Debt consolidation replaces several debts with one new loan. A lower monthly payment does not necessarily mean a lower total cost. The new rate, term, fees and the payments that would otherwise have been maintained all affect the comparison.
Compare scenarios: use the Debt Consolidation Calculator to model three existing fixed-payment debts against one fixed-rate loan. Use the Debt Payoff Calculator when you want to compare repayment order without replacing the debts.
Consolidation changes more than the number of payments
The CFPB defines a debt consolidation loan as money borrowed to repay separate loans, leaving one new amount to repay over time. The rate may be lower, but the new contract may also change the repayment period and fees.
A useful comparison keeps these questions separate:
- What is the new required monthly payment?
- How long does repayment last?
- How much interest and fees are paid in total?
- Are the debts actually closed, or can balances be rebuilt?
Why extending the term can lower payment but raise cost
Assume three debts total €10,000. Their current fixed payments total €380 a month. A new €10,000 loan at 10% for 36 months has a payment of about €322.67 before any fee. The required payment is lower, but the loan keeps the balance outstanding for a defined three-year schedule.
If the existing payments would have cleared the debts sooner, the consolidation loan can cost more even with a lower rate. The result depends on each existing balance, rate and maintained payment.
| Measure | Existing debts | Consolidation loan |
|---|---|---|
| Monthly payment | Sum of maintained fixed payments | Scheduled instalment |
| Payoff time | Month when the last debt reaches zero | New contractual term |
| Borrowing cost | Total modeled interest | Total modeled interest plus entered fee |
| Number of payments | Several | One |
Fees need explicit treatment
An upfront fee paid separately increases borrowing cost but does not change the loan payment. A fee financed into the new balance increases both the amount borrowed and future interest. Do not treat the two arrangements as equivalent.
Existing credit-card minimums complicate the baseline
Credit-card minimums often change with balance and issuer rules. A transparent calculator can either model the exact statement formula or ask for a fixed payment that the user intends to maintain. Finance Charts uses fixed payments so the calculation is visible and does not invent an issuer formula.
Consolidation is different from debt settlement
Consolidation normally repays existing creditors with a new loan. Debt settlement services may instead seek to negotiate amounts owed and can involve different costs and risks. The FTC warns against debt-relief providers that demand upfront payment or guarantee fast forgiveness.
Methodology and sources
The Finance Charts comparison uses fixed monthly rates, fixed existing payments and an amortising consolidation loan. It excludes new borrowing, variable rates, missed payments, tax, credit-score effects and qualification. It is not a lender quote.
- CFPB — Credit counseling, settlement and consolidation
- CFPB — Lower payment and longer repayment term
- FTC — How to get out of debt
- Finance Charts — Methodology
Important: compare the actual contract, lender disclosure and total amount repayable. A lower modeled payment is a cash-flow change, not proof of a better loan.