Debt Consolidation Loan Calculator

Combining Existing Commitments

The current combined repayment is the total of every debt's monthly repayment. In the starting example, a $5,000 credit card at 18% with $250 a month and a $10,000 personal loan at 10% with $400 a month total $650.00.

The calculator projects each debt on its own rate and repayment. Each month it adds one-twelfth of the annual rate as interest, then subtracts the repayment. The card is repaid in 2 years with $989 of interest. The personal loan takes 2 years 5 months and $1,260 of interest.

Incorrect: apply one balance-weighted average rate of 12.67% to the whole $15,000 at $650.00 a month. That shortcut shows $2,282 of interest over 2 years 3 months.

Correct: project each debt on its own terms. Together they cost $2,250 of interest and take 2 years 5 months. The shortcut charges 12.67% after the card is gone and applies all $650.00 to one balance, so its interest and repayment time are both wrong.

When one debt is repaid, its repayment stops in this projection. After the card's final payment, the combined repayment falls to $400 until the personal loan is repaid. A repayment at or below a debt's monthly interest never repays it, and the results show that debt as not repaid within 50 years.

Repayment Relief and Total Interest

Consolidating the $15,000 at 6% over 360 months cuts the monthly repayment from $650.00 to $89.93. That is $560 of monthly relief. Total interest rises from $2,250 to $17,376, so this consolidation costs $15,126 more before any fees.

The longer term causes the extra cost. The card and personal loan would be repaid within 2 years 5 months. Moved into a 30-year loan, the same $15,000 accrues interest for 360 months, so the lower rate cannot make up for the extra years.

The comparison period puts every option on the same date. After 2 years, the current debts leave $1,625 owing on the personal loan. The consolidated loan still owes $14,620. Its interest for those months is lower, $1,779 against $2,214, but it has repaid only $380 of the debt.

Setup and discharge fees count once. A fee added to the loan also accrues interest: a $600 setup fee on the starting loan adds $695 of interest over 30 years. With that fee, the lifetime difference becomes $16,421 more. A fee paid in cash adds to the money paid on day one and leaves the balance unchanged.

Consolidating into a home loan turns unsecured card and personal loan debt into debt secured by the home. Moneysmart's debt consolidation guide warns that the home or car offered as security can be at risk if the loan is not repaid. The calculator compares the entered offer and does not assess approval or suitability. For eligibility and loan choices, read the guide to debt consolidation loans in Australia.

The same arithmetic works for business debts with regular principal-and-interest repayments, such as equipment loans. Enter each debt's own rate and repayment, and the new loan's rate, term and fees from its written offer.

Keeping the Previous Repayment

Keeping the previous combined repayment on the new loan repays it far sooner. Paying $650.00 a month on the $15,000 at 6% repays it in 2 years 1 month, with $979 of interest.

That is $1,271 less interest than the $2,250 the current debts cost. The repayment is the same, but every dollar now reduces a balance charged 6% instead of 18% or 10%. The new loan is also repaid 4 months sooner than the current debts.

Leave the optional repayment blank to keep paying the current combined repayments. Enter another amount to test a different budget. An amount below the new loan's scheduled repayment is rejected, because the scheduled repayment is the minimum the loan requires.

This result depends on the loan accepting extra repayments without a penalty, which Moneysmart lists among the checks to make with a new lender. It also assumes you stop using the old credit. If the client cannot keep paying the higher amount, use the scheduled result and weigh the extra interest from the longer term before choosing.