Debt consolidation loan calculator

27 July2009

You can use our debt consolidation loan calculator to work out how much a debt consolidation loan could cost you each month.

If you have a number of debts, a debt consolidation loan could help to simplify your finances and even reduce your monthly outgoings - helping to free up cash for other things, like savings or simply making sure your monthly finances aren't stretched too much.

Rolling several debts into one can make managing them much simpler and easier to understand. At the same time, by extending your repayment period you could reduce the amount you pay towards your debt each month (but be aware that this could also increase the amount to be paid overall, because you'll be paying interest for longer).

How to use the debt consolidation loan calculator

Here's a quick step-by-step guide to using the calculator.

1. Select the amount you're thinking of borrowing by moving the 'Loan amount' slider.

2. Now select the desired repayment period using the second slider.

3. To see how much the above loan would cost at different interest rates, move the 'Interest rate' slider. Your monthly payment will appear on the right.

Remember: this is only an example, meant as a guide to help you work out how much you could pay on a debt consolidation loan. The actual terms you're offered will vary from lender to lender, based on a number of factors including your current financial circumstances.

Things to remember

Although a debt consolidation loan could save you money each month as well as over the duration of your loan, it's difficult to do both at the same time.

To demonstrate this, let's imagine you're consolidating credit card debts that currently charge 17% interest. Repaid over the same period of time, a debt consolidation loan with 10% interest will cost less.

However, if you choose to extend your repayment period, the benefit of this will be reduced. The longer you take to repay the loan - the longer you're paying interest for - the more you'll pay in the long run. And that means if you extend your repayment period past a certain point, you'll end up paying more interest overall regardless of the lower interest rate.

Of course, you may be content to pay more interest in the long run as long as your monthly payments have been reduced to a level you're more comfortable with.

Finally, remember that debt consolidation loans are not suitable for people with serious financial problems. There are other debt solutions that are more appropriate for people in those circumstances - so always seek advice from an expert if you're unsure.

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