Consider Consolidation with DebtDasher

The Consider Consolidation calculator shows you how much cash you can effectively free up each month by consolidating some or all of your loans and credit card balances into a single consolidation loan. The creditors and balances listed in the "List of Debts to be Consolidated" are those you chose to consider consolidating by clicking the Consolidate check boxes when you tallied Your Loan Debt and Your Credit Card Debt.

The math, of course, is done for you. The options you have to manipulate in the Consider Consolidation calculator are the potential consolidation loan's Interest Rate and Term in Months. You can get a ballpark interest rate by contacting a lender such as your credit union or a local community bank and asking for the typical interest rates on consolidation loans. The term of the consolidation loan is the length of time you'll have to pay it off. Generally, the term of a consolidation loan will 3-5 years. Three years will pay off much more quickly, but the monthly payment may not be small enough to save you money each month. Five years is longer, but the monthly payment is going to be smaller.

For example, a 3 year, $30,000 consolidation loan at 9% will have a monthly payment of $953.99. A similar 5 year loan of $30,000 at 9.25% will have a monthly payment of $626.40.

When you compare the $626.40 payment to the $953.99 payment, the apparent choice is to chose the 5 year loan and have a smaller payment by $327.59. However, you'll pay more for the longer loan. In this example, you'll pay $7,365.04 in interest over the five years. For a three year term, though, you'll pay only $4,343.71 in interest. The five year loan will cost you $3,021.33 more than the three year loan.

Choosing between the three and five year term in this example, is something you and your lender should discuss thoroughly.

You may have also noticed the slightly larger interest rate for the longer term loan. Longer loans usually have higher interest rates than shorter loans. Lenders know the longer the loan, the more time there is for a borrower to default. You pay more in interest to counter the risk the lender assumes.

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