Debt Consolidation Calculator

Debt consolidation means replacing multiple debts with a single new loan, ideally at a lower interest rate. The goal is to reduce the total interest paid, simplify payments (one bill instead of several), and potentially lower the monthly payment. Common consolidation options include personal loans from banks or credit unions, balance transfer credit cards (with a 0% introductory APR), and home equity loans or lines of credit. Source: CFPB, What do I need to know about consolidating my debt?

Applying for a consolidation loan results in a hard credit inquiry, which may lower your score by a few points temporarily. However, consolidation can improve your score over time by reducing your credit utilization ratio (if consolidating credit card debt onto a personal loan removes the revolving balance) and by helping you make consistent on-time payments. Closing old credit card accounts after consolidation can reduce your available credit and raise utilization, which may hurt your score. Source: CFPB.

Generally no. Refinancing federal student loans into a private loan permanently removes access to federal protections: income-driven repayment plans, federal deferment and forbearance options, Public Service Loan Forgiveness eligibility, and IDR loan forgiveness. This trade-off is rarely worth a lower interest rate unless you have a stable high income, no plans to pursue forgiveness, and are confident you will not need flexible repayment options. Source: StudentAid.gov.

A balance transfer card lets you move existing credit card balances to a new card, often with a 0% introductory APR for 12-21 months. This can eliminate interest entirely during the promotional period. The trade-offs: balance transfer fees (typically 3-5% of the transferred amount), high rates after the promo ends, and approval depending on creditworthiness. Balance transfers work best when you can pay off the balance during the promo period and the transfer fee is less than the interest you would have paid. Source: CFPB.

Mathematically, the avalanche method (highest APR first) always minimizes total interest paid and is the faster path to debt freedom in dollar terms. The snowball method (smallest balance first) provides quicker psychological wins as individual debts are eliminated, which can help maintain motivation. Both are better than paying only minimums. Research on behavioral economics suggests snowball may lead to better follow-through for some people despite its higher mathematical cost. Use avalanche if you are disciplined; snowball if you need early wins to stay motivated.

You are not required to close credit card accounts after consolidating their balances with a personal loan. Keeping the accounts open (with a zero or low balance) can help your credit score by maintaining available credit and credit history length. However, if having open credit lines tempts you to accumulate more debt, closing them may be the wiser behavioral choice. Discuss the credit implications with your lender or a non-profit credit counselor.