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Today, the average American household has over $70,000 in debt. With several lines of debt, interest charges can pile up making it seem like you never touch the principal.

Debt consolidation can help to ease the pressure and get your financial life back together. Using our debt consolidation calculator can help you see how debt consolidation works, and allows you to create a plan to regain your financial freedom.

To learn more about the process of debt consolidation, check out the some commonly asked questions below.


What can a debt consolidation calculator tell me?

A debt consolidation calculator helps determine if consolidation is the right move by taking into account your current financial situation.

To get an accurate analysis, you will enter various details into the calculator. The calculator will then tell you a new payment amount if you use debt consolidation. It will also provide you with the loan amount and new payment schedule.

Getting Started

You will need the following information when using the calculator:

  • The balance of all debts you will consolidate.
  • The interest rates of all debts.
  • Your current monthly payments for all your combined debts.

The Result

Calculating your debt consolidation will provide a clear view of the possible benefits.

What is debt consolidation?

Debt consolidation is the process of combining several debts into one debt.

It works like this:

  • You take out a loan for the full amount of your debts
  • This loan pays off your outstanding debts
  • Then you make payments on the one new loan instead of several debts.

Why It's Done

This method is often used to ease the pay-back process. It requires only one monthly payment versus several. Debt consolidation can also lower your interest rate, which in turn can lower your total debt.

If you have several payments it can be hard to manage. Debt consolidation offers a light at the end of the tunnel.

Beyond Debt Consolidation

Debt consolidation won't solve all your financial problems though. You'll need a debt consolidation plan to help you focus on your long-term financial goals.

Continuing bad spending habits after consolidating means all your work is for nothing.

Where can I get a debt consolidation loan?

There are several different ways to receive a debt consolidation loan.

Conventional Lenders

If you have good credit, you can use a lender or financial institution you already know. They will use a risk-based pricing model. This means if you pose lower risk, you receive a better interest rate.

Specialty Lenders

There are also specific debt consolidation lenders. These lenders only focus on debt consolidation. This means they can offer you a variety of loans.

These loans will have ranging interest rates and repayment periods, so you can choose the offer that fits best with your situation. These lenders will help you no matter your credit score.

Which Is Better?

That depends. Check your credit score to see which type of lender you should consider.

How can consolidating my debt improve my cash flow?

Consolidating your debt can improve your cash flow by keeping more of your money in your pocket.

Lower Interest Rate

If you gain a lower interest rate through consolidation you end up paying less money over time. Meaning long-term additions to your cash flow.

Smaller Monthly Payments

Some people don't see their interest rate lowered but do see lower monthly payments. Lower monthly payments mean you'll have a little extra cash flow each month.

Will debt consolidation improve my credit?

Debt consolidation can improve your credit score if you do it right.

Paying your monthly payments on time will have the biggest effect on your credit score. Your credit score also takes into effect your credit utilization ration.

Having one large debt is better for your score than having several credit cards at their limit.

Debt Consolidation Pit Falls

Some people fail to use debt consolidation to improve their financial situation. This can have negative effects on a credit score. Here are a few ways you can hurt your score:

  • You still use your old credit cards and keep balances on them.
  • You close your old credit card accounts. This hurts both the age of your credit and your credit utilization ratio.
  • You make late payments on your consolidated debt.
  • You apply for loans you don't qualify for, increasing your hard inquiries.

It's important to keep in mind your debt consolidation plan as you move forward. Every financial choice you make can help or hurt your credit score and your future.

What kinds of debt can I consolidate?

You can use debt consolidation on any of your unsecured debt or secured debt.

Unsecured Debts

With an unsecured debt, you don't risk your assets. The drawbacks of unsecured debt are higher interest rates and shorter repayment periods.

Common unsecured debt includes:

  • credit cards
  • medical bills
  • student loans

Secured Debts

Secured debt is a loan linked to an asset, such as your house or car. These are the debts you prioritize during payments. If you fail to pay a secured debt, the lender has the ability to take possession of the asset.

Some people choose to include their car loans in debt consolidation if the new rate is lower than what they are currently paying for their vehicle.

Final words?

Now you have all your questions about debt consolidation answered. It's time to start your journey to financial freedom.

Getting out of debt is the first step towards a happier, successful life.

Remember, if used right, consolidating your debt can have the following benefits:

  • One payment each month versus several
  • Smaller monthly payments
  • Lower interest rates
  • Improved credit score
  • Less debt in the long-term
  • Financial freedom

We offer a variety of online calculators for accurate financial analysis. Once you've used the debt consolidation calculator, try another calculator to see how much you'll save on your new financial plan.

Each one of our specially crafted tools address a series of life's toughest questions including mortgages, retirement, investing, and every day life.

Tell your friends about us!