Your Current Debts

Consolidation Loan Details

Understanding Debt Consolidation

Debt consolidation combines multiple high-interest debts—like credit cards, personal loans, or medical bills—into a single loan with (ideally) a lower interest rate. This simplifies your finances and can save you significant money over time.

When Consolidation Makes Sense

  • ✅ Your new loan has a lower APR than your current weighted average
  • ✅ You can qualify for a reasonable loan term (not excessively extended)
  • ✅ You're committed to not accumulating new debt after consolidating
  • ✅ The monthly payment fits comfortably in your budget

Potential Downsides to Consider

  • ⚠️ Longer terms may reduce monthly payments but increase total interest paid
  • ⚠️ Origination fees (typically 1-8%) can offset interest savings
  • ⚠️ Hard credit inquiry may temporarily lower your score by 5-10 points
  • ⚠️ Secured loans (using home/car as collateral) risk asset loss if you default

How to Maximize Your Savings

After consolidating, focus on these strategies:

  • Set up automatic payments to avoid late fees and potentially qualify for rate discounts
  • Redirect the money saved from lower payments toward extra principal payments
  • Build an emergency fund to avoid relying on credit cards for unexpected expenses
  • Monitor your credit report to ensure old accounts are reported as "paid in full"
What types of debt can I consolidate?

Most unsecured debts qualify: credit cards, personal loans, medical bills, payday loans, and some private student loans. Secured debts like mortgages or auto loans typically require separate refinancing.

How does consolidation affect my credit score?

Short-term: A hard inquiry may cause a small, temporary dip. Long-term: Lower credit utilization and consistent on-time payments typically improve your score significantly within 6-12 months.

Your Results

Enter your debts to see potential savings
Current Monthly
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New Monthly
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Interest Saved
$0
Payoff Time
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Applying for a new loan triggers a hard inquiry, which may temporarily reduce your credit score by 5-10 points. However, successfully managing your consolidated loan can improve your score long-term.

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Debt Consolidation Strategies That Actually Work

Choosing the right consolidation method depends on your credit profile, debt types, and financial goals. Here's how to evaluate your options:

1. Personal Loan Consolidation

Best for: Borrowers with good credit (670+ FICO) seeking fixed rates and predictable payments. Unsecured personal loans typically offer APRs from 6% to 36% with terms of 2-7 years.

2. Balance Transfer Credit Cards

Best for: Those with excellent credit (720+) who can pay off debt within the 0% introductory period (typically 12-21 months). Watch for 3-5% balance transfer fees.

3. Home Equity Loans/HELOCs

Best for: Homeowners with significant equity seeking the lowest rates. Warning: Your home serves as collateral—default risks foreclosure.

4. Debt Management Plans (DMPs)

Best for: Those struggling with payments. Non-profit credit counseling agencies negotiate lower rates with creditors. Typically requires closing credit accounts and paying a small monthly fee.

Key Calculation Factors

Our calculator uses the standard amortization formula to project payments:

Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
• P = Principal loan amount
• r = Monthly interest rate (annual rate ÷ 12)
• n = Total number of payments (loan term in months)

Remember to factor in origination fees (typically 1-8% of loan amount) when comparing total costs. A loan with a slightly higher APR but no fees may save more than a "low-rate" loan with high upfront costs.