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How to Calculate Your Debt Consolidation Loan Savings
June 12, 2026
June 12, 2026
How much you can save depends on the APR on your current debts, the debt consolidation loan APR, the loan term, and other factors. To find out how much you could save, you need to compare the cost of your existing debts with the cost of a debt consolidation loan.
To find out how much you could save with a debt consolidation loan, follow these steps:
First, you need to collect details about the debts that you want to consolidate. Keep in mind, debt consolidation loans can only be used for unsecured debts like credit cards, medical debts, and personal loans. Debts that are tied to collateral, such as an auto loan, do not qualify.
Make a list of each debt with the following information:
Balance owed: Write down the current total balance of the debt.
Current APR: Check the Annual Percentage Rate (APR), which is the yearly cost of your debt expressed as a percentage.
Current monthly payment: Write down the monthly payments. If you pay more than the minimum payment each month, use that amount.
Time to repay debt: Write down the number of months you have until the debt is fully repaid. For credit cards, you may need to estimate or use a credit card payoff calculator using your budgeted monthly payment.
Once your debts are listed out, use that information to determine the total cost in interest. The simplest way is to plug your debt details into an online debt calculator to find the total interest paid for each debt. Then add those figures together to determine the total cost of your debt.
For the following example, assume you have $15,000 in unsecured debt that you want to consolidate.
Type of Debt | Current Balance | Annual Percentage Rate (APR) | Monthly Payment | Time to Pay Off Debt | Total Repayment Cost | Interest paid |
Personal Loan | $9,000 | 16.99% | $320.83 | 36 months | $11,549.87 | $2,549.87 |
Credit Card 1 | $4,000 | 22.99% | $250 | 20 months | $4,822.28 | $822.28 |
Credit Card 2 | $2,000 | 19.99% | $200 | 12 months | $2,205.99 | $205.99 |
Total | $15,000 | $770.83 | $18,578.14 | $3,578.14 |
Now let’s take a look at how much you might pay if you combined all three of your debts into a single consolidation loan with a 12.3% APR and a two-year loan term:
Debt | Balance | APR | Monthly Payment | Payoff Time | Total Repayment | Interest paid |
Debt consolidation loan | $15,000 | 12.3%* | $708.21 | 24 months | $16,996.93 | $1,996.93 |
*Average personal loan APR as of June 2026, according to Experian.
As you can see above, the debt consolidation loan reduces your monthly payment and you can pay all debts off 12 months faster. But most importantly, you can see debt consolidation interest savings by subtracting the total interest of your consolidated debt from the total interest you’d pay for your existing debts:
$3,578.14 (interest paid on current debts) – $1,996.83 (interest paid on debt consolidation loan) = $1,581.21 (the amount of interest savings).
Debt consolidation loans do not always save you money. In fact, you might end up paying more in the following situations:
Higher APR: If the APR on a debt consolidation loan is higher than you’re currently paying on your existing debts, consolidating will cost you more money in interest fees (even if the monthly payment is lower). For example, if your credit score actually got worse since you took out your original debts, you may not qualify for a better rate.
Extended loan term: If the loan is stretched over a longer period of time, such as a five year loan term when you could pay off your existing debts much faster, you might end up paying more in interest in the long run.
High fees: Many lenders charge loan origination fees, which is a percentage of the amount borrowed, and other fees like late payment penalties. If the cost of fees would eliminate the savings you’d otherwise get by consolidating, you won’t save any money.
Additional debt: If you get control of your debts by consolidating, but then you start taking out additional debts that stretch your budget, you could end up in the same situation all over again, without any long-term benefit.
“If you keep using your credit cards after consolidating, you now have the consolidation loan AND new credit card debt — which puts you right back where you started. Consolidation is a tool, not a solution. If you do not change the behavior that created the debt, you will be back in the same place in 18 months.”
Remember, a lower monthly payment does not automatically equal savings. In fact, you might end up paying more over the lifetime of the loan. That’s why it’s important to run the numbers before you take out a debt consolidation loan.
Use these steps to find the right debt consolidation loan for you:
Many lenders offer free loan prequalifications directly on their website. You can plug in a few details to check estimated rates and loan terms, without filling out a full application that could affect your credit score. Doing this will give you a better idea of the rates you can expect to pay, and whether they are significantly lower than the APR on your current debts.
Lenders have a maximum amount of money that they’re willing to lend out for debt consolidation loans. Look for a lender that will lend you enough to completely cover all the debts you wish to consolidate.
The loan term is the amount of time you have to pay back your debt consolidation loan. The longer the loan term, the lower your monthly payment will be. However, stretching your loan term out too long may result in you paying more in interest than you would if you just kept paying your existing debts off.
“When you are consolidating just to get a lower monthly payment without reading the fine print carefully — you may end up paying much more over time, not less,” says Moran.
Lenders often charge loan origination fees, which is a percentage of the total amount borrowed, that gets taken off the top of your loan balance. For example, when a lender charges a loan origination fee of 5% for a $10,000 loan, you’ll pay an additional $500 directly to the lender. Make sure to factor this into your loan application when you’re deciding how much to borrow, or look for lenders that don’t charge loan origination fees.
Make sure you’re comparing the APR, not just the interest rate, for all loan offers. Interest rates only include the interest paid on the balance of the loan, while the APR contains the full cost of the loan, including loan origination fees. As of May 2026, credit card APRs range from 12.20% to 34.52%, according to Experian.
Not all debt consolidation lenders work the same way. Look for special features which may include:
Payment date flexibility: This option allows you to adjust your due date based on what works for your schedule.
Direct payment for creditors: Some lenders will pay your creditors off for you, instead of issuing funds for you to pay off your debts yourself, which saves you a step.
Co-borrowers: Want to consolidate shared debts with a spouse, family member, or financial partner? Look for lenders that allow joint debt consolidation loans.
No fees: Some lenders don’t charge loan origination fees, prepayment penalties, or even late fees.
Debt consolidation loans offer a way to simplify debt, adjust monthly payments, and even save money on interest. But even the loan with the lowest monthly payment won’t necessarily lower your total repayment cost, and in some cases may even cost you more money in the long run.
Make sure to compare the total amount of interest you would pay on your existing debts to the total amount you would pay with a debt consolidation loan. And remember that debt consolidation doesn’t erase your debt; you still need to make your payments on time and in full, and you may want to avoid borrowing any more until you pay off your loan in full.
Debt consolidation can be good or bad for your credit score. If you make your payments on time and reduce your overall debt, a debt consolidation loan could help your credit score. But if you keep racking up more debt, make late payments, or otherwise manage your debts irresponsibly, you could end up harming your credit score.
Debt consolidation loans can save you money when you reduce the amount of interest you pay over the lifetime of the loan. If your APR increases or you stretch the length of the loan term out too long, it might actually be more expensive to borrow.
Debt consolidation loans charge interest on the balance of your loan, and may also charge a loan origination fee, which typically gets rolled into the full balance of your loan. For a full picture of how much you’ll pay on your debt consolidation loan, check the APR, not just the interest rate.
Brian Acton is a seasoned personal finance journalist at BestMoney.com who specializes in loans and debt consolidation. His work has appeared in The Wall Street Journal, TIME, USA Today, MarketWatch, Inc. Magazine, HuffPost, and other notable outlets.
