This debt consolidation calculator compares the cost of all your current debts with consolidating...show more instructions
How Much Can You Save By Consolidating Your Debt?
Debt piled high?
Wish there was a way out?
One possible solution is a debt consolidation loan. But will it actually save you money?
This Debt Consolidation Calculator will help you compare the costs of all your current debts – mortgages, credit cards, auto loans, student loans, and more – with that of a debt consolidation loan. No more guessing on the best choice – you'll know with confidence!
Related: 5 Rookie Financial Planning Mistakes That Cost You Big-Time (and what to do instead!) Explained in 5 Free Video Lessons
Debt Consolidation Loans
Debt consolidation loans are simple. They allow you to combine all of your debts into one single debt, so you can pay one lender – making the debt payoff process easier. But will you save money with a debt consolidation loan?
Whether debt consolidation saves or costs you money is simply a matter of crunching the numbers. Fortunately, the Debt Consolidation Calculator makes the process easy. Compare consolidating versus not, and find out which method is most advantageous.
Debt Consolidation Disadvantages
Even though consolidating all of your existing credit commitments into a single monthly repayment might sound like a good idea, you must be aware of the potential disadvantages:
- Expense – Debt consolidation lenders charge fees. Make sure the new loan isn't going to cost you more than it saves.
- Savings – After all fees and expenses are accounted for, use the Debt Consolidation Loan Calculator above to determine if it will save you money over the long run.
- Amortization – Your new loan will have a different amortization schedule so check to see how long it will take to pay off your debt. If you extend the maturity then the lower payment may cost more in interest.
- Penalties – Are you going to pay penalties and charges for closing your existing loans?
- Band-Aide vs. Solution – Have you solved the overspending problems that caused the debt in the first place so that you don't get yourself into more debt?
- Best Solution – Have you considered the debt snowball/debt avalanche as an alternative solution that might produce better results?
You may want to keep your existing loans, even if the payments are higher. Remember that, in some cases, you may actually pay more in interest over time with your new debt consolidation loan.
Benefits Of Debt Consolidation
The good thing about consolidating your loans is you get a chance to lower your monthly payments and possibly save interest. You can structure the loan so that your monthly payments are affordable by spreading them over a longer term so it's easier to keep up. With only one payment to think about it should make budgeting easier.
4 Steps To Consolidate Your Debt
Step 1 – Gather Your Debt Details
Before you consolidate, you need to know the following for each credit type:
- Interest Rate
- Annual Fees
- Prepayment penalties
Step 2 – Explore Your Options
Now that you know how much debt you’re facing, it’s time to look at your options for consolidating your debt.
- Check to see if you are eligible for low credit card balance transfer rates.
- Consider applying for an unsecured line of credit (ULOC). A ULOC is similar to a credit card because the bank allows you to access an unsecured line of credit with an agreement from you that it will be paid back on time and with interest.
Shop around to see who offers the lowest interest rate with the most flexible payoff options. Always ask for quotes from different companies and look for a debt consolidation program that suits your needs.
After acquiring quotes from different lenders, go through them carefully (paying attention to the fine details) and choose the program that offers the best combination of low interest rate and low fees when compared to your current debts.
Step 3 – Apply For Debt Consolidation
Apply for the best consolidation program based on your research. Your application processing may take several days to several weeks so make sure you budget sufficient time.
Step 4 – Stick To Your Commitment
Get out of debt by changing your habits. You need to commit to your planned solution and stick to it. You should keep up with your payments so you will be able to pay off your loan. The trick is to pay as much as you can afford each month so you will get out of debt sooner.
Living Without Debt
Once you're out of debt, here are a few tips to keep you out!
- Avoid overspending on credit cards – Because they are so easy to use, credit cards can rack up debt faster than just about any other payment method. Only spend on credit cards what you can afford to pay the balance in full every month. Credit cards should only be used for transaction convenience – never to extend your purchasing power.
- Build an emergency fund – Having money in the bank encourages you to spend money you already have – no need to get a loan!
- Invest for retirement – Once you've paid off your debt, it's a great idea to start investing for retirement. With old age comes many costs – prepare now to ensure you don't slip back into debt later.
This loan consolidation calculator reveals exactly the right course of action. Don't make a financial decision without doing the math first. Making the right choice helps you escape debt sooner, enabling you to pursue many more worthwhile financial goals. Take action today!
Debt Consolidation Calculator Terms & Definitions
- Debt – Money that is owed.
- Loan Consolidation – The process of combining multiple loans into one loan.
- Credit Card – A card issued by a bank to be used for purchasing of goods or services through credit.
- Mortgage – A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
- Balance – The current outstanding balance of any of your loans.
- Payment – The process of paying a debt.
- Interest Rate – The percentage rate charged for borrowing money.
- Annual Fees – A yearly fee charged by creditors for the privilege of using a credit card.
- Debt Snowball – A debt repayment strategy for systematically paying off debts using the rollover method.
- Closing Costs – The costs incurred for finalizing debts, typically mortgages.
- Amortization – The paying off of debt in regular installments over a period of time.
- Loan Term – The period of time until the debt is completely paid off on a normal payment schedule.
- Principal – The amount owed on a loan, which could include compounded interest.
Related Credit Card Calculators For Debt Payoff
- Credit Card Comparison Calculator: Which credit card is the best deal?
- Credit Card Minimum Payment Calculator: How long will it take to pay off my credit card and how much will it cost me if I make only the minimum payments?
- Debt Snowball Calculator: How fast can the rollover method can get me out of debt and how much will I save?
- Credit Card Interest Calculator: How much of my credit card payment is interest and how much is principal?
- Credit Card Payoff Calculator: How long until I pay off my credit card debt using a variety of payment strategies? Includes printable amortization schedule.
- Credit Card Payment Calculator: Which repayment strategy will cost the least and get me out of debt the fastest?
- Debt Payoff Calculator: How much must I pay each month to be out of debt by any selected date?
- Debt Reduction Calculator (With Amortization Schedule): How fast can I get out debt and how much will I save by adding a fixed amount to each monthly payment?
- Debt Repayment Calculator: How fast can I get out debt and how much will I save by adding a one-time additional payment to principal?
- Debt Calculator: How long will it take to get out using my current payment plan?