Debt Consolidation Calculator
This calculator helps you analyze the potential benefits of combining multiple debts into a single loan. Enter your existing debt information and consolidation loan terms, and we'll calculate your potential interest and monthly payment savings.
Fill in your debt and loan information, then click the "Calculate" button
Your Debts
| # | Debt Name | Balance | Minimum Payment | Interest Rate | |
|---|---|---|---|---|---|
| 1. | $ | $ | % | ||
| 2. | $ | $ | % | ||
| 3. | $ | $ | % |
Consolidation Loan Details
(自动设置为债务总额)
What is Debt Consolidation?
Debt consolidation is the process of combining multiple debts (such as credit cards, personal loans, etc.) into a single loan. The goal is to obtain a lower interest rate, thereby reducing total interest costs, or to lower monthly payments, making debt more manageable.
Typically, debt consolidation is achieved through personal loans, home equity loans, or balance transfer credit cards. This approach is particularly suitable for those with multiple high-interest debts, especially credit card debt.
How Annual Percentage Rate (APR) Affects Debt Consolidation
Annual Percentage Rate (APR) includes the loan's interest rate and various fees, making it a key indicator for comparing different loan options. In debt consolidation, obtaining a lower APR than your existing debts is one of the most important factors.
Even if the consolidation loan has a longer repayment term, a lower APR can help you save significantly on interest. However, extending the repayment term may mean paying more total interest, even if monthly payments are reduced.
Pros and Cons of Debt Consolidation
Advantages
- Simplifies financial management with just one loan to manage
- May lower overall interest rate, reducing interest costs
- May lower monthly payments, improving cash flow
- Can help improve credit score if payments are made on time
Disadvantages
- May extend repayment period, increasing total interest costs
- May include loan application fees, origination fees, or transfer fees
- May require good credit to obtain favorable interest rates
- If consolidating with a secured loan, your assets may be at risk
Common Debt Consolidation Options
Personal Loan
Unsecured loan, typically with lower interest rates than credit cards and fixed terms. Suitable for those with good credit seeking a fixed repayment plan.
Balance Transfer Credit Card
Offers an initial 0% or low interest rate period, suitable for those who can pay off debt within the promotional period. Be aware of transfer fees and higher rates after the promotional period ends.
Home Equity Loan
Uses home equity as collateral, typically offering lower interest rates. But puts your home at risk, so should be considered carefully.
How to Use This Calculator?
- Enter information for each of your debts, including balance, interest rate, and minimum monthly payment
- Set the terms for your consolidation loan, including interest rate, term, and any associated fees
- Click the "Calculate" button to see detailed analysis and comparison
- Review the results to evaluate if debt consolidation benefits your financial situation
Remember, the calculator provides estimated results. Actual loan terms may vary depending on your credit status and lending institution. It's advisable to consult a financial advisor before making a decision.
Frequently Asked Questions
Will debt consolidation affect my credit score?
There may be a short-term impact, especially if credit inquiries are required. However, in the long run, if you make payments on time and reduce your overall debt, debt consolidation can actually improve your credit score.
Can I consolidate my debt with poor credit?
Lower credit scores may make it difficult to obtain favorable interest rates, but there are still debt consolidation options designed for those with poor credit. Consulting a non-profit credit counseling agency may be helpful.
What's the difference between debt consolidation and debt settlement?
Debt consolidation combines multiple debts into one, while debt settlement involves negotiating with creditors to pay less than what you owe. Debt settlement typically has a more severe negative impact on your credit score.
Should I choose the longest repayment term to lower my monthly payment?
While a longer repayment term can lower monthly payments, it usually increases total interest costs. The best strategy is to choose the shortest repayment term you can afford to reduce total costs.