HesapHanem

Loan Consolidation Savings Calculator

Enter your balance, current rate and consolidation rate to see your interest savings.

How it is calculated

Both options are treated as a standard amortising loan on the same balance and the same number of months. With i = APR / 100 / 12 and n = months (a whole number from 1 to 1,200), the monthly payment is P × i / (1 − (1 + i)−n), where P is the balance. At 0% it is simply P / n. Total interest is payment × n − P for each rate, and the saving is old interest minus new interest. The monthly saving is the difference between the two payments. A negative figure, printed as for example -$1,375.30, means the new loan costs more. The term is shared: the tool does not model a longer or shorter consolidation term, and it ignores origination fees and balance-transfer fees. The balance must be above zero and each rate between 0% and 1,000%; a negative rate, a fractional number of months or a term over 1,200 months shows no result.

Worked example

Balance 20,000, current blended rate 22% APR, consolidation rate 11% APR, 48 months. At 22% the monthly rate is 0.22 / 12 and the payment is about 630.12, so 48 payments total about 30,245.83, which is 10,245.83 of interest. At 11% the payment is 516.91, the 48 payments total about 24,811.70, and interest is 4,811.70. The difference is $5,434.13 of interest saved, with the payment falling by $113.21 a month.

Try this example →

Common mistakes

  • Comparing a quoted rate that includes fees with one that does not. Origination or transfer fees are not in this calculation, so subtract them from the saving yourself.
  • Entering the monthly rate (for example 1.8) instead of the annual percentage rate (22).
  • Assuming consolidation always saves. With a current rate of 8% and a consolidation rate of 11% over 48 months on 20,000, the tool shows -$1,375.30 of interest saved, meaning the new loan costs more.
  • Entering the consolidation loan's own term in the months field and expecting it to be compared with the remaining time on the old debts. One term is used for both, so the saving shown comes only from the rate gap.
  • Averaging the rates of several debts without weighting by balance. The current rate should be the balance-weighted blend.

Sources

About this calculator

Consolidating debt means replacing several balances — credit cards, personal loans, each carrying its own interest rate — with a single new loan that pays them all off, ideally at a lower blended rate. The savings (or cost) of doing this comes down to comparing the total interest you'd pay finishing out your current debts at their existing rate against the total interest on the new consolidation loan. In real offers the repayment term matters as much as the rate — a lower rate stretched over a much longer term can end up costing more in total interest even though the monthly payment drops.

This calculator takes your total balance, your current blended interest rate, the rate offered on a consolidation loan and one payoff term in months, which it applies to both paths. It then compares the total interest under each to show your net savings (or added cost), the new monthly payment and the monthly difference. Because the term is the same on both sides, the result isolates the effect of the rate gap; if the lender offers a longer term, compare the monthly payment and total cost over that term yourself. Borrowers evaluating a balance-transfer card or personal consolidation loan, and credit counselors advising clients on debt payoff strategy use it to see past the "lower monthly payment" pitch and check whether consolidating actually reduces total interest paid, not just the payment size.

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