Debt Consolidation Calculator

What this calculator is, and when to reach for it

Consolidation replaces several debts with one: a single balance, a single rate, a single payment, and — crucially — a single end date. For someone juggling four minimum payments at four different rates, that simplification alone has real value, and it is often the honest reason people do it rather than the interest saving.

The arithmetic case is straightforward when it works. Card debt at rates in the twenties replaced by a fixed loan in the low teens genuinely costs less, and a fixed term means the debt actually ends rather than drifting. That is a meaningful improvement over revolving credit, which is designed never to finish.

The trap is equally straightforward, and it hides in the payment. A consolidation loan can show a lower monthly figure while costing more overall, simply because it runs longer. A lower payment is not evidence of a cheaper debt, and it is the number most likely to be put in front of you.

Reach for this page when you are carrying several balances, when an offer has arrived promising to reduce your monthly outgoings, or when you want to know whether combining debts would genuinely save money or merely rearrange it.

What consolidation does and does not change

It changes the rate, the term, the payment, and the number of creditors. It does not reduce what you owe by a single unit. The balance moves; it does not shrink. Any offer implying otherwise is describing debt settlement, which is a different thing with different consequences.

It also does not change the behaviour that produced the balances. This is the part the arithmetic cannot model and the part that most often decides the outcome. Consolidating card balances leaves those cards open with zero balances and full limits, and a household that fills them again is left with the consolidation loan and the cards.

Where consolidation genuinely works, it is usually because the borrower treats it as a closing act rather than a reset — clearing the balances, then leaving the cards alone.

Where to go next

The main alternative is simply paying the existing debts down harder. The credit card payoff calculator shows what a fixed payment achieves without any new borrowing, and it is often surprisingly competitive with a consolidation loan.

If the balances sit on cards with promotional offers available, the balance transfer calculator weighs the transfer fee against interest saved during the promotional window, and the minimum payment calculator shows what happens if you change nothing at all.

To price the replacement loan itself, use the personal loan calculator, and the loan comparison calculator if you have more than one offer. If qualifying for a mortgage is the underlying motive, the debt-to-income calculator shows how consolidation would move that ratio. The debt payoff journey lines up every option together.

How the comparison is worked out

Your existing position is compared against a single fixed-rate loan covering the same balances plus any arrangement fee.

new principal = total balances + fees   |   payment = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

total balances

the sum of the debts being consolidated

fees

arrangement or origination charges, added to the new balance

r

the monthly rate on the consolidation loan

n

the number of months over which it is repaid

Comparing on interest, not on payment

The only comparison that means anything is total interest against total interest, over comparable periods. What you would pay in interest carrying on as you are, against what you would pay in interest on the consolidation loan, plus its fees.

Payments are not comparable unless the timescales match. A consolidation loan over sixty months against card balances you would have cleared in thirty-six is not a cheaper debt with a lower payment; it is a longer debt, and the lower payment is the mechanism rather than the benefit.

Where fees belong

Arrangement or origination fees are commonly deducted from the advance or added to the balance, and either way you pay interest on them for the life of the loan. They belong in the principal, which is where this calculation puts them.

A fee expressed as a small percentage can be substantial in cash: three percent of 24,000 is 720, which then accrues interest for years. Where two offers differ in fee and rate, compare the total cost rather than either component alone.

Secured consolidation changes the risk entirely

Consolidating unsecured debts into borrowing secured on your home converts a debt that could, at worst, damage your credit into one that could cost you the property. The rate is lower for exactly that reason: the lender has taken security, and the risk has moved to you.

It also typically stretches repayment over a far longer period, so interest can rise sharply even at a much lower rate. This is the version of consolidation that most deserves careful thought, and the arithmetic alone does not capture what is being traded.

What the numbers cannot tell you

Whether the cards stay closed. Whether a single payment makes the debt feel manageable enough to sustain, or invisible enough to ignore. Whether the simplification is worth a modestly higher cost.

These are real considerations and they routinely outweigh a few hundred either way. The calculator gives you the arithmetic honestly so that the judgement can be made on the parts it cannot compute.

What this page assumes

The calculator adds any consolidation fees to your existing balance, works out a level monthly payment over the time to repay you entered, then compares that with the debt totals you entered.

Monthly payment difference equals existing monthly payments minus consolidation payment. Interest difference equals entered existing remaining interest minus consolidation interest.

Worked examples, step by step

Take a household with 24,000 across several balances, currently paying 900 a month with roughly 6,400 of interest still to come. They are offered a consolidation loan at 11.5% over 36 months with a 300 arrangement fee.

Carrying on against consolidating

This is a sound consolidation. Interest falls by 1,852.59 and the payment drops by 98.68 a month, and critically the term is almost unchanged — 36 months against roughly 34. The saving is coming from the rate, not from stretching the debt.

That last point is what makes it genuinely good rather than merely comfortable. Both the payment and the total improve at once, which only happens when the rate difference is doing the work.

