Debt Consolidation Calculator

What is Debt Consolidation?

Debt consolidation is the process of combining multiple debts into a single loan, typically with a lower interest rate and a single monthly payment. This can simplify your finances and potentially save you money on interest charges.

How Debt Consolidation Works

You take out a new loan (consolidation loan) and use it to pay off all your existing debts. Instead of making multiple payments to different creditors, you make one payment to your consolidation loan lender. The key benefit is often a lower overall interest rate, which can reduce both your monthly payment and total interest paid.

Benefits of Debt Consolidation

• Lower monthly payment: By extending the term or securing a lower rate, you may reduce your monthly obligation
• Simplified finances: One payment instead of multiple makes budgeting easier
• Lower interest rate: Consolidation loans often have lower rates than credit cards
• Fixed payment schedule: Know exactly when you'll be debt-free
• Potential credit score improvement: Paying off revolving debt can boost your score

Things to Consider

• Fees: Some consolidation loans charge origination or application fees
• Longer term: Lower monthly payments often mean paying more interest over time
• Spending habits: Consolidation won't help if you continue accumulating new debt
• Secured vs unsecured: Some loans require collateral (like a home equity loan)
• Credit requirements: You typically need good credit to qualify for the best rates

Alternatives to Consolidation

Debt consolidation isn't the only option. Consider debt avalanche or snowball methods, balance transfer credit cards, or working with a non-profit credit counseling agency for a debt management plan.