$18,000 of cards consolidated

Cost or constraint

Current weighted rate: 22%

Timing or value

New loan: 12% for 60 months

Cost or constraint

Origination fee: 5% ($900)

Timing or value

Loan payment: about $400

Cost or constraint

Total loan cost: about $6,900 including fee

Keep the time period, usage and exit point consistent across both choices.

Compare the alternatives on equal terms

Build the keep-current-debt case

List each balance, rate, minimum rule and planned payment. A comparison without a realistic current payoff strategy can exaggerate consolidation savings.

Model net proceeds

If the origination fee is deducted, verify the loan still pays every target account. If financed, include interest on the fee.

Do not confuse payment relief with savings

Extending repayment can lower the required payment while increasing total interest. Compare at a common payoff date and also show required cash-flow relief.

Address re-borrowing risk

Closing accounts can affect flexibility and credit profile; leaving them open can enable new balances. The financial model should not pretend behavior is automatic.

This decision belongs in The Real Cost of Borrowing. Use Compare Loan Terms: Put Payment Relief Beside Total Interest to check the next assumption, then test the numbers in the Loan Comparison Calculator.

Make both options comparable

A consolidation is useful only when old balances are actually retired and the comparison uses the same payoff target. Payment relief created only by a longer term is not a cost saving.

Records for the before-and-after test

  • Payoff amount, APR and minimum for every old account.
  • New proceeds, fees, rate, term and total scheduled repayment.
  • Plan for preventing paid-off revolving balances from returning.
  • Collect balances, rates and minimum-payment formulas.
  • Choose the payment you will actually sustain without consolidation.
  • Compare total interest and fees on the same payoff horizon.
  • Check whether loan proceeds fully cover target balances.
  • Create a written rule for card use after payoff.

Compare both paths on the same clock

Loan Comparison Calculator

Compare offers on the same amount and time horizon, including their different fees.

Where the comparison stops being fair

  • Comparing the new payment only with current minimums.
  • Ignoring a deducted origination fee.
  • Assuming all cards have the same rate.
  • Counting an unverified future refinance as part of the plan.

Questions this decision usually raises

Does consolidation reduce debt?

No. It changes structure; debt falls only through payments or negotiated forgiveness.

Is a balance transfer consolidation?

It can consolidate revolving balances, but promotional expiry and transfer fees require a different cash-flow model.

What if the new term is longer?

Compare total cost and balances at the date the old plan would have ended, not just final payments.

Evidence behind the comparison

This page explains a calculation, not a personal recommendation. Contract rules and consumer protections vary by product and jurisdiction. Check the current agreement and official guidance before acting.