Worked example: three debts and a $25,000 loan
Take $10,000 at 17.99% paying $260 a month, $7,500 at 19.99% paying $190 and $6,500 at 18.99% paying $180. Together you pay $630.00 a month and clear the debts in 59 months, paying $36,963.17 in total, of which $12,963.17 is interest. The APR across the three debts is 18.92%.
Offer A is a $25,000 loan at 10.99% over five years with a 5% origination fee. The payment is $543.44 a month and the total of payments $32,606.15. The fee is $1,250.00, taken from the loan, so you receive $23,750 against $24,000 of debts and need to add $250.00 yourself. With the fee, the real APR is 13.25%.
Checked against calculator.net
calculator.net's debt consolidation calculator, run with these same inputs, shows an APR of 18.92% on the current debts and 13.25% on the loan with the fee, a payment of $630.00 against $543.44, payoff in 59 against 60 months and total payments of $36,963.17 against $32,606.15. This calculator matches all of those. Its interest figure for the current debts is five cents higher than the $12,963.17 here.
With a 15% fee the fee is $3,750.00, you must add $2,750.00 and the real APR rises to 18.33%, which is also what calculator.net shows. Even then the loan can leave you ahead, so this page weighs the extra cash needed up front as well: Offer A saves $1,607.02 after counting it.
How your current debts are paid
Your debts are paid with the total of the monthly payments you enter. Each debt gets its own payment, and whatever is left of the total goes to the debt with the highest rate, so the total paid each month stays level until the last debt clears. APRs are nominal: the monthly rate times 12 (Regulation Z Appendix J), and the APR across your debts is the nominal rate at which your payments are worth the total balance.
Two offers and the cash left over
Offer B is the same loan at 9.99% over seven years with no fee. Its payment is $414.90, lower than Offer A's, and it leaves $1,000.00 over after the debts are paid, but its longer term makes it cost $9,851.64 in interest against $7,606.15 for Offer A. A longer term lowers the payment and usually raises the total cost.
To see the payment on one loan, use the debt consolidation loan calculator.
To find the rate you are really paying with fees, use the consolidated loan interest rate calculator.
Use the right country page
This page uses US terms, dollars and the nominal rate convention. For a UK comparison, with pounds, an arrangement fee and the effective APR convention, choose United Kingdom above the form. Inputs reset and amounts are not converted.
Inputs for the US consolidation loan comparison calculator
Debt balance, interest rate and monthly payment
For each debt, what you owe, its yearly rate and what you pay each month. Leave the balance at 0 for an unused row.
Loan amount
How much each loan offer lends you, before the origination fee comes out.
Offer rate and term
The interest rate on the offer and how many years the loan runs.
Origination fee
A percentage of the loan, taken out before you get it. Type 0 if there is none.
CALCULATOR QUESTIONS
US consolidation loan comparison calculator questions
Will a debt consolidation loan save me money?
Only if its total cost, with the fee, is below keeping the debts. In the example, the $25,000 loan saves $4,107.02 after counting the extra cash needed up front.
What is the real APR of a loan with an origination fee?
It is the nominal rate at which the payments equal the money you receive after the fee. The 10.99% loan with a 5% fee has a real APR of 13.25%.
What if the loan is smaller than my debts?
The shortfall is cash you must pay yourself. In the example, you would need $250.00.
Why compare the APR across my debts?
It shows what your debts cost together. Here it is 18.92%, so a loan with a real APR below that lowers the rate you pay.
Does a longer term cost more?
Usually. A longer loan lowers the payment but adds interest, so compare the total of payments as well.