Compare paying off existing debt at its current rate with moving it to a consolidation loan over the same period, including setup costs.
Use this tool to test whether a debt consolidation loan saves money compared with paying off the same balances where they are now. Enter the total you would move, the average rate you pay today, the rate offered on the consolidation loan, the number of years you would take to clear the debt and any fees for the new loan.
How it works. The tool calculates the level monthly payment needed to clear the balance in the same number of years at each rate, then shows the difference and how many months it takes for that difference to cover the fees. Comparing over the same period is the honest test: a consolidation loan that only looks cheaper because it runs longer can cost more in total.
Worked example (illustrative). $20,000 at an average 21% cleared over 4 years needs about $619.31 a month. At 11% over the same 4 years the payment is about $516.91, a difference of about $102.40 a month. With $300 of fees, the saving over 4 years is about $4,615. If you instead stretch the new loan to 5 years, the payment falls to about $434.85 but total interest rises to about $6,090.91.
Limits. Credit card minimum payments do not clear a balance on a fixed schedule, so use the payment you could actually afford. The tool does not model a card balance you run up again after consolidating, which is the most common reason consolidation fails. Rates are illustrative. Read the consolidation worked example.
Worked Examples and Checklists
An illustrative Canadian example of consolidating $20,000 of card and credit balances into one loan, showing the saving, the trap of a longer term and the alternatives.
Mistakes, Complaints and Official Sources
What to do in Canada when personal loan payments become unmanageable: talking to the lender, non-profit credit counselling, debt management programs and consumer proposals under the BIA.
