How the comparison works
Example: $8,000 on a card at 24% with $250 payments, and $4,000 at 19% with $120 payments. Paying them as they are takes 4 years and 4 months and costs $6,630.12 in interest.
A 3-year loan at 11% with a 5% fee has to be $12,631.58 so that $12,000 reaches your cards. Its payment is $413.54 a month, $43.54 more than now, but interest and the fee total only $2,887.50. You'd save $3,742.62 and be debt-free 16 months sooner.
When consolidation helps, and when it doesn't
It helps when the new rate is clearly lower than what you pay now and you keep the payoff time the same or shorter. A lower monthly payment alone can be a trap: stretching $12,000 over 5 or 7 years can cost more in total than the cards would, even at a lower rate. Compare the total, not just the payment.
The fee matters too. Origination fees on personal loans often run 1% to 10% and are usually taken out of the loan, which is why this calculator borrows a little more. A 0% balance transfer card is another option, with a transfer fee of 3% to 5%, if you can clear the balance before the promotional rate ends. Whatever you choose, the savings only stick if the paid-off cards don't fill up again.
Frequently asked questions
Is debt consolidation a good idea?
It is when the new loan's rate, after fees, is lower than your current rates and you don't stretch the payoff much longer. Check the total interest and fee, not just the monthly payment.
Does debt consolidation hurt your credit?
Applying causes a small, temporary dip from the hard inquiry. Paying off cards lowers your credit utilization, which often raises your score over the following months, as long as you don't run the cards up again.
What rate do I need for consolidation to make sense?
Lower than the average rate on your debts by enough to cover the fee. With cards at 19% to 24%, a loan around 10% to 13% usually saves money over a similar term.
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