Debt Consolidation Calculator

What a consolidation loan actually does

Debt consolidation replaces several debts with one new loan. The new loan pays off the old balances, and you make a single monthly payment instead of four or five. Nothing is written off: the same amount is still owed, restructured onto different terms.

The genuine benefits are administrative and psychological, and they are real. One payment date is harder to miss than five. A fixed term gives a definite end date, which revolving credit-card debt never does, because a minimum payment is recalculated against a falling balance and can stretch out for decades.

The financial benefit depends entirely on whether the new rate and term beat the old ones, and those two factors pull in opposite directions. A lower rate saves money; a longer term costs it. Which wins is an arithmetic question, and it is the question this calculator exists to answer.

Why a lower monthly payment often costs more

This is the trap, and it is easy to fall into because the monthly figure is the one advertised. Interest accrues on a balance over time, so stretching repayment over more months means more months of interest, even at a lower rate.

Take three debts totalling £12,500 with a combined monthly payment of £440, clearing in four years and costing £4,952.92 in interest. Consolidating at 9.9% over ten years drops the payment to £164.50, a saving of £275.50 a month and a headline that sells itself. Over the full term it costs £7,240 in interest: £2,287.08 more, and six extra years in debt.

The same loan over five years instead costs £264.97 a month and £3,398.20 in interest, which is £1,554.72 less than doing nothing. Identical rate, identical balance, opposite verdict. The term is doing the work, not the rate.

So compare total interest and end date, not the monthly payment. If consolidating is the only way to afford the payments at all, that is a legitimate reason to accept the higher total, but it should be a decision made with the number visible.

Never secure unsecured debt without understanding the trade

Consolidation loans are offered both unsecured and secured against your home, and secured loans advertise lower rates because the lender's risk is lower. That reduction in risk comes from transferring it to you.

Credit card and personal loan debt is unsecured: default has serious consequences for your credit file and can end in a county court judgment, but your home is not directly at stake. Roll that debt into a loan secured on the property, and missed payments can lead to repossession. A second-charge loan or a remortgage to clear credit cards makes exactly this swap.

Secured terms are also typically much longer, so the two effects compound: a lower rate over a far longer period, frequently producing more total interest and a larger risk. If you are considering it, take free independent advice from MoneyHelper or StepChange first.

Alternatives that are often cheaper

A 0% balance transfer card moves credit card debt to an interest-free period, usually for a fee of around 2 to 3% of the balance. If you can clear the balance within the promotional window, this almost always beats a consolidation loan. The risk is the reversion rate at the end, so it works only with a plan to pay it down rather than park it.

A 0% money transfer card does the same for cash into your bank account, which can then clear an overdraft or a loan. Fees are higher than balance transfers but the arithmetic is the same.

If the goal is speed rather than affordability, the avalanche method, where you pay the minimum on everything and put every spare pound at the highest-APR debt, mathematically beats consolidation in most cases because it shortens the term rather than extending it. Our debt payoff calculator compares that against the snowball method.

If the payments are genuinely unaffordable rather than merely inconvenient, consolidation is the wrong tool. A debt management plan, or in more serious cases an IVA, is a different conversation, and free advice from StepChange or Citizens Advice costs nothing and does not sell you a product.

What to check before you apply

Look for early repayment charges on the new loan. Consumer Credit Act protections mean a regulated loan can always be settled early, but the lender may add up to 58 days of interest to the settlement figure, which erodes the benefit of overpaying.

Check whether the advertised APR is representative or personal. Only 51% of accepted applicants have to be given the representative rate, so the figure you are actually offered after a credit check may be higher, sometimes enough to change the answer entirely.

Use eligibility checkers that run a soft credit search rather than making multiple full applications, as a cluster of hard searches damages your file at the moment you most need it to look good.

Finally, be honest about the behaviour. Consolidation clears the credit cards but does not close them. Running the balances back up while also paying the consolidation loan is the single most common way this goes wrong, and it leaves you with more debt than you started with.