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This Consolidation Loan Investment Calculator is designed to show the financial benefits you could realize by investing your monthly savings from a consolidation loan. While consolidating high-interest credit cards and other loans into a single low-interest loan will save you money each month, investing those savings can produce even greater returns over the long term. This financial planning tool looks at what you're currently paying toward credit cards, auto loans and other consumer debt, calculates what you could save each month by rolling those into a low-interest consolidation loan, and then looks at what you could earn over the long term by regularly investing those savings.
Consolidating high-interest rate credit cards, auto payments and other consumer loans into a single low-interest consolidation loan is a great way to save money and pay down your debts. But the potential financial benefits go beyond that.
Consolidating debts gives you a little extra money to work with each month. What you do with that money can have a significant impact on the health of your future finances. Instead of using it to put more spending money in your pocket, turning it into a series of small but regular investments can pay big dividends down the road, thanks to the power of compound interest.
Consider: A savings of only $60 a month on your credit cards, consistently put into investments with a fairly conservative return of 7.5 percent a year will grow into an $80,000 nest egg in 20 years! Keep going for 30 years and you'll have nearly $200,000! That's a good chunk of a healthy retirement portfolio right there.
This financial planning tool can handle information from up to 19 individual loans you currently have, including credit cards, auto loans, personal loans, real estate loans and others.
To use it, enter the balance owed, interest rate and monthly payment for all your outstanding loans that you'd like to roll into a consolidation loan. If you like, the calculator will determine your minimum monthly payment on your credit cards, assuming a fairly standard minimum of 4 percent of the outstanding balances.
On all other loans the calculator will determine the number of payments you have remaining based on the amount owed, interest rate and monthly payments. Remember to enter the current loan balance and not the original loan amount.
Under "New consolidated loan" enter the total amount you'd like to borrow. The calculator doesn't figure that amount automatically, in case you wish to borrow more than the total owed. Consolidation loans also are generally amounts in round figures, so you'll often borrow at least a bit more than the total owed anyway. The calculator assumes you'll be investing that amount as well.
Note that you do not need to invest all of your savings to use this calculator. It can also calculate the financial return of investing just a portion of your consolidated loan savings, in terms of a percentage, as well.
For guidance on what rate of return to enter for your investment, click on the heading for that box. Clicking on the heading for any box will provide a definition of or further information about that box.
The "View Report" button at the top of the page will provide a summary of your current loan debts vs. a consolidation loan, as well as a chart showing the annual amortization of your consolidation loan and growth of your investment account.