Consolidation is a rate cut, not a debt cut
The loan doesn't reduce what you owe — it repackages it (plus a fee) at a hopefully-lower rate. That's genuinely valuable when the rate drop is real: converting 24% card compounding into a 12% fixed schedule is a big win. It's worthless or negative when the "win" is just a longer term. Our comparison shows the current plan (avalanche method — see the method guide), the offer as quoted, and the offer at your current budget — the only row that's apples-to-apples. And the iron rule after consolidating: the emptied cards stay at zero, or you'll end up servicing both debts at once.
How this calculator works
An honest comparison needs both paths fully computed, so the engine does exactly that:
Your current path
each debt simulated at its own APR and payment → total interest + payoff date
The consolidated path
M = P · r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1) on the combined balance + any fee
The verdict compares measured totals, because a lower rate on a longer term can still cost more — the exact trap covered in our consolidation guide.
Worked example
Three cards — $6,000 at 22.99%, $4,500 at 19.99%, and $3,500 at 24.99% ($14,000 total) — versus one 36-month consolidation loan at 12% with a 3% origination fee.
| Cards, interest if kept (minimums) | $11,912 |
|---|---|
| Cards, payoff time | 73 months |
| Consolidation payment | $478.95 |
| Consolidation total interest (incl. fee) | $3,242 |
| Interest saved | $8,670 |
Rolling $14,000 of card debt into a 12% loan cuts the interest from $11,912 to $3,242 and turns a 73-month grind into a fixed 36-month payoff — because a real rate cut plus a firm end date is exactly when consolidation works. The trap is behavioral: if the paid-off cards get run up again, you now owe both. Consolidation is a rate cut, not a debt cut. See when it helps vs. hurts.
Frequently asked questions
Does debt consolidation save money?
Only when the new APR (including origination fee) is meaningfully below your blended current rate. The calculator’s bottom row makes the fair comparison: same monthly budget pointed at the new loan. If that row doesn’t beat your current plan, the offer isn’t a deal.
Why compare at the same monthly budget?
Because lenders advertise lower PAYMENTS, which usually come from longer TERMS — you can pay less per month and far more overall. Holding your total budget constant isolates what the interest-rate change is actually worth.
What APR do consolidation loans charge?
Typically 8–20% for good credit (personal loans), plus origination fees of 1–8% often deducted upfront. Balance-transfer cards offer 0% for 12–21 months with a 3–5% fee — a different structure the same logic applies to.
Does consolidation hurt my credit?
Briefly (hard inquiry, new account), then usually helps: card utilization drops to zero and an installment loan diversifies the mix. The real risk is behavioral — re-running the cards up and carrying both debts.
Consolidation loan vs. balance transfer — which is better?
Transfers win if the balance fits the promo window and you can clear it in time (compute the required payment in our credit-card payoff calculator, goal mode). Loans win for larger balances and longer timelines with a fixed schedule.
Should I use home equity to consolidate?
Cheapest rate, biggest risk: you convert unsecured card debt into debt secured by your house. Miss card payments and your credit suffers; miss home-equity payments and foreclosure is possible. Model it in the cash-out refinance calculator and treat it as a last resort, not a rate optimization.
Related calculators
- Debt Snowball Calculator — Compare the snowball and avalanche payoff methods side by side across all your debts.
- Credit Card Payoff Calculator — How long your payment takes — or the payment that hits your target date — with a +$50/+$100 ladder.
- Personal Loan Calculator — Payment, total interest, and full schedule for any personal loan — plus early-payoff savings.
- Cash-Out Refinance Calculator — What the cash really costs per dollar borrowed — plus the 80% LTV check and your new payment.
Disclaimer: Educational purposes only — not financial advice or a loan offer. See our Terms of Use.