A longer term
4 years gives $387. 7 years gives -$4,906 — a difference of $5,292 less (-1368.6%).
The same loan over seven years instead of four: a smaller payment and a larger total, which is the trade every consolidation advert leaves out.
| Input | 4 years | 7 years |
|---|---|---|
| Credit cards(usd) | 12,000 | 12,000 |
| Card APR(percent) | 24.5 | 24.5 |
| Paying a month on the cards(usd) | 400 | 400 |
| Other debt(usd) | 8,000 | 8,000 |
| Rate on it(percent) | 11 | 11 |
| Paying a month on it(usd) | 250 | 250 |
| Consolidation loan rate(percent) | 13.5 | 13.5 |
| Consolidation loan term(years) | 4 | 7 |
| Origination fee(percent) | 5 | 5 |
| Saved by consolidating | $387 | -$4,906 |
Every figure, both ways
| Step | 4 years | 7 years | Difference |
|---|---|---|---|
| Total debt | 20,000 | 20,000 | 0 |
| Paying a month now | 650 | 650 | 0 |
| Blended rate you pay now(%) | 19.1 | 19.1 | 0 |
| Months to clear at what you pay now | 42.61 | 42.61 | 0 |
| Interest if you carry on | 7,695.41 | 7,695.41 | 0 |
| Origination fee | 1,000 | 1,000 | 0 |
| Loan you need, fee included | 21,052.63 | 21,052.63 | 0 |
| Consolidation payment a month | 570.03 | 388.73 | -181.29 |
| Interest on the loan | 6,308.71 | 11,601.07 | +5,292.37 |
| Interest plus fee | 7,308.71 | 12,601.07 | +5,292.37 |
| What consolidating saves | 386.71 | -4,905.66 | -5,292.37 |
| Change in the monthly payment | -79.97 | -261.27 | -181.29 |
| Months sooner it clears | -5.39 | -41.39 | -36 |
Questions people actually ask
- Does raising consolidation loan term change the answer in proportion?
- No, and that is the point of putting them side by side. Consolidation loan term changes by 75% while saved by consolidating changes by 1369% in the opposite direction. The step table below shows which line breaks the proportion.
- What is held constant between the two columns?
- Everything except consolidation loan term: credit cards, card apr, paying a month on the cards, other debt, rate on it, paying a month on it, consolidation loan rate, origination fee. That is what makes the difference attributable — change two things at once and neither column tells you which one moved the answer.
- Can I compare my own two numbers?
- Yes, from the address bar: add ?a.loan_years=… and &b.loan_years=… to set each side, and a parameter without a prefix sets both at once. The page is computed per request, so any pair works — these two are only the ones worth a link.
Change either side by adding query parameters — ?a.loan_years=… and b.loan_years=…. A parameter without a prefix sets both sides at once. Source: CFPB — debt consolidation and credit counselling, Federal Reserve — consumer credit interest rates (G.19)