Question 1

Should I consolidate my debt?

Accepted Answer

Debt consolidation makes sense when you can qualify for a new loan at a meaningfully lower interest rate than your current average. If your current debts carry rates of 18–25% (typical for credit cards) and you can secure a personal loan at 10–14%, consolidation will likely save you significant money in interest. Run the numbers in this calculator first — if net savings after fees are positive and you can handle the new monthly payment, consolidation is worth considering.

Question 2

How do I know if consolidating my debt will actually save me money?

Accepted Answer

The key number is net savings — the difference in total cost between staying on your current payment path and taking the consolidation loan, after subtracting any origination fees. If net savings are positive, consolidation saves you money overall. A lower monthly payment alone is not enough: stretching a loan over a longer term can reduce monthly payments but increase total interest paid. This calculator shows both figures so you can make an informed decision.

Question 3

Does debt consolidation hurt your credit score?

Accepted Answer

Applying for a consolidation loan typically causes a temporary dip of 5–10 points due to the hard credit inquiry. However, if you use the loan to pay off credit cards, your credit utilization ratio drops significantly, which can improve your score over time. As long as you make on-time payments on the new loan and avoid running up balances on the freed-up cards, your credit score should recover and may improve within 6–12 months.

Question 4

What is a break-even period for debt consolidation fees?

Accepted Answer

The break-even period is the number of months it takes for your interest savings to outweigh the upfront fees you paid to get the consolidation loan. For example, if you pay a $500 origination fee and save $50 per month in interest, your break-even is 10 months. This calculator shows your exact break-even month in the Full Analysis tab, so you can verify the loan pays off before you would realistically pay it off or refinance again.

Question 5

Is a lower monthly payment always better with debt consolidation?

Accepted Answer

No. A lower monthly payment can actually cost you more money if it comes from extending the loan term rather than lowering the interest rate. For example, consolidating $20,000 at the same interest rate over 10 years instead of 5 years halves the monthly payment but roughly doubles the total interest paid. Always compare total cost — not just monthly payment — before deciding. The side-by-side comparison table in this calculator shows both figures.

Question 6

Can I use a personal loan to consolidate credit card debt?

Accepted Answer

Yes — using a personal loan to consolidate high-rate credit card debt is one of the most common and effective uses of debt consolidation. Credit cards typically charge 18–29% APR, while personal loans for borrowers with good credit often range from 7–16% APR. Rolling multiple credit card balances into a single fixed-rate personal loan simplifies payments, lowers the interest rate, and sets a definite payoff date. This calculator is designed specifically for this comparison.

Question 7

What is the avalanche method and why does this calculator use it?

Accepted Answer

The avalanche method is a debt payoff strategy where you direct any extra payments toward the highest-interest-rate debt first, while paying minimums on all others. Once the highest-rate debt is gone, you roll that payment to the next-highest, and so on. It is mathematically the fastest and cheapest way to pay off multiple debts. This calculator uses the avalanche method to model your current debt path, which ensures a fair comparison — if your current path is optimized, the consolidation savings shown are real, not inflated by assuming inefficient minimum-only payments.

Question 8

What is the difference between debt consolidation and a balance transfer?

Accepted Answer

A balance transfer moves existing credit card balances onto a new card with a 0% introductory APR (typically 12–21 months), usually charging a transfer fee of 3–5%. A debt consolidation loan provides a fixed-rate, fixed-term installment loan you use to pay off multiple debts at once. Balance transfers are typically better for smaller amounts (under $15,000–$20,000) that you can pay off during the 0% promo period. Consolidation loans are better for larger amounts, longer payoff timelines, or mixed debt types (credit cards plus personal loans). Use the Balance Transfer Calculator to compare these two options directly.

	Current Debts	Consolidation	Difference
Monthly Payment	$375	$357	−$18
Time to Pay Off	12y 8m	5 years	-92 mo
Total Interest	$17,384	$4,218	−$13,166
Total Cost	$34,084	$21,419	−$12,665
Avg. Interest Rate	17.39%	10.26%	—
Loan Fees	—	$501	—

Month	Payment	Principal	Interest	Balance	Total Paid
1	$375	$133	$242	$16,567	$375
12	$375	$150	$225	$15,001	$4,500
24	$375	$172	$203	$13,057	$9,000
36	$375	$198	$177	$10,828	$13,500
48	$375	$227	$148	$8,273	$18,000
60	$175	$49	$126	$6,769	$21,103
72	$175	$61	$114	$6,103	$23,203
84	$175	$75	$100	$5,282	$25,303
96	$175	$93	$82	$4,269	$27,403
108	$110	$47	$63	$3,227	$29,297
120	$110	$59	$51	$2,585	$30,617
132	$110	$75	$35	$1,777	$31,937
144	$110	$94	$16	$763	$33,257

Will Consolidating Your Debt Save Money?

Your Current Debts

Consolidation Loan

Remaining Balance Over Time

Your Current Debts

Consolidation Loan

Side-by-Side Comparison

Balance Over Time

Payment Schedule

About This Analysis

How to Use This Calculator

Related Resources

Related Calculators

Also Consider

Quick Reference

Insights