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Debt Consolidation

Compare your current debt path vs. consolidating into a personal loan — including origination fees. Free, instant, and accurate.

✓ Tested formula & cited sources Checked against independent sources · Oct 11, 2026 Private: runs in your browser

See it worked out

Example — Consolidation Loan — New Interest Rate 11.99 %, Origination Fee 2.00 %:

Monthly Cost Increase

$389.04/mo

Raises your payment by $389.04/mo, but judge it on the lifetime line: after fees you save $3,206 overall. A lower monthly payment stretched over a longer term can cost more — the rate alone doesn't tell you.

Total Lifetime Savings (after fees)

$3,206

Current Total Monthly Payment

$200.00/mo

New Consolidated Monthly Payment

$589.04/mo

Current Plan — Total Interest

$3,775

Consolidation Plan — Total Interest

$438

Origination Fee (2.00%)

$130

Current Plan — Estimated Payoff

4yr 4mo

Consolidation Loan — Term

1yr

Current Plan — Total Cost (Principal + Interest)

$10,275

Consolidation — Total Cost (Principal + Interest)

$7,068

The formula

New Monthly Payment = P × r / [1 − (1+r)^−n] · Savings = Current Total Interest − New Total Interest − Origination Fee

Origination Fee
The Hidden Cost
Break-Even
When Consolidation Pays Off
Weighted Rate
Your Blended Interest Rate

Worked example — Consolidation Loan — New Interest Rate 11.99 %, Origination Fee 2.00 %

Monthly Cost Increase = $389.04/mo

Full explanation ↓

How Debt Consolidation Works

New Monthly Payment = P × r / [1 − (1+r)^−n] · Savings = Current Total Interest − New Total Interest − Origination Fee

The consolidation loan uses standard amortization to calculate the new payment. True savings must subtract the origination fee from the interest saved — a step most basic calculators miss entirely. This gives you the real bottom line, not just a rosy monthly payment comparison.

Origination Fee
The Hidden Cost — Personal loans typically charge 1-5% of the loan amount upfront, either deducted from the disbursement or added to the loan balance. A $10,000 loan with a 3% origination fee costs $300 immediately. Always factor this into the real break-even analysis to get an accurate picture of your true savings.
Break-Even
When Consolidation Pays Off — Divide the total upfront cost (origination fee) by the monthly savings to find the break-even month. If the fee is $300 and you save $75/month, you break even in 4 months. After that, every month of savings is pure financial gain.
Weighted Rate
Your Blended Interest Rate — If you have three debts at 22%, 19%, and 10%, your weighted average rate depends on the balance at each rate. Consolidation is most effective when your new rate is significantly below the weighted average of all existing debts. The new rate does not need to be lower than every individual rate to be beneficial.
Debt consolidation combines multiple high-interest debts into one loan at a lower rate, but origination fees and extended terms can reduce or negate the savings

Worked Examples

Sarah has three debts: a credit card with $6,500 at 23% APR ($200/mo), another card with $3,200 at 20% APR ($150/mo), and a personal loan with $4,000 at 10% APR ($100/mo). She is considering a consolidation loan at 12% APR over 5 years with a 2% origination fee.

newRate = 12 · newTermMonths = 60 · originationFee = 2

Monthly savings: about $139/mo. Total lifetime savings: approximately $497 after the $274 origination fee.

At 12% APR, Sarah's new rate is well below her weighted average of ~18.5%. Consolidating saves her roughly $139/month in payments, but because she was on track to pay off her current debts in about 52 months while the new loan runs a fixed 60 months, most of the interest-rate benefit is offset by the longer term — netting only about $497 in total lifetime savings after the 2% origination fee. She should compare a shorter consolidation term (e.g. 48 months) to capture more of the rate advantage, and verify the new rate with at least 3 lenders before committing.

Understanding the Result

Debt consolidation works when your new interest rate is meaningfully lower than the weighted average rate you are currently paying across multiple debts. However, the origination fee is the often-overlooked variable that can flip the math. A $15,000 personal loan with a 3% origination fee ($450) requires you to save at least $450 in interest before you break even — and that is $450 you would not owe if you kept paying the original debts separately.

A lower rate that significantly extends your repayment term can also result in you paying more total interest even with a lower monthly payment. This tool exposes that trade-off clearly so you can make an informed decision.

