Debt Consolidation With User-Entered Rates

What this tool calculates

The calculator returns two figures from the same set of inputs. The first is the standard amortised monthly payment for a consolidation loan at the entered rate over the entered term. The second illustrates what occurs if the borrower makes that same monthly payment against the existing debt at its current rate — how long it would take to clear, and how much interest would accrue. The comparison shows the difference in total interest paid and the difference in months to clear, with both paths held at the same monthly outlay.

How the apples-to-apples comparison works

When evaluating consolidation, comparing a low-rate consolidation loan against the existing minimum payments on the existing debts introduces different rates and different payment levels simultaneously. This tool isolates the rate effect by holding the monthly payment constant. The consolidation monthly payment, computed by amortisation, is then projected forward as if it were the payment on the existing debt at the current rate. The difference in total interest indicates the rate-effect benefit; the difference in months shows the timeline benefit.

How term length changes the answer

The consolidation term is set directly. A longer term lowers the consolidation monthly payment but raises the total interest paid; a shorter term does the reverse. Re-running the calculator at multiple term lengths shows the trade-off in concrete numbers. The current-rate comparison adjusts automatically — at a smaller monthly payment (longer consolidation term), the existing debt at the current rate clears more slowly and accrues more interest.

What rate to enter for the current weighted rate

The current weighted rate is the balance-weighted average of the rates across the existing debts. For a single debt it is that debt's rate. For multiple debts it is each balance multiplied by its rate, summed, then divided by the total balance. Entering this figure produces the appropriate comparison; entering the highest rate or an arithmetic average rather than weighted average alters the result.

When the simulation refuses to run

If the consolidation monthly payment is at or below the monthly interest charge on the existing debt at the current rate, the existing debt does not amortise under that payment — the balance does not fall. The calculator detects this case and flags it explicitly rather than producing a misleading number. The consolidation side still computes a valid result, but the current-path comparison is reported as not amortising.

Where the simulation simplifies

The calculation is a clean two-path comparison at constant monthly payment. It does not include consolidation origination fees, balance transfer fees, prepayment penalties on the existing debts, or rate changes during the term. It also does not model the credit-score impact of opening a new loan and closing existing accounts. The figure shown represents the cost difference in steady state — fees and other one-off charges are calculated separately and may affect the overall consolidation decision.

Where to look next

The standard debt consolidation calculator handles the case where current monthly payment, term length, and origination fees are all known and need to be modelled together. The debt consolidation break-even calculator runs the simpler comparison of months to recover an upfront fee from a known monthly saving.