The purpose of the Personal Debt Consolidation financial planning tool is to help people determine if debt consolidation is the right option for them. To use this tool you will need to enter information about your current debt situation, as well as information about a consolidation loan that you are considering.

This financial tool will then create a bar chart that will help you compare your current situation to that created by the consolidation loan scenario. You can change the terms in the consolidation loan fields to see what terms you need to make consolidating your debt worthwhile.

Personal Debt Consolidation Calculator Overview

Accumulating debt is increasingly easy to do in modern society. We live in a consumer-driven world and place great value on material possessions. To help people to satiate their wants and needs in this regard, there are thousands of credit cards, personal loan programs and zero down payment mortgage programs offered to consumers each day.

Of course, it isn’t just overspending on luxuries that can land you in heaps of debt – buying a car to replace your old clunker, refurbishing your bathroom, exorbitant hospital fees and student tuition are just four examples of perfectly legitimate and understandable spending that can land you in a situation where your debts exceed your income.

If you have accumulated a lot of unsecured debt and aren’t sure how you will manage to pay it off, then you aren’t alone in looking for a way out. One such way out is to consolidate your debt with a second mortgage or by refinancing your home.

However, before you consider consolidating your debt it is wise to determine if this is truly your best option. Use our Personal Debt Consolidation financial planning tool to ascertain how much you are currently repaying, and how much less per month you could be repaying if you consolidated your debt.

 

How To Use The Personal Debt Consolidation Calculator

Here's what to do:

  1. Enter the outstanding balance and interest rate for each of your credit cards in the ‘Credit card debt’ section
  2. If you have outstanding auto loans, add these under the ‘Auto loan debt’ section
  3. Under the ‘Other loans & instalment debt’, include any other loans you are thinking about consolidating
  4. Under the ‘New consolidated loan’ section, specify your interest rate and preferred term – the loan balance and payment will automatically populate
  5. Click ‘View Report’, to see a direct comparison of your debts in their current form, and how they will look if you consolidate
  6. Compare the monthly payments, length of time to pay off the debt, and total interest to inform your decision.

Who is this Calculator for?

This calculator is most useful if you:

  • Have multiple unsecured debts from different sources
  • Want to make your finances easier to organize
  • Want to reduce your monthly payment to a manageable amount while still working towards paying off your debt as soon as possible.

I’m still not quite sure how consolidating works, can you explain?

It’s actually much simpler than it sounds! The basic idea is to take out a loan equal to or greater than the total amount of debt you currently have. You then use the money from this loan to pay off the individual lenders that you owe money to, leaving you with one larger debt instead of multiple. Consolidating loans can drastically reduce your monthly repayments, although it often means taking a little longer to repay the full amount owed. It is also worth remembering that you will usually pay more interest in the end.

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