Debt Consolidation Calculator

Debt consolidation can be a good idea if you qualify for a lower interest rate than your current debts and you have the discipline not to rack up new debt. It simplifies payments and can save money on interest. However, it's not right for everyone — use our calculator above to see if the math works for you.

Initially, opening a new consolidation loan may cause a small dip in your score due to the hard inquiry. However, if you make on-time payments and reduce your credit utilization, your score typically improves over time.

Look for an APR lower than the weighted average of your current debts. For credit cards averaging 20-24% APR, a consolidation loan at 8-15% represents significant savings. The lower the rate, the more you save.

Debt consolidation uses a personal loan to pay off debts. A balance transfer moves debt to a new credit card with a promotional 0% APR period. Balance transfers work for smaller amounts you can pay off during the promo period; consolidation loans are better for larger amounts.

Generally, no. Closing old credit card accounts can hurt your credit score by reducing your total available credit (increasing your "utilization ratio") and shortening the average age of your credit history. Instead, keep the accounts open with a zero balance to preserve your score.

Specifically, look for origination fees. These are one-time fees lenders deduct from your loan upfront, ranging from 1% to 8%. If you borrow $10,000 with a 5% origination fee, you’ll only receive $9,500 in your bank account, but you'll owe interest on the full $10,000. Always factor this "net" amount into your savings calculation.

The trap happens when you pay off your cards with a loan but continue to spend, ending up with both a loan payment and new credit card balances. To avoid this, experts recommend removing saved cards from digital wallets and shopping sites and strictly following a budget for at least three months before consolidating.