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Read the guideDebt consolidation: what it does and who it may help
Debt consolidation means using a new loan to repay several existing debts, leaving you with one new repayment schedule. The goal may be simpler payment management, a lower borrowing cost, or a monthly payment that fits your budget. It moves debt into a different arrangement; it does not erase the amount you owe.
Who might consider consolidating debt?
Consolidation may be worth comparing if you have several balances and a new offer could improve the combined repayment cost. It can also simplify tracking multiple due dates. Before applying, list each balance, payment, rate, fees, and expected payoff timeline so you can compare the new arrangement with keeping the debts separate.
The payment needs to fit a sustainable budget. If ongoing spending exceeds income, replacing the loans alone will not solve the shortfall. The CFPB’s guide to consolidating credit card debt recommends reviewing your budget and the reason debts accumulated before taking on another loan.
A smaller payment can still mean a higher total cost
A lower rate may reduce interest, but extending repayment can offset that benefit. Compare the term and all fees alongside the monthly payment. Check whether an advertised rate lasts for the entire loan or is temporary. This calculator assumes one fixed rate throughout the new loan’s term and fees paid upfront.
For example, the calculator’s starting assumptions model $35,000 of existing debt with $1,100 monthly payments for four more years: $52,800 in remaining payments. A five-year loan at an illustrative 9% rate produces a payment of about $726.54. Including $800 in upfront fees, the modeled new repayment cost is about $44,393—a difference of $8,407. These figures are examples, not offers or guaranteed savings.
Understand which product you are comparing
A consolidation loan and a credit card balance transfer have different terms. A balance transfer may have a promotional rate followed by a higher rate and a transfer fee; that changing-rate structure is outside this calculator. Borrowing against home equity also changes the risk: converting unsecured balances into debt secured by your home can put your home at risk if you cannot repay it. The CFPB’s consolidation guide explains these product differences.
Consolidation is different from debt settlement
Debt settlement seeks an agreement to repay less than the amount owed. It is not the same as borrowing to pay creditors in full. Settlement programs may involve missed payments, added charges, credit damage, and collection activity. A credit counselor can instead help assess your budget and may discuss a debt management plan. Review the CFPB’s comparison of credit counseling, consolidation, and settlement to understand what a provider is actually offering.
Use the estimate as a starting comparison
Include only the balances and payments the new loan will replace. Convert the remaining payoff period to years by dividing months by twelve. The model treats existing debts as one constant combined payment for that period; separate payoff dates and changing credit card payments can make the real cost different. It does not calculate each existing account’s amortization or include penalties.
Compare several quoted terms, then check the results against your actual statements and the lender’s disclosures. If the new payment remains unaffordable, consider contacting your creditors about payment options or speaking with a reputable nonprofit credit counselor before committing to new borrowing.
