Two paths, measured the same way
On the current side, the calculator runs the existing debts with their own balances, rates and minimum payments. On the consolidation side, it combines those balances into one loan with the APR, term and origination fee entered.
Each side gets three results: what is paid each month, the total interest, and the month the last dollar is paid. The side-by-side view shows exactly where one path costs more and the other costs less. It doesn’t pick a winner.
The two paths can come out close, or one can be far ahead. Small changes in the loan’s rate or term can flip the result, so running a few versions of the new loan shows how sensitive the comparison is.
Four things that decide which side costs less
- The rate. The new loan’s APR compared with the rates on the existing debts, weighted by how big each balance is. A loan rate below a few of the debts but above others can land on either side.
- The term. A longer term spreads the balance over more months, which lowers the payment. More months also means more months of interest, so a smaller payment and a smaller total don’t always go together.
- The fee. An origination fee is a cost the current path doesn’t have. A 5% fee on a $10,000 loan is $500. The calculator includes the fee on the consolidation side.
- What happens to the old accounts. The comparison assumes the old balances stay at zero once they are paid off.
Why a lower monthly payment can still cost more
The monthly payment is the number people see first, and it is often lower on the consolidation side. But the payment and the total cost answer different questions.
A loan with a lower rate and a much longer term can show a smaller payment and more total interest at the same time. A loan with a similar rate and a shorter term can show a higher payment and less total interest. That is why the calculator shows all three results, not just the payment. Looking at only one of them can tell a different story than the full picture.
What the comparison leaves out
The math covers the debts and the loan as entered. It doesn’t model new charges. If cards that were paid off by the loan pick up new balances, those balances add to the real cost of the consolidation path, and the side-by-side figures won’t include them. Some people close or set aside old cards for this reason. Others keep them open. The calculator doesn’t assume either.
The current side also assumes the same minimum payments continue. Adding extra each month would change that path’s results. The debt payoff calculator shows the current debts with an extra amount, and the balance transfer calculator covers moving card debt to a promo card instead of a loan. For a single loan by itself, the personal loan payoff calculator shows how extra payments shorten the term.