How this calculator works
The current balance is simulated month by month using a weighted APR and current payment. That payoff is compared with a fixed consolidation loan, including its origination fee.
What makes consolidation useful
Consolidation may reduce interest, provide a fixed payoff date, or simplify several bills into one. It does not erase debt, and a lower payment can cost more when it comes from a much longer term.
Real-world example
A $20,000 balance at a 20% weighted APR may cost substantially more than a three-year loan at 10%, even after a 2% fee. The result depends on maintaining the current payment and avoiding new balances.
Common mistakes
- Comparing payment instead of total cost.
- Omitting origination fees.
- Reusing paid-off credit cards and increasing total debt.
- Pledging collateral without considering the added risk.
When to use this calculator
Use it after receiving a real consolidation quote. Compare the result with avalanche, snowball, and balance-transfer strategies before applying.
FAQ
Does consolidation reduce debt?
No. It replaces or combines balances; savings occur only when the new borrowing costs and behavior improve the payoff.
Why include an origination fee?
The fee is a real borrowing cost and can offset savings from a lower APR.
What is a weighted APR?
It is an approximate rate weighted by each current balance. A debt-by-debt payoff calculator is more precise.