Debt consolidation isn’t automatically a good deal, it depends entirely on your current rate compared to the new loan’s rate, term, and any origination fee. This calculator runs both scenarios side by side using your actual numbers, rather than a generic estimate.
What “blended average APR” means
If you’re consolidating multiple debts with different rates, you’ll need a single representative rate for the comparison. A rough approach: weight it toward whichever debt has the largest balance, since that debt drives most of your current interest cost. This is a simplification, not a substitute for adding up your actual debts individually, but it’s a reasonable starting point.
Why the term length changes everything
A longer loan term almost always means a lower monthly payment, but it can also mean paying more in total interest, even at a lower rate, simply because you’re paying interest for more months. Try a few different term lengths above to see this tradeoff directly rather than assuming “longer term, lower payment” is automatically the better deal.
Frequently Asked Questions
Is debt consolidation the same as debt settlement?
No, these are different things. Consolidation combines your existing debts into one new loan that you pay back in full, typically at a lower rate. Settlement involves negotiating to pay less than you owe, which usually damages your credit significantly and can have tax implications. This calculator only models consolidation.
Will debt consolidation hurt my credit score?
There’s often a small, temporary dip from the new credit inquiry and account. Over time, consolidation can actually help your score if it lowers your credit utilization and you make consistent on-time payments on the new loan.
What credit score do I need to qualify for a good consolidation rate?
This varies significantly by lender and country, but generally, the higher your credit score, the lower the rate you’ll be offered. If your score isn’t strong, run the numbers above using a realistic rate for your situation, a consolidation loan at a similar or higher rate than what you’re already paying usually isn’t worth it once fees are included.