📋 Table of Contents
How to Calculate Debt Consolidation Savings
Calculating genuine consolidation savings requires comparing your current total interest costs against the new loan's total cost, including any fees.
Key Numbers to Compare
| Factor | What to Calculate |
|---|---|
| Current weighted average rate | Blended rate across all existing debts |
| New consolidated rate | The rate offered on the new loan |
| Total cost comparison | Include any origination fees in the new loan's true cost |
Calculating Your Weighted Average Rate
Multiply each debt's balance by its interest rate, sum these figures, then divide by your total debt — this gives your true current blended rate to compare against the new consolidated loan offer.
Factor in the Payoff Timeline
A lower rate with a longer term can sometimes cost more in total interest than a slightly higher rate with a shorter term — compare total cost over the full loan life, not just the monthly payment.
Common Mistakes
Comparing only interest rates without factoring in origination fees, which can meaningfully offset apparent savings from a lower rate.
Frequently Asked Questions
Calculate your current weighted average interest rate across all debts and compare it against the new loan's total cost including fees — genuine savings require the new option to be meaningfully cheaper overall.
Not necessarily — a lower monthly payment often means a longer term and more total interest paid. Compare total cost over the full loan life, not just the monthly payment amount.