Debt Consolidation Calculator
Key Takeaway
Debt consolidation combines multiple high-interest debts (credit cards at 36%, personal loans at 18%) into a single lower-interest loan (12–14%), simplifying payments and reducing total interest by 30–50%.
Existing Debts
New Consolidation Loan
Consolidation Analysis:
- Total Outstanding Balance to consolidate: ₹3,00,000.
- Previous combined monthly payment: ₹10,933.
- New consolidated single monthly payment: ₹9,893.
- Your monthly cash outflow drops by ₹1,040.
- After subtracting the new loan processing fee of ₹4,500, your net interest savings are ₹32,930!
What to do next
Based on your Debt Consolidation Calculator, here are the tools you should try next:
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Consolidation Benefit Formula
Calculates financial savings of rolling multiple high-rate loans and cards into a single personal loan with a lower interest rate.
Worked Example: Consolidating ₹3 Lakhs of card debt (avg. 36%) into a 12% loan for 3 years
Debt Consolidation: Simplifying payments and reducing financing costs
Rahul had ₹3 Lakhs of outstanding credit card debt spread across three cards, with interest rates averaging 36% p.a. He found it difficult to track multiple due dates and faced heavy interest penalties. He decided to look into a consolidation loan.
He consolidated his card debts into a single personal loan of ₹3 Lakhs at 12% interest for a 3-year term. His monthly payment dropped from ₹13,741 (across cards) to a single EMI of ₹9,964. Over 3 years, this consolidation saved him ₹1.36 Lakhs in interest and streamlined his monthly tracking.
Consolidation merges multiple high-interest debts into one lower-interest loan. It reduces your monthly payment burden and stops compounding at extreme card rates.
Only consolidate if the interest rate of the new loan is significantly lower than your current average. Avoid running up new balances on the cleared cards.
Frequently Asked Questions
What is debt consolidation?
Debt consolidation involves taking out a single low-interest personal loan to pay off multiple high-interest credit card debts or loans, combining them into one single monthly payment.
Does debt consolidation hurt my credit score?
It can cause a minor, temporary drop due to a hard inquiry. However, in the long term, it improves your credit utilization ratio and payment consistency, boosting your CIBIL score.
What are the fees involved in debt consolidation?
Consolidation loans typically carry a processing fee of 1-2%. You must also account for any prepayment or foreclosure charges on your existing loans.
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