# Debt Consolidation Calculator

> Compare your current debts with a consolidated loan to see potential savings

**Category:** Finance
**Keywords:** debt, consolidation, loan, interest, savings, credit card, payment, finance, calculator
**URL:** https://complete.tools/debt-consolidation-calculator

## How it calculates

The Debt Consolidation Calculator uses the following formula to compare current debt payments with those of a consolidated loan: 

Total Monthly Payment = (Debt Amount × Interest Rate ÷ 12 ÷ (1 - (1 + Interest Rate ÷ 12) ^ -Number of Payments))

Where: 
- Debt Amount is the total sum of all current debts. 
- Interest Rate is the annual percentage rate (APR) of the debts expressed as a decimal. 
- Number of Payments is the total number of monthly payments over the loan term. 

The calculator first calculates the monthly payments for each current debt and then aggregates them. It then computes the monthly payment for the consolidated loan using the same formula, allowing users to see the difference in their financial obligations. This calculation offers insight into potential savings from consolidation.

## Who should use this

1. Financial analysts assessing client debt portfolios for optimal consolidation strategies. 
2. Loan officers evaluating loan options for clients with multiple debts. 
3. Personal finance advisors helping individuals strategize debt repayment plans. 
4. Small business owners analyzing their business debt to streamline repayments.

## Worked examples

Example 1: A user has two debts: a $10,000 credit card debt at 18% APR and a $5,000 personal loan at 12% APR. The monthly payment for the credit card is calculated as follows:

Monthly Payment = (10,000 × 0.18 ÷ 12 ÷ (1 - (1 + 0.18 ÷ 12) ^ -12)) ≈ $929.53. 

For the personal loan:
Monthly Payment = (5,000 × 0.12 ÷ 12 ÷ (1 - (1 + 0.12 ÷ 12) ^ -12)) ≈ $451.24. 

Total Current Monthly Payment = $929.53 + $451.24 = $1,380.77.

If they consolidate into a new loan of $15,000 at 15% APR over 5 years:
Monthly Payment = (15,000 × 0.15 ÷ 12 ÷ (1 - (1 + 0.15 ÷ 12) ^ -60)) ≈ $356.31.

Total savings = $1,380.77 - $356.31 = $1,024.46 monthly.

Example 2: A user has a $20,000 car loan at 7% APR for 5 years. Monthly Payment = (20,000 × 0.07 ÷ 12 ÷ (1 - (1 + 0.07 ÷ 12) ^ -60)) ≈ $396.24. If they consolidate this with a $10,000 credit card debt at 18% APR into a $30,000 loan at 9% over 6 years:
Monthly Payment = (30,000 × 0.09 ÷ 12 ÷ (1 - (1 + 0.09 ÷ 12) ^ -72)) ≈ $573.75. Total savings = $396.24 + monthly payment of credit card debt - $573.75.

## Limitations

1. The calculator assumes fixed interest rates for all debts, which may not reflect variable rates that can change over time. 
2. It does not account for additional fees associated with consolidating loans, such as origination fees or closing costs. 
3. The tool assumes all debts are paid off in full through consolidation; it does not consider partial payments or ongoing credit card usage post-consolidation. 
4. It does not factor in potential changes in credit score due to debt consolidation, which can affect future borrowing capability.

## FAQs

**Q:** How does changing the interest rate affect my total savings?


**A:** A lower interest rate on the consolidated loan compared to existing debts reduces the total interest paid over time, thus increasing potential savings.


**Q:** Can I consolidate loans with different repayment periods?


**A:** Yes, but the calculator assumes a single repayment period for the new consolidated loan, which may affect total interest costs.


**Q:** What happens if I miss a payment on the consolidated loan?


**A:** Missing a payment may result in late fees and could negatively impact your credit score, which could affect future borrowing opportunities.


**Q:** Is it beneficial to consolidate if my current debts have low interest rates?


**A:** Consolidation may not be beneficial if current debts have low interest rates, as it could lead to higher overall costs or extended repayment terms.

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*Generated from [complete.tools/debt-consolidation-calculator](https://complete.tools/debt-consolidation-calculator)*