Debt Consolidation Calculator
Current Debts
| Debt Name | Balance | Interest Rate (%) | Minimum Payment | Actions |
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Consolidation Loan Details
Debt Consolidation Calculator
Our debt consolidation calculator helps you determine if consolidating your debts into a single loan could save you money. Compare your current debt payments with a potential consolidation loan to see monthly savings and total interest costs.
What is Debt Consolidation?
Debt consolidation is the process of combining multiple debts into a single loan, typically with a lower interest rate. This strategy can simplify your finances by reducing multiple monthly payments to just one, potentially saving money on interest and helping you pay off debt faster. Common types of debt that can be consolidated include credit cards, personal loans, medical bills, and other unsecured debts.
How to Calculate Debt Consolidation Savings?
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n - 1]Where P = Principal loan amount, r = Monthly interest rate, n = Number of payments. For example, consolidating $10,000 in debt at 18% APR into a 12% APR loan over 5 years could save hundreds in interest and reduce monthly payments.
Frequently Asked Questions
When should I consider debt consolidation?
Consider debt consolidation when you have multiple high-interest debts, can qualify for a lower interest rate, have steady income to make payments, and want to simplify your finances. It's most beneficial when you can secure a significantly lower interest rate than your current debts.
What types of debt can be consolidated?
Most unsecured debts can be consolidated, including credit card balances, personal loans, medical bills, payday loans, and store credit cards. Secured debts like mortgages and auto loans typically cannot be included in debt consolidation.
Will debt consolidation hurt my credit score?
Initially, debt consolidation may cause a small, temporary dip in your credit score due to the credit inquiry. However, it can improve your score over time by reducing your credit utilization ratio and helping you make consistent payments.
What are the risks of debt consolidation?
Risks include potentially paying more in total interest if you extend the repayment term, the temptation to accumulate new debt on cleared credit cards, and possible fees associated with the consolidation loan. It's important to address the underlying spending habits that led to the debt.
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