When the typical debt-consolidation company advertises
that they can "save you money," what they are most often referring to
is simply a reduction in your total monthly debt payments -- not a savings
in the cost of paying off your debt (interest charges). Sure, by consolidating
your payments into a single loan, you might be paying one monthly payment
that is smaller than the sum of your current monthly payments, but if
they stretch your loan out for a longer period of time you could actually
end up paying more interest by consolidating. This calculator will help
you to determine whether or not consolidating will actually reduce the
cost of retiring your debts.
Instructions: Starting with the first line of
entry fields, enter each one of your debts, along with their corresponding
principal balances, interest rates and monthly payment amounts (the
last two columns will be filled in by the calculator). Once you have
entered all of the debts you wish to consolidate, click on the "Compute
Current Debt Cost" button. Next, enter the consolidating loan's interest
rate, term and any origination fees that might apply and click the
"Compute Consolidation Loan Costs" button.
In order for the this calculator to work, each debt must have the
four left-hand fields filled in (for interest-free debts enter .001
just to satisfy the required interest-rate entry). Also, be sure to
enter only numbers and decimal points in the numeric entry fields.