General Debt Consolidation Questions
Find answers to common questions about using our debt consolidation calculator, how it works, and how it can help simplify your finances.
Table of Contents
What is debt consolidation?
Debt consolidation combines multiple debts into a single loan with one monthly payment. This simplifies your finances and potentially reduces your interest rate, lowering your overall borrowing costs.
Is debt consolidation right for me?
Debt consolidation may benefit you if you have multiple high-interest debts, struggle to track payment due dates, or want simpler financial management. Our calculator helps determine if consolidation would save you money based on your specific debt situation.
What types of debt can be consolidated?
Most unsecured debts can be consolidated, including credit cards, personal loans, medical debts, and private student loans. Secured debts like mortgages and auto loans typically require specialized programs.
How does debt consolidation differ from debt settlement?
Debt consolidation combines your debts into a new loan that you repay in full. Debt settlement involves negotiating with creditors to accept less than what you owe. Settlement typically has a much more significant negative impact on your credit score than consolidation.
Calculator Usage Questions
How do I use the debt consolidation calculator?
Enter details for each current debt (balance, interest rate, monthly payment) and potential consolidated loan terms (interest rate and term length). The calculator shows a side-by-side comparison of your current situation versus the consolidated option.
What does “Remaining Term” mean in the debt input section?
The “Remaining Term” is the number of months left until your debt is fully paid off under the current payment schedule. This field is optional—if you don’t know it, the calculator will estimate it based on your balance, interest rate, and current monthly payment.
What fees should I include in the “Upfront Fees/Costs” field?
Include any origination fees, balance transfer fees, closing costs, or other charges associated with obtaining the new consolidated loan. These fees are typically added to your loan amount and financed over the loan term.
Can I save or share my calculation results?
Yes! After calculating your results, you can use the export options at the bottom of the results section to export as PDF, CSV, print your results, or email them to yourself or a financial advisor.
Credit Score Impact Questions
How does the Credit Score Impact Estimator work?
The Credit Score Impact Estimator analyzes how debt consolidation might affect your credit based on:
- Your current credit score range
- Whether you’ll close paid-off accounts
- How many loan applications you plan to submit
It provides separate estimates for short-term and long-term impacts with visual meters showing the potential effect strength.
Why might my credit score temporarily decrease after consolidation?
Several factors can cause a temporary credit score decrease:
- Hard inquiries from loan applications
- Opening a new credit account (which reduces your average account age)
- Closing old credit accounts (if you choose to do so)
- Initial high utilization on the new consolidated loan
How long does it take for a credit score to recover after debt consolidation?
Recovery time varies, but typically your score may dip for 1-6 months before beginning to improve. Most negative effects fade after 12 months, while positive effects from consistent payments and debt reduction continue to build over time.
Does closing paid-off credit card accounts hurt my credit score?
Yes, closing old accounts can negatively impact your score in two ways:
- It reduces your total available credit, potentially increasing your credit utilization ratio
- It may lower your average account age, especially if the closed accounts are older
The Credit Score Impact Estimator factors this in when you select “Yes” to the account closure question.
How do multiple loan applications affect my credit score?
Each loan application typically results in a hard inquiry, which can lower your score by a few points. However, credit scoring models generally treat multiple inquiries for the same type of loan within a 14-45 day period as a single inquiry, recognizing that you’re rate-shopping rather than seeking multiple new credit lines.
What credit factors are most affected by debt consolidation?
Five main factors are affected:
- Credit utilization: Typically improves as revolving accounts are paid off
- Payment history: Improves with on-time payments on the new loan
- Credit mix: May improve by adding an installment loan if you primarily had revolving debt
- Length of credit history: May be negatively affected if you close old accounts
- New credit inquiries: Temporary negative impact from application inquiries
Alternative Payoff Strategy Questions
What is the debt snowball method?
The debt snowball method involves paying minimum payments on all debts while putting extra money toward the smallest debt balance first. Once that debt is paid off, you roll its payment into the next smallest debt, creating momentum as you eliminate each debt. This method provides psychological wins that help maintain motivation.
What is the debt avalanche method?
The debt avalanche method involves paying minimum payments on all debts while putting extra money toward the debt with the highest interest rate first. Once that debt is paid off, you move to the debt with the next highest rate. This method minimizes total interest paid and is mathematically optimal.
Which payoff method is best: consolidation, snowball, or avalanche?
Each method has advantages:
- Consolidation simplifies payments and may lower interest rates
- Snowball provides psychological wins that boost motivation
- Avalanche saves the most money in interest
Our calculator compares all three to help you choose the best approach for your situation and preferences.
Amortization Schedule Questions
What is an amortization schedule?
An amortization schedule shows the breakdown of each loan payment into principal and interest over the life of the loan. It demonstrates how your loan balance decreases with each payment until the debt is fully paid.
Why does more of my early payments go toward interest?
Loan payments are calculated to remain consistent throughout the loan term. Since interest is calculated based on the outstanding balance, which is highest at the beginning of the loan, early payments contain more interest. As the principal decreases, less interest accrues, and more of each payment goes toward reducing the principal.
How can I use the amortization schedule to pay off my loan faster?
The amortization schedule shows exactly how much principal you’re paying each month. By making additional principal payments (even small ones), you can reduce the outstanding balance faster than scheduled, which reduces future interest and shortens the loan term.
Technical Questions
Is my financial information secure with this calculator?
Yes. All calculations are performed locally in your browser. No data is sent to or stored on any server. You can even use the calculator offline once the page has loaded.
Can I use this calculator on my phone or tablet?
Yes, the debt consolidation calculator is fully responsive and works on smartphones and tablets. The interface automatically adjusts to provide an optimal experience regardless of your device’s screen size.
How accurate are the calculator’s results?
The calculator provides estimates based on the information you enter. The accuracy depends on the precision of your inputs. For exact figures, consult with the lender offering your consolidation loan, as they may have additional fees or terms not accounted for in our basic calculations.
