Debt Consolidation Calculator
The calculator below compares the APR (Annual Percentage Rate) of the debts and the real APR after the adjustment of the consolidation loan fee. It also compares the monthly payment, payoff length, total interests, etc. Generally, the fee-adjusted APR is the real financial cost of the debts or loans. Therefore it is the major indicator for debt consolidation loan selection.
Debt consolidation is a form of debt restructuring that take one loan to pay off many others, usually high interest debts. People do debt consolidation mainly for two purposes 1) to lower the interest rate. 2) to lower the monthly payment amount. If found the appropriate loan, it is possible to achieve both. The most common loans for debt consolidation are home equity loan, home equity line of credit, cash-out refinancing, and personal loan. Home equity loan, home line of credit, and cash-out refinancing are secured by real estate properties. Therefore, the risk is lower for the lender. Accordingly the interest rate is lower. Personal loan is an unsecured loan. So the interest rate is higher and usually has a lower loan limit. Many loans have upfront fees. Often, the upfront fees are very expensive. Therefore the real cost (real APR) of the loans is higher than the interest rate given by the lenders. The calculator above gives out the real APR of the loan after fee adjustment. The real APR of the loan should be the major indicator for loan picking. Many lenders use monthly payment amount as the indicator when selling their loans. This is misleading! The monthly payment amount does not include the upfront fee. Furthermore it can be manipulated by adjusting the loan term/length.
While good consolidation loan can lower your financial burden slightly, the real debt solution for most people is to change the habits—refrain in buying, start saving, live within or below your means.