The comparison that actually matters
Nearly every consolidation calculator online is run by someone who sells consolidation loans. They compare the loan against making minimum payments forever, and against that, almost any loan looks like a rescue.
The honest comparison is different: if you can afford the loan’s monthly payment, you could pay that same amount against the debts you already have. This calculator runs that scenario beside the loan. Sometimes the loan still wins, and then it is a genuinely good deal. Often it does not.
Where the savings leak away
The term. Moving 23% debt to an 11% loan sounds like halving your interest. Stretch the repayment from three years to five and much of that gain disappears, because you are paying the lower rate for far longer.
The fee. A 5% origination fee on $15,000 is $750, added to the loan and charged interest for its whole life.
The advertised rate. The rate in the advertisement goes to applicants with excellent credit. The rate you are offered after applying may be several points higher — use that one here, not the headline.
When consolidation is genuinely the right move
When the rate drop is large and real, when the term is no longer than the time you would have taken anyway, and when a single fixed payment with an end date is what finally makes the plan manageable. That last reason is worth something real, even if the arithmetic is close — just be honest with yourself that you are buying simplicity rather than savings.
Common questions
- Does debt consolidation save money?
- Sometimes. It saves money when the new rate is meaningfully lower than what you are paying now and the fee is small. It costs money when a longer term stretches the debt out, or when the origination fee eats the rate advantage. The comparison above tests both against your actual numbers.
- Why compare against paying the same amount without a loan?
- Because it is the fair test, and it is the one most consolidation calculators leave out. A loan is usually shown against minimum payments, which makes almost any loan look good. The real question is whether the loan beats putting that same monthly payment against the debts you already have.
- What is an origination fee?
- A charge for issuing the loan, commonly 1% to 8% of the amount borrowed. It is normally added to the loan rather than paid up front, so you borrow more than you owe and pay interest on the fee as well.
- Will consolidating hurt my credit score?
- Usually a small dip at first from the hard inquiry and the new account, then an improvement as your card utilisation drops. Keep the paid-off cards open — closing them cuts your available credit and can push utilisation back up.
- What is the biggest risk?
- Using the cards again. Consolidation clears them to zero, which feels like progress and creates room to spend. If the balances come back you owe the loan and the cards together, which is the single most common way consolidation makes things worse.