Credit card consolidation is a strategy to combine multiple high-interest credit card debts into a single, potentially lower-interest loan or balance transfer. This can simplify payments, reduce the total interest paid over time, and provide a clearer path to becoming debt-free.
How the Calculator Works
This calculator helps you estimate the potential savings by consolidating your credit card debt. It compares the total interest you would pay on your current credit cards to the total interest you would pay on a new consolidation loan.
Total Credit Card Debt: The sum of balances across all your credit cards that you wish to consolidate.
Consolidation Loan APR (%): The Annual Percentage Rate (interest rate) of the new loan you might take out for consolidation (e.g., a personal loan or a balance transfer card's introductory rate if applicable for the term).
Consolidation Loan Term (Months): The duration (in months) over which you plan to repay the consolidation loan.
Average Current Credit Card APR (%): The typical interest rate you are currently paying on your credit cards. This is crucial for comparing the cost of your existing debt.
The Calculation Logic
The calculator performs two main calculations:
Total Interest on Current Credit Cards: This estimates the total interest paid if you were to pay off your current debt over the same term as the consolidation loan, at your average current APR. It uses a standard loan amortization formula for approximation, assuming consistent payments over the term.
Total Interest on Consolidation Loan: This calculates the total interest paid on the new consolidation loan using the provided APR and term.
The difference between these two figures represents your Estimated Savings. A positive saving indicates that consolidation could be financially beneficial, provided the terms are met.
Key Considerations:
Fees: Some consolidation methods (like balance transfers) may involve upfront fees, which are not directly accounted for here but should be factored into your decision.
Credit Score: Eligibility for lower-APR consolidation loans depends heavily on your credit score.
Discipline: Consolidation can be a tool, but managing spending habits is essential to avoid accumulating new debt.
Variable Rates: This calculator assumes fixed rates for simplicity. Be aware of variable rates on both credit cards and potential consolidation products.
Use this calculator as a guide to understand the potential financial impact of credit card consolidation.
function calculateLoanInterest(principal, annualRate, termInMonths) {
var monthlyRate = annualRate / 100 / 12;
var totalPayments = termInMonths;
var monthlyPayment = 0;
var totalInterestPaid = 0;
if (monthlyRate > 0) {
monthlyPayment = principal * (monthlyRate * Math.pow(1 + monthlyRate, totalPayments)) / (Math.pow(1 + monthlyRate, totalPayments) – 1);
} else {
monthlyPayment = principal / totalPayments;
}
var totalAmountPaid = monthlyPayment * totalPayments;
totalInterestPaid = totalAmountPaid – principal;
return totalInterestPaid;
}
function calculateConsolidationSavings() {
var totalDebt = parseFloat(document.getElementById("totalCreditCardDebt").value);
var consolRate = parseFloat(document.getElementById("consolidationLoanInterestRate").value);
var consolTerm = parseInt(document.getElementById("consolidationLoanTermMonths").value);
var currentRate = parseFloat(document.getElementById("averageCurrentInterestRate").value);
var resultMessageElement = document.getElementById("result-message");
var resultValueElement = document.getElementById("result-value");
resultMessageElement.textContent = ""; // Clear previous message
if (isNaN(totalDebt) || totalDebt <= 0 ||
isNaN(consolRate) || consolRate < 0 ||
isNaN(consolTerm) || consolTerm <= 0 ||
isNaN(currentRate) || currentRate 0) {
resultValueElement.textContent = "$" + savings.toFixed(2);
resultMessageElement.textContent = "You could potentially save this amount in interest!";
resultValueElement.style.color = "#28a745"; // Green for savings
} else if (savings < 0) {
resultValueElement.textContent = "$" + Math.abs(savings).toFixed(2);
resultMessageElement.textContent = "Consolidation may cost you more in interest. Consider alternatives.";
resultValueElement.style.color = "#dc3545"; // Red for increased cost
} else {
resultValueElement.textContent = "$0.00";
resultMessageElement.textContent = "No significant savings estimated with these rates and terms.";
resultValueElement.style.color = "#6c757d"; // Neutral color
}
}