Debt consolidation, in short
Consolidation only makes sense when the new loan's rate beats the weighted average of what you're currently paying across all debts by enough to matter. On the calculator's defaults — an $8,000 credit card at 21.99% and a $12,000 personal loan at 14.5%, a 17.5% weighted average — rolling both into one loan at 9.5% drops the payment from $650 to $430.54 a month and still saves $1,816.35 in total interest, even though the term stretches from 49 to 60 months.
Key takeaways
- Current debts (default example): $8,000 at 21.99% + $12,000 at 14.5% = $20,000 total, $650/month combined payment, 17.5% weighted average rate, paid off in 49 months for $7,148.64 total interest if kept separate.
- Consolidated into one $20,500 loan (balance plus $500 fee) at 9.5% over 60 months: $430.54/month — a $219.46 monthly savings.
- Despite the term stretching 11 months longer (49 → 60 months), total interest still drops by $1,816.35, because the rate gap (17.5% → 9.5%) is large enough to overcome the extra time.
- The $500 origination fee pays for itself in about 2.28 months of the $219.46 monthly savings — everything after that is net savings.
The weighted average rate: what you're really comparing against
A single "average" of 21.99% and 14.5% would misleadingly suggest 18.25% — but the weighted average accounts for how much is owed at each rate, not just the rate itself. With $8,000 at 21.99% and $12,000 at 14.5%, the weighted average comes to 17.5%, pulled toward the larger $12,000 balance. That 17.5% — not either individual rate — is the number a consolidation loan's rate actually needs to beat.
How this calculator prices your current debts
Each debt is amortized separately at its own rate and payment, exactly as it would play out if left alone:
Credit Card: $8,000 at 21.99%, $250/month → paid off in 49 months, $4,154.98 total interest
Personal Loan: $12,000 at 14.5%, $400/month → paid off in 38 months, $2,993.67 total interest
Combined, that's $650 a month and $7,148.64 in total interest across both — with the household not fully debt-free until the slower of the two, the credit card, clears at month 49.
Lower payment, longer term, still less interest
Rolling both debts into a $20,500 loan (the $20,000 balance plus a $500 fee) at 9.5% over 60 months:
New payment: $430.54/month (vs. $650 combined before)
New total interest: $5,332.29 (vs. $7,148.64 before)
New term: 60 months (vs. 49 months for the slower original debt)
This is the case worth understanding: the term got longer, yet total interest still fell by $1,816.35. That only happens because the rate drop is large enough — 17.5% down to 9.5% — to overcome 11 extra months of interest accrual. A smaller rate improvement with the same term extension could easily go the other way, which is exactly why checking total interest, not just monthly payment, matters every time.
When the fee actually gets paid back
Break-even months = fee ÷ monthly savings. Here, $500 ÷ $219.46 ≈ 2.28 months — under three months to recover the origination cost purely from the lower payment, before even counting the total interest savings. A consolidation loan with a slower break-even, or one where the monthly savings barely covers the fee within the loan's own term, deserves more scrutiny before committing.
Related calculators
If avalanche or snowball ordering without a new loan might work better than consolidating, compare against the credit cards payoff calculator and debt payoff calculator. To price the consolidation loan itself in isolation, the personal loan calculator works through payment and interest for a single fixed-rate loan.