The same loan stretched to sixty months

Suppose the same 24,300 at 11.5% is offered over 60 months instead. The payment falls to about 535, which is 365 a month less than the current 900 and looks dramatically better. Total interest rises to roughly 7,800.

So the borrower would pay more than the 6,400 they were already facing, while feeling considerably better off each month. Same rate, same lender, same balance — and a worse outcome, produced entirely by the term. This is the single most important thing to check on any consolidation offer.

The alternative nobody quotes

The household could also keep paying 900 a month against the existing balances and clear them in around 34 months with 6,400 of interest. Against the sensible 36-month consolidation, the loan saves 1,853 — real money, worth having.

But if they took the consolidation at 801 and spent the 99 difference, they would save nothing at all relative to their current path in cash terms while extending the debt slightly. Consolidation rewards borrowers who keep paying at the old level; it merely reorganises things for those who do not.

The vocabulary, on and around this page

Debt consolidation

Replacing several debts with a single loan carrying one rate, one payment, and one end date. It reorganises debt without reducing the amount owed.

Consolidation loan

The new fixed-rate loan taken out to clear existing balances. It is ordinary borrowing and is assessed like any other application.

Origination fee

A charge for arranging the loan, often a percentage of the amount. It is usually added to the balance and accrues interest.

Weighted average rate

The blended rate across your existing balances, weighted by size. It is the figure a consolidation rate should be compared against.

Total interest

All interest still to be paid. Comparing this figure, not the monthly payment, is the only reliable test of whether consolidation saves money.

Term extension

Repaying over a longer period. It lowers the payment while usually increasing total interest, and it is how a worse deal can look better.

Revolving credit

Borrowing with no fixed end date where the limit is restored as you repay, such as a card. Consolidation converts it into instalment debt.

Instalment debt

A loan repaid in fixed amounts over a set term. It has a defined end date, which is a genuine advantage over revolving credit.

Secured consolidation

Consolidating into borrowing secured on your home. The rate is lower because the lender has taken security, which moves the risk to you.

Unsecured loan

Borrowing with no asset pledged. It carries a higher rate but cannot cost you your home if things go wrong.

Debt settlement

Negotiating to repay less than owed. Entirely different from consolidation, and it typically causes serious credit damage.

Debt management plan

An arrangement administered by a third party to repay creditors, sometimes at reduced rates. Distinct from taking out a consolidation loan.

Credit utilisation

The share of available credit in use. Consolidation usually lowers it, which can help a credit score if the cards stay unused.

Reloading

Running balances back up on cards cleared by consolidation, leaving both the loan and the new balances. The most common way consolidation fails.

Debt to income

The share of gross income going to debt payments. Consolidation can improve it by lowering the payment, without reducing what is owed.

Prepayment penalty

A charge for repaying a loan early. It matters if you intend to clear the consolidation loan ahead of schedule.

Fixed rate

A rate that does not change for the term, which is what makes the total cost of a consolidation loan knowable in advance.

Hard inquiry

A credit check made when applying. It causes a small temporary dip in a credit score.

Amortization

The repayment schedule of the new loan, with each payment covering interest first and reducing the balance with the remainder.

Effective saving

Interest avoided less any fees. It is the honest measure of what consolidation delivers.

Common mistakes, and what this page will not do

• Judging the offer on the monthly payment. Stretching the same balance over sixty months instead of thirty-six cut the payment by 365 while raising total interest above the current path.
• Assuming consolidation reduces what you owe. The balance moves rather than shrinks. Only debt settlement reduces the amount owed, and it carries serious consequences.
• Leaving the arrangement fee out of the comparison. Fees are added to the balance and accrue interest for the whole term. Three percent of 24,000 is 720 before any interest.
• Spending the difference in payment. Consolidation rewards borrowers who keep paying at the old level. Pocketing the saving reorganises the debt without improving the outcome.
• Running the cards back up. Cleared cards keep their limits. Filling them again leaves you with the consolidation loan and the balances, which is worse than where you began.
• Securing unsecured debt on the home without weighing it. A lower rate is available because the lender has taken your property as security. The risk has not disappeared; it has moved to you.
• Comparing against the wrong current cost. Compare against what you would genuinely pay carrying on, not against minimum payments you have no intention of making.
• Assuming you can clear the new loan early for free. Some consolidation loans charge for early settlement, which matters if a bonus or windfall might let you finish ahead of the term you signed up to.
• Treating a lower ratio as real progress. Consolidation can improve debt-to-income by lowering the payment while the balance is untouched. That helps you qualify, not to owe less.

What this calculator leaves out: This calculator does not verify your existing balances or rates, model promotional or variable rates on current debts, include late fees or penalty charges, assess whether you would be approved, account for secured lending risk, or predict behaviour after the balances are cleared. It compares the figures you enter against one fixed-rate loan.

Frequently asked questions