How to Use This Calculator
- 1
Enter Total Existing Loan Amount
Input the combined principal amount of all current loans you plan to consolidate.
- 2
Set Average Interest Rate of Existing Loans
Enter the average annual interest rate across all your existing debts.
- 3
Enter New Loan Amount
Input the total principal of the new consolidation loan (typically equal to existing debt).
- 4
Set New Interest Rate
Enter the annual interest rate for the new consolidated loan.
- 5
Set New Loan Term
Enter the repayment period for the new loan in months.
- 6
Review Savings and Costs
The calculator displays your New Monthly Payment, Interest on New Loan, Estimated Interest on Existing Loans, and Interest Savings. The insights panel shows the rate difference, daily cost, and total repayment breakdown.
Example Calculation
A borrower consolidates $35,000 in existing loans averaging 9% into a new 5-year loan at 5%.
Total Existing Loan Amount
$35,000
Average Interest Rate (Existing)
9%
New Loan Amount
$35,000
New Interest Rate
5%
New Loan Term
60 months
Results
New Monthly Payment
$660.49
Interest on New Loan
$4,629.59
Estimated Interest on Existing Loans
$15,750.00
Interest Savings
$11,120.41
Insights card shows rate difference, daily cost, and interest comparison breakdown.
Tips
Focus on APR Reduction
The primary benefit of consolidation is a lower rate. A 4-percentage-point reduction (e.g., 9% to 5%) on $35,000 over 60 months saves $11,120 in interest.
Watch the Term Length
A longer term lowers monthly payments but increases total interest. On a $50,000 loan at 5%, a 120-month term costs $13,639 in interest vs. $6,614 over 60 months.
Avoid New Debt After Consolidating
After consolidation, resist accumulating new debt on the freed-up credit lines. Running up new balances while paying the consolidation loan puts you in a worse position.
Account for Fees
Consolidation loans may include origination fees (1-6% of the loan). Factor these into the new loan amount to get an accurate comparison.
Evaluating Debt Consolidation
Managing multiple debts with different rates and due dates can be stressful and costly.
The Loan Consolidation Calculator helps you evaluate whether combining your debts into a single loan saves money.
For example, consolidating $50,000 in existing loans averaging 7% into a new loan at 5% over 120 months produces a payment of $530.33/month and saves an estimated $21,361 in interest.
How Consolidation Savings Are Calculated
The calculator compares the estimated interest on your existing loans against the actual interest on the new consolidated loan:
New Monthly Payment = (New Loan Amount x Monthly Rate) / (1 - (1 + Monthly Rate)^-Term)
Total Interest on New Loan = (New Monthly Payment x Term) - New Loan Amount
Estimated Interest on Existing Loans = Existing Amount x (Existing Rate / 12) x Term
Interest Savings = Estimated Existing Interest - New Loan Interest
Where:
Monthly Rateis the new annual interest rate divided by 12Termis the new loan term in months
Note: The existing loan interest is a simplified estimate using simple monthly interest.
Actual interest on amortizing loans varies, but this provides a useful comparison.
Worked Example: Consolidating $35,000 in Debt
A borrower has $35,000 in various debts averaging 9% annual interest.
They can get a consolidation loan for $35,000 at 5% over 60 months.
- Monthly interest rate (new): 5% / 12 = 0.4167% (0.004167)
- New monthly payment: ($35,000 x 0.004167) / (1 - (1.004167)^-60) = $660.49
- Total cost of new loan: $660.49 x 60 = $39,629.59
- Total interest on new loan: $39,629.59 - $35,000 = $4,629.59
- Estimated interest on existing loans: $35,000 x (0.09 / 12) x 60 = $15,750.00
- Interest savings: $15,750.00 - $4,629.59 = $11,120.41
By consolidating at a 4-percentage-point lower rate, the borrower saves over $11,120 in interest.
When Consolidation Makes Financial Sense
Consolidation works best when three conditions are met:
- Significant rate reduction — A drop of at least 2-3 percentage points makes a meaningful difference. On $35,000, moving from 9% to 5% saves $11,120 over 60 months.
- Manageable term length — Choose the shortest term you can afford. A 60-month term at 5% costs $4,630 in interest, while a 120-month term on the same $35,000 would cost $9,548 — more than double.
- Discipline after consolidating — The freed-up credit lines tempt many borrowers to accumulate new debt. Avoid this by closing or freezing cards you have paid off through consolidation.
Typical Interest Rate Spreads
Understanding rate differences helps you assess potential savings:
- Credit cards: Typically 20-25% APR — consolidating into a 6-10% personal loan yields massive savings
- Personal loans: 6-15% APR depending on credit score — refinancing may help if your credit has improved
- Auto loans: 5-8% APR — consolidation usually makes sense only if combined with higher-rate debt
- Student loans: Federal rates around 5-7% — consolidating federal loans into private loans sacrifices forgiveness and income-driven repayment options
Frequently Asked Questions
What is loan consolidation?
Loan consolidation combines multiple existing debts into a single new loan, ideally at a lower interest rate. This simplifies payments (one monthly payment instead of several) and can reduce total interest costs. For example, consolidating $35,000 at 9% average into a 5% loan saves $11,120 in interest over 60 months.
How does the calculator estimate existing loan interest?
The calculator uses a simplified estimate: Existing Loan Amount x (Annual Rate / 12) x Term in Months. This approximates interest as if the existing loans ran at simple monthly interest over the consolidation period. Actual interest on amortizing loans would differ, but this provides a useful comparative benchmark.
When does consolidation not make sense?
Consolidation may not be beneficial if the new rate is not meaningfully lower, if extending the term increases total interest beyond current costs, if origination or closing fees are high, or if you would lose benefits like federal student loan forgiveness by consolidating into a private loan.
Can I consolidate different types of loans?
Yes, you can typically consolidate credit cards, personal loans, auto loans, and student loans into a single loan. However, mixing federal and private student loans means losing federal protections like income-driven repayment and loan forgiveness. Weigh the benefits carefully.