What this calculator answers

When you carry a credit card balance at 22 percent and a lender offers you a personal loan at 12 percent to consolidate it, the answer feels obvious. But the real comparison is not the rate; it is the total cost over the actual payoff period, accounting for the fact that personal loans force you to amortize on schedule while credit cards let you drag minimum payments out for decades. This tool models both paths honestly.

How the math works

On the credit card side, the tool computes how long it would take to pay off the balance making either minimum payments or a fixed payment of your choice, along with the total interest cost. On the consolidation side, it computes the fixed monthly payment and total interest on a personal loan for the same balance at a lower rate. The comparison shows total interest paid and total months in debt on each path.

When to use it

• You have been pre-approved for a personal loan to consolidate credit card debt and want to verify the deal actually saves you money.
• You are deciding between a balance transfer card (with a transfer fee but a 0 percent intro period) and a fixed-rate personal loan.
• You want to see whether the discipline of a fixed loan payment will save you more than the flexibility of carrying credit card debt with extra payments when you can afford them.
• A family member or friend is in credit card debt and you want to show them concretely what consolidation could do.

Common mistakes

• Consolidating without addressing the spending that created the debt. Most people who consolidate without changing behavior end up with both the consolidation loan and a new credit card balance within two years.
• Ignoring origination fees. Many personal loans charge a 3 to 8 percent origination fee that comes out of the proceeds, effectively raising the loan's true rate by a meaningful amount.
• Choosing the longest loan term to get the lowest payment. A 60-month consolidation often costs more in total interest than the credit card it replaced, even at a lower rate.
• Failing to actually close (or commit to not using) the paid-off credit cards. The available credit becomes a temptation, not a backup.

A worked example

You have a 15,000 dollar credit card balance at 22 percent. Making minimum payments (about 2 percent of the balance), you would take roughly 30 years to pay it off and pay nearly 24,000 dollars in interest. A 36-month personal loan at 12 percent for the same 15,000 dollars has a monthly payment of 498 dollars and total interest of about 2,944 dollars. The consolidation saves you over 21,000 dollars in interest and gets you out of debt in three years instead of 30.

Frequently asked questions