The useful starting point

A smaller payment can cost more overall when repayment lasts longer.

Make the two sides comparable

A consolidation loan replaces debts with a new loan. The CFPB cautions that a lower payment can result from a longer term and may increase the total cost.

Use the actual proposed terms if you have them. A calculator input is not a lender quote, approval or a statement that the loan is suitable.

  • List the balances and rates being compared.
  • Record the proposed rate and whether it can change.
  • List fees separately from the amount used to pay existing debts.
  • Compare the repayment length and total modeled payments.

Check temporary rates and collateral

A promotional rate may expire. If home equity secures the new borrowing, the home can be at risk if the loan is not repaid.

Do not treat an unsecured consolidation loan and home-secured borrowing as the same decision simply because both create one payment.

  • When does any introductory rate end?
  • What rate or calculation applies afterward?
  • Does the offer require collateral?
  • What costs are paid upfront or added to the balance?

Understand the calculator's limits

Check the assumptions shown with any estimate, including how it handles rates, fees and payment timing. Actual card interest can be calculated daily, so an estimate may differ from statements.

Compare the result with hardship options and counseling as well. A new loan does not itself resolve the spending or income gap that made payments difficult.

  • Check every input instead of relying on a default.
  • Review both monthly payment and total cost.
  • Ask for clarification of any term the estimate does not model.

Keep going