How this calculation works
Each existing balance has its own rate and term. Calculate its remaining scheduled payments, then compare their sum with the scheduled new loan. Financing the fee adds it to the balance and charges interest on it.
Cash savings = sum of existing remaining payments − new payments − any upfront fee.A worked example
Keeping the two sample debts costs about 16,798 over their remaining terms. Financing 15,200 at 10% for 24 months costs about 16,834, so consolidation increases total outlay by about 35.
Good to know
All debts use fixed monthly amortization and an entered nominal annual interest rate. Revolving minimum payments, variable rates and early closure charges require separate scenarios.
How the inputs affect the result
Compare cash cost and payment size separately. The combined existing payment is an initial figure and drops when a shorter debt ends. A longer new term can reduce the current payment and still cost more overall.
This removes interest on the fee and changes day-one cash outlay.
Where the calculation applies
All debts use fixed monthly amortization and an entered nominal annual interest rate. Revolving minimum payments, variable rates and early closure charges require separate scenarios.
For a related calculation, see the Multiple debt snowball and avalanche calculator.
A few questions, answered
Should a financed fee also be entered as an upfront fee?
Choose one fee treatment. The same fee should appear once in the modeled cash flows.
What does the “Pay the fee upfront” setting illustrate?
This removes interest on the fee and changes day-one cash outlay.