Debt Consolidation Calculator

Before you consolidate, try this for 3 months: Stop using credit cards entirely. Make the new consolidated payment amount (from the calculator above) toward your current debts using the debt avalanche method (highest interest rate first). If you can't do this for 3 months, you're not ready for consolidation—you have a spending problem, not a debt structure problem.

— David Chen, CFA | "I helped a friend consolidate $40k. Six months later, they had $15k in new credit card debt. The loan didn't fix the behavior."

1. Extending Your Payoff Timeline: Sure, a 7-year consolidation loan cuts your monthly payment from $800 to $450. But you're now paying $37,800 total instead of $28,800. Lower payment ≠ cheaper debt.
2. Ignoring Fees: "0% balance transfer!" sounds great until you see the 3-5% balance transfer fee. On $20k, that's $600-$1,000 upfront.
3. Consolidating Secured Debt into Unsecured Debt: Never consolidate a car loan (secured) into a personal loan (unsecured). If you default, they can't repo your car on an unsecured loan, but they CAN garnish your wages AND sue you.
4. Forgetting About the Origination Fee: Many personal loans charge a 1-6% origination fee. On a $25k loan, that's $250-$1,500 that gets deducted from the loan amount (you get $23,500 but owe $25,000).

Scenario: Sarah has $25,000 in credit card debt across 4 cards, averaging 18% interest. She's paying $800/month.

Option 1: Keep paying $800/month → Debt-free in 37 months → Total paid: $29,600 (including interest)

Option 2: Consolidate into a 5-year loan at 10% → $531/month → Debt-free in 60 months → Total paid: $31,860

Option 3: Consolidate into a 3-year loan at 10% → $807/month → Debt-free in 36 months → Total paid: $29,052

✅ Winner: Option 3. Same timeline as Option 1, but saves $548. Option 2 is a trap—lower payment, but you pay $2,260 MORE overall.

Does debt consolidation hurt my credit score?

Short answer: Temporarily, yes. Long answer: Applying for a consolidation loan triggers a hard inquiry (drops your score 5-10 points temporarily). However, if consolidation helps you pay on time and lowers your credit utilization ratio, your score can actually improve within 6-12 months. The key is to NOT rack up new debt on the cards you just paid off.

What's the difference between debt consolidation and debt settlement?

Consolidation: You take out a new loan to pay off multiple debts in full. You still owe 100% of what you borrowed, just at a (hopefully) lower interest rate. Settlement: You negotiate to pay less than you owe (e.g., $5,000 to settle a $10,000 debt). This tanks your credit score and has tax consequences. Consolidation is the less-damaging option.

Can I consolidate debt with bad credit?

Yes, but your options are limited and often not worth it. With a credit score below 580, banks will offer you high interest rates (12-24%) that may not be better than your current debt. Alternatives: Nonprofit credit counseling (debt management plans), 0% balance transfer cards (if you qualify), or the debt snowball/avalanche method (pay off debts yourself without a loan).

Should I use a personal loan or balance transfer card for debt consolidation?

Depends on your discipline and timeline. Balance transfer card (0% APR for 12-18 months) is cheaper IF you can pay it off before the promo ends. If not, you're stuck with 20%+ APR on the remaining balance. Personal loan has a fixed rate (usually 6-15%) and predictable payments, but you pay interest from day one. Pro tip: If you can't pay off the debt in 12 months, go with the loan.