Debt Consolidation Savings Calculator
Debt consolidation replaces multiple debts with a single loan at a lower interest rate. This calculator compares your current total monthly payments and total remaining interest across multiple debts against a single consolidation loan covering the same total balance. Enter up to four current debts (balance, APR, remaining months), then enter the terms of your proposed consolidation loan to see whether consolidation saves money.
Current debts (leave unused rows at 0):
| Debt | Balance ($) | APR (%) | Months Left |
|---|---|---|---|
| 1 | |||
| 2 | |||
| 3 | |||
| 4 |
Proposed consolidation loan:
Debt consolidation formula
Current: M(i) = P(i)*r(i)*(1+r(i))^n(i) / ((1+r(i))^n(i)-1) for each debt; total interest = sum((M(i)*n(i)) - P(i)). Consolidation: M = TotalP * rc * (1+rc)^nc / ((1+rc)^nc - 1); total interest = M*nc - TotalP.
The blended rate is a weighted average by balance. Savings = current total interest - consolidation total interest. This ignores origination fees on the consolidation loan; subtract any fees from calculated savings.
When consolidation makes sense
Consolidation saves money when the new APR is meaningfully lower than the blended rate of existing debts, and when any origination fees are outweighed by the interest savings. The CFPB recommends comparing the total cost of all loans (APR plus fees over the full term) rather than just the monthly payment. A lower monthly payment with a longer term can cost more in total interest.
Frequently asked questions
What is debt consolidation?
Debt consolidation combines multiple debts into a single loan, ideally at a lower interest rate. The goal is to simplify payments and reduce total interest paid. Common methods include personal consolidation loans, balance transfer cards, and home equity loans.
How is a blended interest rate calculated?
The blended rate is the weighted average of your individual debt rates, weighted by their balances: (sum of balance * rate) / total balance. For example, $2,000 at 18% and $3,000 at 22% gives blended rate = (2000*18 + 3000*22) / 5000 = 20.4%.
When is consolidation not a good idea?
Consolidation is not beneficial if the new loan has a higher rate than your blended rate, or if fees exceed the interest savings. It also does not address spending habits that created the debt; without behavioral change, people often accumulate new debt on the paid-off accounts.
Does consolidation hurt my credit score?
Applying for a consolidation loan triggers a hard inquiry, which may temporarily lower your score. However, paying off revolving credit (credit cards) with installment debt (personal loan) typically improves your credit utilization ratio, which can raise your score over time.
Should I use a home equity loan for debt consolidation?
The CFPB cautions against using home equity to pay unsecured debt. Converting unsecured credit card debt to secured home equity debt means your home becomes collateral. If you default, you risk foreclosure, whereas defaulting on credit card debt does not put your home at risk.
Official sources
- CFPB: What is debt consolidation?
- FTC: Dealing with Debt.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.