Debt Consolidation Calculator: Is One Loan Cheaper?

Disclaimer: This calculator is provided for educational and estimation purposes only and does not constitute formal financial advice.

The question behind the calculator

Once a household is carrying more than one balance, two distinct questions compete for the same extra money. One is about order — which balance to attack first — answered by the debt snowball vs. avalanche calculator. The other is about structure — whether to keep several balances alive at their own rates, or to close them all with one new installment loan at a single rate and fixed term, usually with an origination fee. That second question is what this calculator answers, and it is not settled by the rate alone.

Keeping debts separate means every open debt accrues interest first, then receives its own minimum payment, then whatever the household budget has left cascades down the payoff order to one debt at a time — the same avalanche simulation the snowball comparison uses, held at the optimal order so the “keep separate” number is the cheapest that plan can achieve. Consolidation means borrowing the sum of every balance plus the fee, and paying one fixed amortized payment for the whole term. The comparison is then reported three ways that do not always move together: the monthly payment, the number of months, and the all-in dollar cost (interest plus fee).

How the “keep separate” plan is simulated

Every month, each open debt accrues interest on its current balance:

Every open debt then receives its own minimum payment. Whatever the single total monthly debt budget did not spend on minimums — the “extra” — goes entirely to the single highest-priority debt still open, in avalanche order (highest APR first, ties broken by smaller balance, then by debt number). If the extra needed to finish one debt is smaller than what is available, the remainder falls through to the next debt in the same month rather than sitting idle, and the moment a debt is paid off its minimum becomes additional extra for whatever is still open. Total interest paid is the running sum of every $I_t$ until every balance reaches zero, or until 30 years pass without that happening, which the calculator reports as unreachable.

How the consolidation loan is priced

The consolidation loan borrows more than the household owed. With total balance $B$, fee percent $f$, rate $r$, and term $n$ months:

$M$ is zero when $P$ is zero, and $P/n$ when $r$ is zero. Lifetime consolidation interest is $M \times n - P$, and the all-in cost shown in the results is principal plus interest — equivalently, $M \times n$ — so the fee is counted as money paid, not as a footnote. The advertised “interest saved” figure is

so a fee of even a few percent directly subtracts from the gross interest gap before a rate difference is credited.

A worked example: $19,800 across four balances, 9% for 3 years

The calculator’s default household is the same four-debt household from the snowball vs. avalanche comparison, now with a consolidation offer on the table. The four debts owe $19,800 at a balance-weighted average APR of 20.82% and require $765 in combined minimum payments, leaving a $900 monthly debt budget — $135 of extra to direct each month under the optimal order:

Keeping them separate at $900 a month under the optimal (avalanche) order — Debt 2 → Debt 3 → Debt 4 → Debt 1 — clears every balance in 2 yr 4 mo for $5,376 in interest. A 3-year consolidation loan at 9% with a 3% origination fee borrows $20,394 — the $19,800 plus a $594 fee — for a fixed payment of $648.52 a month, costing $2,953 in interest over 3 years, or $23,347 all-in versus $25,176 all-in keeping them separate. That is $1,830 saved all-in, even though consolidation runs 8 months longer than the separate plan:

Two things are worth noticing before the next tables. First, consolidation is cheaper overall despite being slower: the fee and the extra eight months are more than covered by swapping a 20.82% weighted rate for 9%. Second, the two savings numbers are not the same — gross interest saved is $2,424, all-in saved is $1,830 — and the gap between them is exactly the $594 fee, which this calculator counts as money paid rather than as a disclosure footnote.

The rate has to beat the weighted APR and the fee

Holding the same $19,800 household, 3-year term, and 3% fee, only the consolidation rate moves:

Every row borrows the same $20,394 for 36 months, so the payoff time does not move — only the interest does. Below about 13% on this household, consolidation saves all-in even at the 3% fee; above it, the rate gap is no longer enough and consolidation costs more than keeping the debts separate, even though every row’s monthly payment is a few hundred dollars lower than $900. That last sentence is the whole hazard: a lower monthly payment alone does not imply a lower lifetime cost, and this household would need to pass that comparison explicitly rather than trust it by feel.

The fee comes straight off the saving

Holding the same $19,800 household, 9% rate, and 3-year term, only the origination fee moves:

Every point of fee is a point of principal the household did not owe and now pays interest on. On a 3-year 9% loan, each percentage point of fee costs roughly $200–$230 of the consolidation’s saving here — which is why a “1–5%” fee that looks modest in disclosure terms is actually the first subtraction the comparison has to clear.

The term stretches the payment down and the interest up

Holding the same $19,800 household, 9% rate, and 3% fee, only the term moves:

A short term preserves consolidation’s advantage on this household — a 2-year 9% loan actually finishes sooner than keeping the debts separate and still saves $2,816 all-in. A long term reverses it: at 5 years the monthly payment is $477 cheaper than $900, but the loan collects $5,007 in interest over 60 months instead of $2,953 over 36, and the deal costs $225 more all-in than doing nothing. By 7 years it costs $2,386 more. The pattern is deliberately starker than the rates-and-fees table because compounding multiplies: more months is more times interest is charged, even at the same lower rate.

When the household rate already beats the loan

Not every household needs consolidation. Take the same four debts and $19,800 of balances but at modest rates — 6%, 7%, 6.5%, and 7% — and a 9% consolidation offer:

A 9% loan cannot help a household already averaging 6.85%, fee or not — and no fee disclosure fixes it, since the rate gap is negative. Consolidation only makes arithmetic sense when the single rate, after counting the fee, is meaningfully below the balance-weighted average it replaces, and even then only at terms short enough not to stretch the interest window past what the old plan would have closed.

Reading your own numbers

Enter each debt exactly as the statement shows — balance, APR, and the real required minimum, not a round number — and set the total monthly debt budget to whatever the household can reliably direct at debt every month, across all balances at once. The calculator will not accept a budget below the combined minimums, since there is no valid plan underneath that floor. Then describe the consolidation loan the way a lender actually quotes it: rate, whole-year term, and origination fee percent. The note beneath the results states the avalanche order used for the “keep separate” comparison and the exact fee, payment, interest, and all-in figures for both plans — the same four numbers every table above rests on, rebuilt for the numbers entered.

If one of the debts is a single card balance whose minimum-payment formula is worth testing in isolation, run it through the credit card payoff calculator as well — and if re-borrowing on a card cleared by the consolidation loan is a real risk, assume it happens before consolidating, not as a surprise after.