Debt Consolidation Calculator

Debt consolidation combines multiple high-interest debts—such as revolving credit cards, store accounts, and medical bills—into a single structured installment loan with one fixed monthly payment. When executed strategically, consolidation replaces variable interest rates of 20% to 29% with a fixed interest personal loan at 9% to 14%, substantially accelerating principal debt reduction.

However, consolidation only creates genuine wealth savings if the net mathematical cost is lower. Two critical pitfalls must be evaluated: upfront origination fees and term-length extension. Many personal loan lenders charge upfront origination fees ranging from 1% to 8% of the loan amount, which are deducted from the payout or added to the principal. A consolidation loan must generate sufficient interest savings to comfortably exceed these upfront transaction fees.

The second trap is term extension. If you stretch a credit card balance that could have been eliminated in 2 years into a 5-year (60-month) personal loan, you may end up paying more total interest dollars over the life of the loan despite having a lower nominal APR percentage.

Finally, debt consolidation treats the symptom of debt, not the behavioral cause. Consolidating credit cards to zero balances creates large amounts of newly available credit. Without strict budgetary discipline to avoid recharging those cleared credit cards, consumers risk doubling their debt load. Closing or locking paid-off cards prevents relapse.