Loan Consolidation Calculator
✦ Finance & MoneyUse this free loan consolidation calculator to see how combining multiple debts into a single personal loan changes your monthly payment, interest cost, and payoff timeline.
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- ✓ Formula and sources shown
The formula
Weighted average interest rate, loan amortization and net savings
R_{\text{w}} = \frac{\sum (B_i \cdot r_i)}{\sum B_i} \quad\Big|\quad PMT = P \cdot \frac{r(1+r)^N}{(1+r)^N - 1} \quad\Big|\quad \Delta S = \sum \text{Int}_i - (\text{Int}_{\text{new}} + \text{Fee})R_w is the balance-weighted interest rate of existing debts. P is the consolidated loan amount (including financed origination fees). PMT is the fixed monthly payment. Net lifetime savings compares total remaining interest across all debts against the new loan's total interest and fees.
Calculating it by hand
- Enter each of your current debts with its outstanding balance, annual interest rate (APR), and monthly payment.
- Add up to 8 separate debts (credit cards, personal loans, retail credit, or auto financing).
- Set your new consolidation loan repayment term in months (e.g. 36, 48, or 60 months).
- Enter the interest rate (APR) offered by the consolidation lender.
- Open the Advanced section to specify any origination fee percentage and whether it is financed or paid upfront.
- Review your weighted average rate, monthly payment change, total lifetime savings, and payoff timeline difference.
Worked examples
Consolidating 3 high-interest credit cards ($15,700 total balance @ 20.22% weighted APR)
Current debts: Card A ($6,500 @ 23.99%, $195/mo), Card B ($4,200 @ 21.49%, $130/mo), Personal Loan ($5,000 @ 14.25%, $175/mo).Total current balance = $6,500 + $4,200 + $5,000 = $15,700.00.Total current monthly payments = $195 + $130 + $175 = $500.00/mo.Weighted average rate = [($6,500 × 23.99) + ($4,200 × 21.49) + ($5,000 × 14.25)] / $15,700 = 20.22%.Remaining interest on each current debt at its own payment: Card A 56 months / $4,315.06; Card B 49 months / $2,129.08; Personal Loan 36 months / $1,143.72 — $7,587.86 in total, debt-free in 56 months.New consolidation loan: $15,700 for 36 months @ 10.99% APR with a 3.0% financed origination fee ($471.00).Total loan principal borrowed = $15,700 + $471 = $16,171.00.New monthly payment = $16,171 × [0.009158 × (1.009158)^36] / [(1.009158)^36 − 1] = $529.34/mo.New total interest over 36 months = (36 × $529.34) − $16,171.00 = $2,885.24.Total consolidation cost (interest + fee) = $2,885.24 + $471.00 = $3,356.24.Net lifetime savings = $7,587.86 − $3,356.24 = $4,231.62, with debt paid off 20 months sooner (36 vs 56).
Total lifetime savings: $4,231.62 | Monthly payment: $529.34 (+$29.34/mo) | Debt-free 20 months earlier.
Lowering the monthly payment with a 60-month term (cash flow vs total cost)
Current debts: retail card $8,000 @ 24.99% paying $280/mo (44 months, $4,279.32 interest) and auto loan $12,000 @ 7.90% paying $300/mo (47 months, $1,973.04 interest).Combined: $20,000 at a 14.74% weighted rate, $580.00/mo, debt-free in 47 months, $6,252.36 of remaining interest.Consolidation loan offer: $20,000 for 60 months @ 9.50% APR with zero fees.New monthly payment = $20,000 × [0.007917 × (1.007917)^60] / [(1.007917)^60 − 1] = $420.04/mo.Monthly payment savings = $580.00 − $420.04 = $159.96/mo freed up in the household budget.New total interest over 60 months = (60 × $420.04) − $20,000 = $5,202.40.Lifetime saving = $6,252.36 − $5,202.40 = $1,049.96, although the debt now lasts 13 months longer (60 vs 47).
Total lifetime savings: $1,049.96 | Monthly cash flow freed: $159.96/mo | Term: 13 months longer.
The term-extension trap — a $131 lower payment that costs $3,261 more
Same three debts as Example 1: $15,700 at a 20.22% weighted rate, $500/mo, $7,587.86 of remaining interest, 56 months.Offer: 72 months at 17.99% APR with a 3% ($471) origination fee financed → principal $16,171.New monthly payment = $368.73 — $131.27 less than today.New interest = 72 × $368.73 − $16,171 = $10,377.56; with the $471 fee the cost is $10,848.56.Lifetime change = $7,587.86 − $10,848.56 = −$3,260.70, and the debt lasts 16 months longer (72 vs 56).
Extra lifetime cost: $3,260.70 | Monthly payment: $368.73 (−$131.27/mo) | Term: 16 months longer — the calculator shows a term-extension warning.
Methodology
How loan consolidation actually works
Consolidating debts combines several payments into one, but a lower monthly payment only saves money if the new rate, the term and any origination fee together cost less than the interest your current debts would still charge — which this calculator works out debt by debt.
Read sources and limitsWhat rate does a consolidation loan have to beat?
When you carry multiple balances across credit cards and personal loans, each balance accrues interest at its own rate. To know whether a consolidation loan offer is mathematically advantageous, you must calculate your balance-weighted average interest rate rather than a simple arithmetic average — $6,500 at 23.99%, $4,200 at 21.49% and $5,000 at 14.25% average 20.22%, not 19.91%.
