •**Single Payment**: One monthly payment instead of many
• •**Fixed Terms**: Predictable payoff timeline
• •**Simplified Management**: Easier to track and manage

Consolidation Loan Formula

Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]

Where:

• •P = Principal (total debt)
• •r = Monthly interest rate
• •n = Number of payments

When to Consider Consolidation

• •**High APR debts**: Credit cards typically 18-25%
• •**Multiple payments**: Managing many due dates
• •**Lower rates available**: Good credit score
• •**Stable income**: Can afford new payment
• •**Discipline needed**: Won't accumulate new debt

Common Consolidation Options

• •**Personal Loan**: Unsecured, fixed rate
• •**Home Equity Loan**: Secured by home equity
• •**Balance Transfer**: Move to 0% APR card
• •**401(k) Loan**: Borrow from retirement
• •**Debt Management Program**: Through credit counseling

Tips for Successful Consolidation

• •**Compare total costs** including fees
• •**Check credit score impact** before applying
• •**Read terms carefully** for hidden fees
• •**Close old accounts** to avoid reusing
• •**Create budget** to stay on track
• •**Build emergency fund** to prevent new debt

Potential Drawbacks

• •**Upfront fees**: Origination or application fees
• •**Longer terms**: May pay more over time
• •**Risk**: Some consolidation loans are secured
• •**Credit impact**: New inquiry and account
• •**Temptation**: Available credit on paid-off cards

Debt Consolidation vs. Bankruptcy

• •**Consolidation**: Repay all debts in full
• •**Bankruptcy**: Legal process to eliminate debt
• •**Credit impact**: Consolidation less damaging
• •**Future borrowing**: Consolidation preserves options
• •**Cost**: Consolidation usually cheaper long-term