Use this free debt consolidation calculator to calculate the consolidation of debts such as credit card debts, auto loans, and more based on the real cost.
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What is Debt Consolidation?
Debt consolidation is the process of taking out one new loan to pay off many smaller debts. Think of it like cleaning out your closet, instead of having clothes scattered everywhere, you put them all in one organized place.
With debt consolidation, you are taking all your scattered payments and combining them into one monthly payment, usually with a lower interest rate.
Debt Consolidation Calculator Terms Explained
Current Balance
The current balance is the total amount you owe on a particular debt obligation at present. This figure includes the original borrowed amount (principal) plus any accumulated interest that hasn’t been paid yet. When you calculate your debt consolidation options, you need to have an accurate current balance for each debt to determine the total amount you need to consolidate.
Interest Rate (APR)
The Annual Percentage Rate, commonly abbreviated as APR, is the yearly cost of borrowing money, expressed as a percentage of the loan amount. This rate not only includes the interest you pay but also certain fees associated with the loan. In the debt consolidation calculator, the APR helps determine how quickly your debt grows when you make only minimum payments.
Different types of debt carry different APRs—credit cards normally have higher rates (often 15-25%) while mortgages and some personal loans feature lower rates. The weighted average of your current debts’ APRs compared to a potential consolidated loan’s APR demonstrates one of the primary benefits of debt consolidation: securing a lower overall interest rate to reduce the cost of carrying your debt.
Monthly Payment
The monthly payment is the amount you regularly pay toward each debt obligation every month. This payment covers the interest that accrued during the previous month, with the remainder going toward reducing the principal balance. Accurate monthly payment information helps the calculator determine your current financial commitment and compare it to potential consolidated payment options.
Your total monthly payment commitment across all debts influences your monthly cash flow and budget. If you are considering debt consolidation, comparing your current combined monthly payments against the proposed consolidated payment helps determine if consolidation will provide immediate monthly relief, which is a primary motivation for consolidating debt.
Weighted APR
The weighted APR is the average interest rate across all your debts, adjusted for the size of each debt. Rather than a simple average, a weighted APR gives more influence to larger debts in the calculation. This provides a more accurate picture of your overall interest burden.
For example, if you have a $10,000 credit card debt at 20% APR and a $5,000 personal loan at 10% APR, your weighted APR would be closer to 20% than 10% because the higher-rate debt represents a larger portion of your total debt. The debt consolidation calculator automatically performs this complex calculation to help you understand your current situation.
Consolidated APR
The consolidated APR is the proposed interest rate for your new consolidated loan that would replace all your existing debts. This single rate normally falls below your weighted APR, which creates the opportunity for you to save. In the calculator, this rate is used to determine your new monthly payment and calculate potential savings.
Financial institutions determine consolidated APR based on many factors like your credit score, income, debt-to-income ratio, and current market conditions. While the calculator uses a typical rate for illustration purposes, actual offered rates may vary.
New Monthly Payment
The new monthly payment shows what you would pay each month under the consolidated loan terms. This payment depends on the total consolidated balance, the consolidated APR, and the loan term (typically 3-5 years for personal consolidation loans). The calculator uses these factors to compute a payment that would fully pay off your debt within the specified timeframe.
This new payment amount represents one of the most tangible benefits of debt consolidation—simplifying multiple payments into a single, predictable monthly obligation. Beyond convenience, this new payment amount helps you evaluate whether consolidation works with your budget.
Monthly Savings
Monthly savings are the difference between your total current monthly payments and your proposed consolidated monthly payment. This figure immediately shows you the potential monthly budget relief that consolidation might provide. Positive monthly savings indicate that consolidation could free up cash flow for other financial priorities.
Monthly savings provide immediate budget relief, it’s worth considering that consolidated loans usually have structured repayment periods. This means you might pay less monthly but more in total interest if the consolidated loan extends your repayment timeline beyond your current debt payoff trajectory. The calculator helps visualize this tradeoff by highlighting the monthly cash flow improvement.