Quick answer: Debts of 10,000 at 24%, 5,000 at 30% and 15,000 at 15% paid at 1,150 a month cost 9,936.92 in interest; one 30,000 loan at 9% over 48 months with a 1% fee costs 746.55 a month and 6,134.46 in interest and fee, saving 3,802.46.
How it's calculated
Current debts: each one is run month by month at its own rate and payment until it is cleared; the interest is added up. New loan: the combined balance is repaid at M = P·r ÷ (1 − (1 + r)^−n), and the fee (a percentage of the loan) is added to its cost. Some calculators instead assume you keep paying the same total and move each cleared debt's payment to the next, which shows less current interest.
A lower monthly payment is not the same as a saving. A longer term can cut the payment but raise the total cost, so the calculator shows both.
Islamic consolidation (for example a Tawarruq or Murabaha that settles existing debts) quotes a profit rate; the payment maths is the same. For a flat-rate offer, convert it first with the loan and Murabaha calculator.
Worked examples
- Three debts (30,000 in total), new loan 9%, 48 months, 1% fee: M = 746.55, saving 3,802.46
- Same debts, new loan 12%, 36 months, 1% fee: M = 996.43, saving 3,765.47
Frequently asked questions
When does consolidation not help?
When the new rate is not lower, the fees are high, or the term is much longer than your current debts would take. Also if the cards are used again after they are cleared.
Are there early settlement fees?
Possibly on the debts you pay off. In Saudi Arabia, a lender settling consumer finance early may ask for the remaining principal plus at most the profit for the next three months; ask each lender for the payoff amount.
Does it change my debt-to-income ratio?
Yes, if the new payment is lower. Check with the debt-to-income calculator.
Does consolidation reduce what I owe?
No. It moves the debts into one loan. You save only if the rate and fees are lower and the term isn't stretched too far.
Why can a lower payment still cost more?
A longer term means more months of interest. Compare the total interest and fee in the result, not only the monthly payment.
What should I do after consolidating?
Avoid building new card balances, as that leaves you with both the loan and fresh debt. Keep the cards for planned spending only, or close them.