Personal Loan vs Credit Card Debt Consolidation Calculator

Understanding Personal Loan vs Credit Card Debt Consolidation Calculator

Debt consolidation through a personal loan can be a powerful strategy for managing high-interest credit card debt. This calculator helps you compare the potential savings and benefits of consolidating your credit card balances into a single personal loan with a potentially lower interest rate.

How Calculations are Derived

The calculator uses standard amortization formulas to compare two scenarios:

1. Current Credit Card Debt Path:

• Monthly Payment = P * (r/12) / [1 - (1 + r/12)^-n]
• Where P = Principal, r = APR, n = Term

2. Personal Loan Consolidation Path:

• Similar formula but includes origination fees and typically lower APR

Legal/Financial Implications

• Personal loans are legally binding agreements
• Credit score impact considerations
• Tax implications of debt consolidation
• Impact on credit utilization ratios

Case Studies

Case Study 1: High-Interest Credit Card Debt

$20,000 at 22% APR consolidated to 8.9% APR personal loan

Case Study 2: Multiple Card Consolidation

$35,000 across 4 cards (avg 19% APR) to single 7.5% loan

FAQ

1. Will consolidation hurt my credit score?
2. What if I can't qualify for a low APR?
3. Should I close my credit cards after consolidation?
4. How do origination fees impact savings?

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