How to Use

  1. Add each existing debt with its current balance, interest rate (APR), and the monthly payment you actually make.
  2. Enter the consolidation loan's new interest rate, term (in months), and origination fee percentage.
  3. Review the side-by-side comparison of monthly payment, total interest paid, and payoff timeline for both strategies.
  4. Check the "Total Lifetime Savings after fees" figure — this is the true bottom line that tells you whether consolidation actually saves you money.

Quick Reference

Good Credit RateLowest personal-loan rates go to good-to-excellent credit; compare several lenders
Fair / Poor Credit RateOften 20%+ — may not save over existing debts
Origination Fee Range1–8% of loan amount; 2–5% is most common
Break-Even TestLifetime interest saved > origination fee = good deal
Term WarningLonger terms lower payments but increase total interest paid

Frequently Asked Questions

When does debt consolidation NOT make sense?
Consolidation is counterproductive in several situations: (1) The new interest rate is not significantly lower than your current weighted average rate; (2) The origination fee is large relative to the interest savings, extending the break-even period too far; (3) You extend the term so much that higher total interest costs outweigh the monthly payment reduction; (4) You are already close to paying off the existing debts. Always check the "Total Lifetime Savings" figure rather than just looking at the monthly payment reduction, which can be misleading when the term is extended.
How does consolidation affect my credit score?
A consolidation loan triggers a hard credit inquiry that typically lowers your score by a few points for a short time. However, paying off multiple revolving credit card balances significantly reduces your credit utilization ratio, which accounts for 30% of your FICO score. Most borrowers see a net positive credit score impact within 6 months, provided they keep the paid-off cards open and do not accumulate new balances on them.
What credit score do I need for a personal loan?
Lenders set their own cutoffs, but the lowest personal loan rates generally go to borrowers with good-to-excellent credit (roughly the high 600s and above), while rates for fair or poor credit can climb well above 20%, which may make consolidation less beneficial or even counterproductive. Check pre-qualification offers from multiple lenders — these typically use a soft inquiry that does not affect your credit score.
How accurate is this calculator for real-world use?
This calculator uses standard mathematical formulas and provides estimates based on the inputs you enter. For financial decisions, always verify results with a qualified professional and check against official statements or lender-provided figures which may include additional factors not modeled here.

Common Uses

  • •Compare your current total debt payments against a consolidation loan to see if rolling multiple debts into one actually saves you money.
  • •Evaluate whether the interest savings from consolidation outweigh the origination fees and extended repayment term.
  • •Determine the break-even point where consolidation fees are recouped through lower monthly interest charges across all debts.

Pro Tips

  • →Always compare the total cost (interest + fees), not just the monthly payment. A lower monthly payment over a longer term can cost more in total interest, even at a lower rate.
  • →Check for prepayment penalties on both your existing debts and the new consolidation loan. Some lenders charge fees if you pay off early, which can erode your savings.
  • →Your credit score determines your consolidation rate. Check your score before applying — rates can range from 7% (excellent credit) to 25%+ (poor credit). Improving your score by even 20 points can save thousands.
  • →Use the Debt Payoff (Avalanche/Snowball) calculator first to see if keeping your current debts and accelerating payments beats consolidating — sometimes the math favors staying the course.

Limitations to Know

  • •This calculator assumes you make all payments on time and exactly as scheduled. Late fees, missed payments, or rate changes (on variable-rate loans) are not modeled.
  • •Each current debt keeps its own payment until it is paid off; payments freed up by a cleared debt are not redirected to the others (a debt-payoff strategy would do better). A debt whose payment does not cover its monthly interest is rejected.
  • •The origination fee is modeled as added to the loan balance. Some lenders deduct it from the disbursement or charge it separately — verify with your lender how the fee is applied.
  • •Debt consolidation does not eliminate debt — it restructures it. Without addressing spending habits, many borrowers re-accumulate credit card debt within 2 years.
  • •For secured consolidation loans (home equity, HELOC), failing to pay can result in losing your home. This calculator treats all debts as unsecured and does not model collateral risk.

Sources

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Cite this calculator

TheCalcUniverse. "Debt Consolidation Calculator — Is It Worth It?." TheCalcUniverse, 2026, https://thecalcuniverse.com/finance/debt-consolidation-calculator/. Accessed October 25, 2026.

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