How to use this tool to explore your debt management options
This debt consolidation calculator can help you explore ways to restructure and repay your debt. Here’s how to fill in each section:
- Credit Card Debt: Enter your total credit card debt. If you have more than one card, add up all the balances and enter that number.
- Personal Loans: This includes secured and unsecured personal loans you may owe money on. Again, add up all of these balances and enter the total.
- Medical Expenses: This value is the total of any outstanding medical bills you currently owe.
- Other Debt: This includes any other debt you may have, such as an auto loan. Do not include your student loans or mortgage. For help with student loans specifically, click the “High Student Loans? Click Here” link in the calculator’s top right hand corner.
- Credit Score: Select the range that contains your current credit score. Don’t know your score? Click the “Get your credit score” link.
- Rent or Own: Select whether you rent or own your current residence.
- State: Your options can change a lot based on where you live, so be sure to include this information as well.
- More Details: Hit the “Enter your details to see savings” tab in the bottom right hand corner to input more specific data, such as the APR on your credit cards and personal loans, your home equity information (if applicable) and any fees you may owe to a debt settlement expert.
Once you’ve entered your financial information, the debt management tool will help you compare your options in three sections:
- Your Debt Management Options: This section will show you some of your options for consolidating your debt into fewer or even one single payment. Each option is customized around your own financial information, showing the cost of your monthly payments and how long it will take to pay off your debt.
- Time vs. Money: This section shows you how long it would take — and how much it would cost — to pay off your debt using each consolidation option. Some people want to get debt-free as soon as possible, while others prefer a lower monthly payment. This tool lets you explore that balance.
- Savings Breakdown: This section shows you how much money you’d ultimately save using each method, compared to if you continued repaying your debt in its current form. There’s a lot to consider with each option, such as monthly payment costs and the fact that some plans may not cover certain types of debt.
FAQs: Debt management advisor tool
What is debt consolidation?
Debt consolidation is the process of replacing several debts with one, combined debt. Essentially, it involves taking out a new loan — or a balance transfer card — that you can use to pay off your existing debts. It’s a way to avoid the hassle of managing multiple payments at once, and it can also save you money.
Is debt consolidation right for me?
There are several reasons why you may want to consolidate your debt. Here’s when it’s worth considering:
- If you have good credit and a favorable debt-to-income (DTI) ratio.
- If you can get better interest rates by consolidating.
- If you’re willing to increase your loan term in order to decrease your monthly payment costs.
- If you’re willing to increase your monthly payment amounts in order to pay off your debt faster.
What is a personal loan?
A personal loan is a loan that isn’t backed by collateral. Unlike with secured loans — like mortgages and auto loans — there’s nothing your lender can repossess if you fail to make payments. Personal loans generally have higher interest rates than secured loans, and they normally range between $1,000 and $50,000.
If you’re not sure whether or not you qualify for a personal loan, you can read our guide on how to know if you’re a good candidate for one.
How do I use a personal loan to consolidate or refinance my debt?
Personal loans can be used for almost anything, including paying off debt. The idea here is simple: instead of juggling multiple monthly payments, you can take out a new loan and use that money to pay off all of your debts at once.
That way, the only payment you have to worry about is the one for your new personal loan. And, because loans usually have fixed interest rates, you won’t have to worry about your monthly dues changing over time.
What is a home equity loan?
Also known as a second mortgage, a home equity loan allows homeowners to borrow a lump sum and repay it in monthly installments.
The amount of the loan is determined by your home equity, the difference between the property value and the balance of the mortgage against it. These loans are typically valued between 80% and 90% of your home’s property value.
How do I use a home equity loan to consolidate or refinance my debt?
Similar to a personal loan, home equity loans offer a lump sum that you use to pay off your outstanding debts. That way, you’re stuck with just one payment — a fixed-rate home equity loan — instead of multiple debts with varying monthly payments.
What is a balance transfer card?
Balance transfer cards are credit cards that have low or no interest rates for the first six to 18 months. If you plan to repay your debt quickly, a balance transfer card can allow you to avoid high interest charges. However, balance transfer cards do come with a balance transfer fee.
How do I use a balance transfer card to consolidate or refinance my debt?
Balance transfer cards come with an introductory period of low or 0% APR. The aim is to use that introductory time to pay off as much of your debt as you can — all without racking up more interest. Once the introductory period ends, you’ll begin paying interest on your remaining balance.
Which debt consolidation option is best for me?
Ultimately, it depends on your financial situation. Your credit score, homeownership status and monthly income play a major role in choosing your consolidation option. Luckily, that’s where our debt consolidation calculator can help; the tool will help you compare each strategy and figure out which one is right for you.
Other ways to manage your debt
Consolidation isn’t the only way to tackle debt though. There are plenty of other strategies that, depending on your situation and preference, may be a better fit. Here are few more methods to consider:
Create a strict budget
Limiting your expenses is one of the easiest ways to tackle debt. To make sure you’re saving as much as possible, create a detailed budget with your monthly income, your regular expenditures and all of your debt.
A zero-based budget can be extremely helpful here. These budgets make you account for every single dollar you earn, letting you see exactly how much you can commit to paying off your debt.
Borrow from your 401(k) or life insurance policy
Some 401(k) plans allow you to take out a loan on your account. This strategy is obviously risky — you won’t gain interest on the money you’ve removed — but it can be useful for people who have a comfortable amount already saved. The amount will vary from person to person, and you’ll usually need to repay the loan within five years.
If you have a life insurance policy large enough to cover your debts, that could be an option as well. However, this strategy comes with drawbacks — such as decreasing the financial support your loved ones would receive if something happens to you — so it’s usually not worth considering as a first option.
Use the debt snowball method
The debt snowball method isn’t a way to consolidate your debt, but rather a strategy for attacking each payment separately. This method involves tackling your lowest balance first, then building momentum as you pay off each debt from smallest to largest.
Use the debt avalanche method
Similar to the debt snowball, the debt avalanche method involves organizing all of your debts and tackling them one by one. With this strategy, you organize your debts in order of interest rate — from highest to lowest — then start by paying off the debt with the highest rate. It’s a great way to save money, especially if you have a few debts with particularly high rates.