Debt Consolidation Calculator
See how consolidating multiple debts into one loan saves money and simplifies payments.
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Frequently Asked Questions
Is debt consolidation a good idea?
Consolidation is good when: you qualify for a meaningfully lower interest rate, you will not accumulate new debt on paid-off cards, the new monthly payment fits your budget, and the total cost is lower. Warning signs: extending the payoff period so much that you pay more total interest, consolidating into a secured loan (risking your home) for unsecured debt, and not addressing the spending habits that caused the debt.
Debt consolidation vs debt settlement: what is the difference?
Consolidation combines debts into one new loan at (ideally) a lower rate — you pay 100% of what you owe. Debt settlement negotiates with creditors to accept less than the full balance — damages your credit severely (stays 7 years), you may owe income tax on forgiven amounts, and it only makes sense if you are already severely delinquent. Consolidation is almost always the better choice for people still current on payments.
What credit score do I need for a debt consolidation loan?
Good rates (under 12%) typically require 700+ credit score. Fair rates (12-18%) require 640-700. Below 640, consolidation rates may not be lower than your current debt rates, eliminating the benefit. Options for lower credit: balance transfer to a 0% card (requires 670+), credit union personal loans (more flexible than banks), or a debt management plan through a nonprofit credit counselor.
Consolidating $15,000 of card debt: what changes and what does not
Consolidation replaces several debts with one loan. It helps only if the new rate is lower, the term is not stretched too far, and the cards do not refill. The table takes $15,000 across three cards at an average 24% and compares the card minimums with a personal loan at 12% and 18%.
| Option | Monthly payment | Months to pay off | Total interest |
|---|---|---|---|
| Cards, minimum payments (1% + interest) | $300 falling to $25 | 344 (28.7 years) | $28,887 |
| Cards, fixed $498 a month | $498 | 47 | $8,190 |
| Personal loan, 12%, 3 years | $498.21 | 36 | $2,936 |
| Personal loan, 12%, 5 years | $333.67 | 60 | $5,020 |
| Personal loan, 18%, 5 years | $380.90 | 60 | $7,854 |
The 12%, 3 year loan and the fixed $498 on the cards cost the same per month; the loan saves $5,254 of interest and 11 months purely through the rate.
Worked example: the stretch trap
A borrower paying $450 a month on cards at 24% is offered a 5 year loan at 18% with a $381 payment. The payment falls by $69, which feels like relief, but the interest is $7,854 against about $9,970 for staying the course on the cards at $450 (56 months): a saving of only about $2,100 for four extra months of debt and a lower payment. The same borrower approved at 12% over 3 years pays $48 more a month than now and saves over $6,000. The rate matters more than the payment; the term should be as short as the budget allows.
Balance transfer instead of a loan
A 0% balance transfer card for 15 to 21 months with a 3% to 5% fee is the cheapest consolidation for anyone who can clear the balance inside the promotion: $15,000 at 0% with a 4% fee ($600) paid off at $867 a month over 18 months costs $600 total. The risk is the cliff: any balance left when the promotion ends reverts to 25% to 30%, and a missed payment can void the 0% rate early. It also needs a credit limit high enough to hold the balance, which usually means a score above 700.
Home equity and 401(k) loans
A HELOC at 8% to 9% is cheaper than any unsecured option, but it converts unsecured card debt into debt secured by the house. A 401(k) loan charges interest to yourself at about prime plus 1%, has no credit check, and must be repaid within 60 to 90 days if you leave the job, with the unpaid balance taxed and penalized. Both are reasonable for disciplined borrowers and dangerous for anyone who might run the cards back up.
The behavior problem
Studies of consolidation borrowers find that a large share carry new card balances within two years, ending with the loan plus the cards. The consolidation that works comes with a budget that explains how the debt happened and closes the gap, the cards left open for the credit score but not carried in a wallet, and the freed-up monthly amount redirected to savings the day the loan is paid off.