The weighted average multiplies each debt's principal by its interest rate, sums those values, and divides by your total outstanding balance. If a new consolidation loan carries an interest rate lower than your weighted average rate, you reduce the ongoing cost of interest across your portfolio. Conversely, if the new rate exceeds your weighted average, consolidation increases your total borrowing cost regardless of monthly payment size.
Can a lower consolidation payment cost more in total?
A major motivation for loan consolidation is improving monthly cash flow. However, stretching an existing balance over a longer repayment term reduces your monthly payment while substantially increasing total lifetime interest, because the balance is outstanding for more months — sometimes enough to cancel the benefit of a lower rate.
For example, paying off $15,000 of credit-card debt at 22% over 24 months takes $778.17 a month and costs $3,676 in total interest. Moving that balance into a 60-month personal loan at 13% drops the payment to $341.30, but five years of interest at the lower rate total $5,478 — $1,802 more. Always evaluate both monthly cash flow and lifetime borrowing cost.
How do origination fees change the real cost of consolidating?
Most personal loan and debt consolidation lenders charge an origination fee ranging from 1% to 8% of the loan amount. This fee covers loan processing and underwriting, and it directly affects your true cost of borrowing: a 3% fee financed into a 36-month loan at 10.99% lifts the APR to 13.05%.
Under the Truth in Lending Act (Regulation Z), lenders must disclose an annual percentage rate (APR) that incorporates these upfront finance charges into the annualized borrowing cost. If an origination fee is financed, it increases the initial loan principal and accumulates interest over the life of the loan. Ensure your net interest savings exceed the origination fee before proceeding.
Is federal student loan consolidation the same as debt consolidation?
Consumer debt consolidation through personal loans is fundamentally different from the U.S. Department of Education's Direct Consolidation Loan program for federal student loans. A personal loan replaces your debts with new private credit; a Direct Consolidation Loan stays a federal loan, with federal rules attached.
Federal Direct Consolidation combines eligible federal loans into a new loan with a fixed interest rate equal to the weighted average of your existing loans rounded up to the nearest one-eighth of one percent. Federal consolidation preserves vital borrower protections, including income-driven repayment (IDR) plans, Public Service Loan Forgiveness (PSLF), and statutory deferment options. Refinancing federal student loans into a private consolidation loan permanently forfeits these federal protections.
Loan Consolidation questions
How much can I save by consolidating my loans?
Your savings depend on the difference between your current weighted average interest rate and the new consolidation loan APR, plus any origination fees. Borrowers consolidating high-interest credit card debt (typically 20% to 28% APR) into a fixed-rate personal loan (often 9% to 14% APR) frequently save hundreds or thousands of dollars in lifetime interest while establishing a fixed payoff date.
What is a good interest rate for a debt consolidation loan?
A good consolidation loan interest rate is any rate that is meaningfully lower than your existing debts' weighted average interest rate after accounting for origination fees. In the current market, fixed personal loan rates for good-to-excellent credit profiles generally range from 7% to 15%, compared to average credit card rates exceeding 21%.
Does loan consolidation hurt your credit score?
Applying for a consolidation loan causes a small, temporary dip in your credit score due to the hard credit inquiry. However, using the loan to pay off revolving credit card balances dramatically lowers your credit utilization ratio, which is a major factor in credit scoring models. Over time, making consistent on-time payments on the installment loan typically improves credit health.
What is the difference between debt consolidation and debt settlement?
Debt consolidation combines multiple loans into a single new loan that you repay in full, protecting your credit standing. Debt settlement involves negotiating with creditors to accept less than the full balance owed, which requires falling delinquent on payments, incurs severe credit score damage, and can generate taxable cancellation of debt income.
Can I consolidate federal student loans with personal loans?
While private lenders allow refinancing federal and private student loans into a private consolidation loan, doing so permanently forfeits federal protections. Federal Direct Consolidation Loans through StudentAid.gov allow consolidating federal student loans while preserving income-driven repayment plans and loan forgiveness eligibility.
How does an origination fee affect loan consolidation savings?
An origination fee (commonly 1% to 8%) is an upfront finance charge deducted from loan proceeds or added to the balance. A $15,000 loan with a 5% fee costs $750 upfront. For consolidation to be beneficial, your total interest savings over the loan term must exceed the fee amount.
What happens if my new interest rate is higher than my weighted average rate?
If the new loan rate is higher than your weighted average rate, you will pay more in total interest over an identical repayment term. Consolidating into a higher rate only reduces monthly payments if the repayment term is significantly stretched, which increases total borrowing cost.
Is it better to lower monthly payments or pay off debt faster?
If you are struggling with monthly cash flow or at risk of missing minimum payments, lowering monthly payments via consolidation provides essential financial relief. However, if your budget allows, keeping payments high or choosing a shorter consolidation term maximizes total interest savings and achieves debt freedom faster.
Source notes
Method, sources & limitations
Every figure on this page comes from the formula above applied to the values you enter. Nothing is estimated from market data, and no result is a forecast. These are the sources behind the method and any fixed figures it uses:
- CFPB — What to consider when consolidating debt
- FTC — Debt Consolidation and Credit Counseling
- CFPB — Regulation Z / Truth in Lending (12 CFR Part 1026, App. J)
- Federal Student Aid — Direct Consolidation Loans
Educational information only. Results are estimates produced from the assumptions you enter, and are not financial, tax, legal or medical advice. Check anything that matters against a qualified professional and the cited sources.