Debt can build up through personal loans, credit cards, and other financial obligations that eat into monthly income. With debt consolidation loan calculator online tools, you can get a better estimate while you compile multiple debts into one loan.
What is a Debt Consolidation Loan Calculator?
Debt consolidation loan calculator online tools are useful tools to get a better perspective on managing your debt. The tool helps users estimate potential savings and payment structures when combining multiple debts into a single loan.
Components of Debt Consolidation Loan Calculator Online Tools
These tools consider various aspects of your existing loan, they then estimate what your monthly payments might look like. Also, it also helps you preview how much you can save if you choose to consolidate them. Here are the main calculator components you need to fill in.
- Debt amount: each debt amount across multiple accounts (generally 10 and up to 12 different accounts);
- Interest rates: the current interest rate of each account on your outstanding debt;
- Monthly payment: the amount you currently pay for each debt;
- Loan term: the period you plan you repay the consolidated loan;
- The interest rate of the consolidated loan.
Those are the basic components you need to fill in for a new consolidated loan, but sometimes even less. On the other hand, some more thorough calculators need more components. Below are the possible components you need to fill in based on your current finances.
- Upfront cost: initial expenses that borrowers incur when taking out a consolidated loan (origination fees, prepayment penalties, insurance costs, and miscellaneous fees). Some lenders require these fees, so get to know their terms first and then calculate your total loan again.
- Income tax rate: both of your federal and state income tax rates.
- Installment loans: there is a different space in an online calculator for auto loans, boat and RV loans, and education loans.
- Credit score.
- Saving rate: the percentage you can get if you decide to put the closing cost into your savings account.
Using these inputs, these particular tools can give you a snapshot of your potential monthly payment, total interest savings, and the duration to pay off the newly consolidated loan. Keep in mind that this is just an estimation since lenders have their specific terms.
2 Top Debt Consolidation Loan Calculator Online Tools
You can simply type in “debt consolidation loan calculator” on your browser and find various websites offering free calculators for this particular loan. After understanding the components, you can easily access their calculator and start estimating. Between the options, here is the top calculator for your reference.
1. Bankrate
Bankrate has a comprehensive calculator with an intuitive and user-friendly interface, accessible to users with varying levels of financial knowledge. The result of the calculation shows the estimated monthly payment, total interest savings, and payoff timeline.
On top of that, Bankrate also offers insights into various methods of consolidating debt, namely, personal loans, balance transfers, home equity loans, and debt management plans. This feature provides better options for the different avenues available for managing your debt more effectively.
2. NerdWallet
NerdWallet uses a step-by-step approach on their calculator. The tool indirectly guides you by asking for just enough information so you don’t get confused. After filling in, the calculator shows your current total debt, combined interest rate, total monthly payment, and debt-free timeline.
NerdWallet also provides pre-qualification with multiple lenders, allowing you to compare loan offers based on your particular financial situation across multiple lenders. This feature conveniently streamlines you to find the best lender.
How a Debt Consolidation Loan Affects Your Credit Score
One aspect that debt consolidation loan calculator online tools rarely ask, but in practice, lenders always look at is your credit score. Your credit score is the representation of your creditworthiness and it will affect your loan terms. Learn about the effect if you are considering taking a debt consolidation loan, as follows.
Short-Term Effect
The following actions will temporarily fluctuate your credit score but are necessary for the overall loan process.
1. Hard Inquiries
Lenders assess your credit report by hard inquiry (of course, with your consent) when you apply for a debt consolidation loan. This action leads to a temporary decrease in your credit score, typically 3 to 10 points. Hence, multiple hard inquiries in a short period mean you are actively seeking a new loan.
2. New Account Opening
Taking new loans can lower your average account age, which is a factor in credit scoring. This action will result in a slight decrease in your credit score.
3. Credit Utilization Ratio
By merging multiple loans into one, you appear less reliant on credit card debt. This can improve your credit utilization ratio and viewed positively in your credit score.
Long-Term Effect
These are actions you make while you are in a term. If you obey the loan term carefully, you can make up for the short-term credit score loss and even improve.
1. Improved Payment History
About 35% of your credit score is from your payment history. So, making payments on time is crucial to maintaining good credit.
2. Simplified Payments
Consolidating multiple debts into a single loan reduces the chase of missing payments, which ultimately improves your credit score.
3. Potential for Increased Available Credit
If you keep the old account open after consolidating, you have fewer total outstanding credit card balances while the total credit limit is increased. This will affect the credit utilization ratio positively and boost your credit score.
So, while debt consolidation loan calculator online tools help you with surface calculation, you need to consider these deeper, more personal calculations on your own. Taking holistic consideration in this action can greatly improve your financial situation in the future.
Guided by Debt Consolidation Loan Calculator Online Tools
With these simple yet powerful tools, you can have a better visualization of your financial decisions. Although, it is essential to have a clear understanding of each component since you are doing it online. Consider these tools just as a baseline of your potential savings and routes to a debt-free future.
While these calculators are immensely helpful, wisely consider consulting a financial advisor for better insights that you might not encounter. If you have a complex financial situation, personalized guidance is a better choice than an online calculator.