Debt Consolidation Calculator
Calculate monthly savings and total lifetime interest reduction from consolidating multiple debts into one loan.
How It's Calculated
Formula
\overline{\text{APR}} = \frac{\sum \text{Balance}_i \times \text{APR}_i}{\sum \text{Balance}_i} \qquad \text{Savings} = \text{Payment}_{\overline{\text{APR}}} - \text{Payment}_{\text{consolidated}}This calculator compares your existing debts against a single proposed consolidation loan. Since individual debts often carry different repayment terms that BRD-level inputs don't specify, this calculator uses a clear, explicit modeling choice: it computes the balance-weighted average APR across all your existing debts, then compares the amortized payment at that weighted rate against the amortized payment at the new consolidated rate — both computed over the SAME proposed consolidation term, so the comparison isolates the effect of the rate change. Monthly savings is the difference between those two payments, and the total lifetime interest reduction is that monthly savings multiplied by the number of payments over the consolidation term.
Worked Examples
Two debts: $10,000 at 22% APR, $5,000 at 18% APR, consolidated at 10% over 5 years
- Total balance: 10,000 + 5,000 = $15,000
- Weighted average APR: (10,000×22 + 5,000×18) / 15,000 = 310,000 / 15,000 ≈ 20.67%
- Payment at 20.67% over 5 years (60 payments): ≈ $402.99/month
- Payment at 10% over 5 years: ≈ $318.71/month
- Monthly savings: 402.99 − 318.71 ≈ $84.29; lifetime savings: 84.29 × 60 ≈ $5,057
A worse deal: $10,000 at 5% APR, consolidated at 15% over 5 years
- Since the proposed consolidation rate (15%) is higher than the existing debt's rate (5%), the new payment is actually higher
- Monthly savings and total lifetime savings both come out negative — a clear signal this particular consolidation offer isn't beneficial
Frequently Asked Questions
Why does this use a 'weighted average APR' instead of each debt's own term?
Individual repayment terms for each existing debt aren't part of this calculator's inputs. Rather than guessing at terms that weren't provided, this calculator makes an explicit, transparent modeling choice: it compares the balance-weighted average rate of your existing debts against the new rate, both amortized over the same proposed consolidation term — an apples-to-apples rate comparison.
Can the savings be negative?
Yes. If the proposed consolidation rate is higher than your existing debts' weighted average rate, or the new term is significantly longer, the new payment can come out higher — a negative result is a valid, meaningful signal that the consolidation offer isn't actually favorable.
What if I only have one debt to consolidate?
That's a valid case — the 'weighted average APR' simply equals that single debt's own APR, and the comparison becomes a straightforward rate-and-term refinance of that one balance.
Does this account for consolidation fees?
No — this calculator compares monthly payments and interest cost only. If your consolidation loan has origination fees or other upfront costs, factor those in separately when deciding whether the total savings justify the switch.