Translation unavailable - this article is shown in English. View English version
Summary
Debt consolidation combines multiple debts (credit cards, store cards, overdrafts, personal loans) into a single loan with one monthly payment. The calculator compares the total cost of keeping your existing debts versus consolidating them, showing whether consolidation actually saves money or just spreads the cost over a longer period.
How it works
The comparison
For each existing debt, the calculator projects the total repayment using:
- Current balance
- Interest rate (APR)
- Monthly payment or minimum payment percentage
For the consolidation loan:
- Total of all balances = new loan amount
- New interest rate (the consolidation loan APR)
- New monthly payment and loan term
When consolidation saves money
Consolidation saves money when both conditions are met:
- The consolidation loan interest rate is lower than the weighted average of existing debts
- The loan term is not significantly longer than the current payoff timeline
A common trap: consolidation reduces your monthly payment by extending the term, but you pay more total interest over the longer period.
Weighted average interest rate
Weighted average APR = Sum of (balance x APR) / Total balance
If your credit cards charge 25-30% APR and a consolidation loan offers 7-10% APR, consolidation is likely to save significant interest — provided you don’t extend the term excessively and don’t run up the credit cards again.
Worked example
Existing debts:
| Debt | Balance | APR | Monthly payment |
|---|---|---|---|
| Credit card A | £3,500 | 24.9% | £100 |
| Credit card B | £2,000 | 29.9% | £60 |
| Overdraft | £1,500 | 39.9% | £50 |
| Total | £7,000 | - | £210/month |
Weighted average APR: (3,500 x 24.9 + 2,000 x 29.9 + 1,500 x 39.9) / 7,000 = 29.2%
Without consolidation:
- At £210/month, payoff takes approximately 4.5 years
- Total interest paid: approximately £4,340
- Total cost: £11,340
Consolidation loan: £7,000 at 8.9% APR over 3 years
- Monthly payment: £220
- Total interest: £940
- Total cost: £7,940
- Saving: £3,400
Same loan over 5 years (lower monthly payment)
- Monthly payment: £145
- Total interest: £1,690
- Still saves £2,650 vs keeping separate debts, but costs £750 more than the 3-year loan
Inputs explained
- Individual debts — balance, APR, and monthly payment for each
- Consolidation loan APR — the rate offered (depends on credit score)
- Loan term — desired repayment period
- Monthly budget — how much you can afford per month
Outputs explained
- Total interest comparison — existing debts vs consolidation loan
- Monthly payment comparison — old total vs new single payment
- Total cost — full repayment amount under each scenario
- Payoff timeline — when you become debt-free under each option
- Break-even — the maximum consolidation loan rate that still saves money
Assumptions & limitations
- Assumes you stop using credit cards after consolidation. Running them up again while paying a consolidation loan leads to worse debt.
- The APR offered depends on your credit score. Poor credit may only qualify for rates above 15%, reducing the benefit.
- Secured loans (against your home) typically offer lower rates but put your property at risk.
- Does not model 0% balance transfer credit cards, which can be a better option for smaller debts if you can clear them within the promotional period (typically 12-24 months).
- Early repayment charges on existing loans may reduce the benefit of consolidation.
出典
Related calculators
50/30/20 Budget
Split your after-tax income into needs, wants, and savings using the 50/30/20 rule. Custom ratios and preset budgets.
Compound Interest
Project how your savings or investments grow over time with compound interest. See contributions vs growth with a chart.
Savings Goal
Calculate how much you need to save per month to reach your target, or how long it takes at your current saving rate.