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Debt Consolidation Calculator

Current Debts

Consolidation Loan

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How to use the Complete Guide to Debt Consolidation

Debt consolidation isn't just about a lower interest rate—it's about regaining control. By rolling multiple high-interest debts (like credit cards at 20%+) into a single, lower-rate loan, you stop the bleeding of compound interest.

🌨️ Snowball vs Avalanche

Consolidation is one strategy. Warning: Don't consolidate if you haven't fixed the spending habit! Alternatively, use the Avalanche Method (pay highest rate first) to save the most money manually.

⚠️ The Trap

Many people consolidate debt to clear their credit cards, only to run up the balances again. This leads to double debt. Close or lock old cards after paying them off!

The Formula

Savings = Old Interest Cost - New Interest Cost

Consolidation Options Compared

Option Pros Cons
Personal Loan Fixed rate, fixed term (3-5 years). Need good credit for low rates.
Balance Transfer 0% APR for 12-18 months. High fees (3-5%), rate jumps if not paid.
HELOC Lowest interest rates. Uses your home as collateral (risk of foreclosure).

🛑 The 'Double Debt' Trap

The #1 danger of consolidation: You pay off your credit cards with the loan, but then you run up the balances again. Now you have the loan payment AND the new credit card payments. To avoid this:

  • Close the old credit card accounts (or cut up the plastic).
  • Remove saved card details from Amazon/online stores.
  • Build a small emergency fund so you don't use credit for surprises.

Frequently Asked Questions (FAQ)

Frequently Asked Questions

Does consolidation hurt my credit score?

Short term: Yes, a small dip due to the hard inquiry. Long term: Yes (Positively)! reducing your credit utilization ratio on revolving cards (credit cards) usually boosts your score significantly.

Are there fees involved?

Yes. Personal loans may have origination fees (1-8%) and balance transfer cards usually charge 3-5% of the transferred amount. Always do the math including these fees!

Will this get me out of debt faster?

Only if you stop using your credit cards. Consolidation simplifies payments and lowers interest, but it doesn't solve overspending habits. You must commit to not racking up new debt.