People consider debt consolidation for many reasons, including replacing multiple, high-interest monthly payments with a single one at a lower rate. Consolidating debt into one fixed-rate loan might save you money, simplify payments and improve your debt-to-income ratio in the eyes of future lenders. Our Personal Debt Consolidation Calculator can help you decide whether a consolidated loan might be worth your while.
Debt Consolidation Calculator Definitions
Loan balance – The amount you still owe on a given loan.
Loan payment – The monthly amount you currently pay as part of your loan contract.
Credit card balance – Your outstanding balance via your credit card agreement.
Credit card rate – Annual interest rate paid on outstanding credit card balances, per your agreement.
Credit card payment – Your monthly bill based on your outstanding balance and annual interest rate. To compare this to a fixed-rate loan, extend your credit card balance over the same number of months as the loan.
Interest rate – The proposed interest rate for your new consolidation loan.
Upfront costs – Any fees the lender adds to the loan amount, including appraisal and loan-origination fees.
Points – Your lender may ask you to pay points in exchange for a lower interest rate. These points are actually pre-paid interest. Instead of paying the interest over the life of the loan, points are a way to pay that amount up front at the inception of the loan. Points typically equal 1% of the loan amount, and they’re rolled into your closing costs.1 Some points are tax-deductible.
Rate earned on saving – This is the comparative interest amount you could have earned by saving money instead, typically 2 to 5% in the short term.
Income tax rate – This compilation of your annual state and federal taxes helps determine what you could save in income tax if you were to consolidate debt via a home equity loan.
Loan type – Compare advantages before consolidation. Home equity loans typically offer lower, tax-deductible interest, along with higher fees. Personal loans usually have lower fees but higher interest rates.