This debt consolidation loan calculator shows your debt management options, estimated monthly payments for each option and the time it will take to get out of debt, depending on the route you choose. Here’s how to customize this debt calculator:
If you have several types of debts, and keeping track of payments is becoming difficult, or if you can’t make headway in your repayment plan because the interest rates are too high, you may want to consider debt consolidation.
Debt consolidation makes sense if you can qualify for a better interest rate than what you are currently paying, thereby saving you money over the long run. Borrowers with a good credit score and a low DTI ratio could be eligible for loans with favorable terms.
Paying off $50,000 in debt can take anywhere from three to seven years. How much you pay in interest over the life of the loan will depend on how long your loan term is.
For instance, if you have a $50,000 loan with a five-year term and a 12% interest rate, you’ll have a monthly payment of $1,112.22 and pay a total of $16,733.34 in interest. However, if you shorten that to three years, you’ll pay $1,660.72 a month but just $9,785.76 in interest.
The debt you should pay off first depends on which strategy you want to use. For instance, if you utilize the debt avalanche method, you’ll first target your debts with the highest interest rates. On the other hand, if you use the debt snowball method, you’ll instead pay off the debts with the smallest balances.
The debt avalanche method can save you money on interest in the long run, but the debt snowball method may make you feel more accomplished, since those smaller balances may be easier to pay off quickly.
Debt consolidation loans can have a negative impact on your credit score if you are unable to make the monthly payments in full and on time.
Additionally, applying for a loan will likely require a hard credit inquiry, which can also cause a small dip in your score and can remain on your credit reports for up to two years. Otherwise, showing a history of making payments on time can demonstrate your reliability as a borrower and could boost your credit score in the long run.