Debt · Canada
Debt consolidation.
Compare your existing debts against a single consolidated loan. See potential monthly and lifetime interest savings before you commit.
Debt consolidation replaces several debts with one loan; it saves money only if the new loan has a lower rate or a shorter payoff than the debts it replaces, once any fees are counted. This calculator compares your current balances, rates and payments with a single consolidated loan.
Source: FCAC — Debt consolidation; FCAC — Paying off your debt · As of
Cite this page: TNAADO Tools, “Debt Consolidation Calculator”, https://tools.tnaado.ca/calculators/debt/consolidation/
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What is debt consolidation?
Debt consolidation is the process of combining multiple debts into a single loan, typically with a lower interest rate and a single monthly payment. This can simplify finances and save money on interest.
Benefits
- Lower monthly payment via lower rate or longer term.
- Simplified finances: one payment instead of many.
- Lower interest rate than typical credit cards.
- Fixed payoff date: know when you're debt-free.
Things to consider
- Origination or application fees on some loans.
- Longer term can mean more total interest even with a lower rate.
- Consolidation won't help if new debt keeps accumulating.
- Some loans require collateral (e.g. home equity).
- Best rates require good credit.
Worked example: three debts totalling $15,000
The starting case has three debts: a $5,000 credit card at 19.99% (minimum $150), a $3,000 credit card at 22.99% (minimum $90) and a $7,000 personal loan at 12% (minimum $250). Together that is $15,000 owed and $490 a month in minimums. The calculator pays each debt off on its own minimum and adds up the interest: $5,438 over 54 months (the longest of the three). Replacing them with one $15,000 loan at 8.5% over 3 years costs $474 a month and $2,046 of interest, paid off in 36 months. The page reports an interest saving of $3,391.
| New loan | Monthly payment | Interest on new loan | Time to pay off | Interest saving shown |
|---|---|---|---|---|
| 8.5% over 3 years | $474 | $2,046 | 36 months | $3,391 |
| 8.5% over 5 years | $308 | $3,465 | 60 months | $1,973 |
| 20% over 3 years | $557 | $5,068 | 36 months | $370 |
- A longer term lowers the payment and raises the interest. Stretching the same 8.5% loan from 3 to 5 years drops the payment from $474 to $308 but the interest rises from $2,046 to $3,465, and the payoff is now 60 months, longer than the 54 months of the original debts.
- Read the saving as a comparison of two repayment plans, not only of two rates. The old debts are paid on minimums over 54 months; the new loan is scheduled to finish in 36 months. At a 20% rate the new loan still shows a $370 saving on this basis, largely because it is repaid faster, and its $557 payment is above the current $490.
- Keep the freed-up cash flowing to debt. The new payment is $474 against $490 of minimums; the $16 difference is not counted as extra payment.
Next steps: see a single card in detail with the credit card payoff calculator, compare a fixed loan with the personal loan calculator, or work out a payoff order with the debt snowball calculator.
How this is calculated
- Current debts: for each debt, interest accrues monthly at rate ÷ 12 on the balance, and the fixed minimum is paid until the balance is cleared (capped at 600 months). Interest and months are totalled across debts, and the longest payoff is shown.
- Consolidated loan: payment = B × i(1 + i)n ÷ ((1 + i)n − 1), with i = new rate ÷ 12 and n = term in months; total interest = payment × n − B.
- Savings: monthly = current minimums − new payment; interest = current interest − new interest; total = (balance + current interest) − total paid on the new loan.
Fees, closing costs and prepayment charges on the old debts are not included, and nor is any new borrowing. The Financial Consumer Agency of Canada cautions that a poor credit history may mean you only qualify for a consolidation product with a higher interest rate than your current products, in which case consolidation will likely increase your debt, and that consolidation can help your credit score if you make payments on time and reduce the number of high-balance accounts (FCAC, Debt consolidation, checked 1 October 2026). See also the FCAC’s guidance on paying off debt.
General information, not financial advice. A non-profit credit counsellor can review whether consolidation fits your situation.
TNAADO Inc. · Toronto
Consolidation lowers the rate; it does not remove the debt
Consolidation replaces several balances with one at a lower rate. The saving is real and comes from two places: the lower interest rate, and a fixed amortization that forces the balance down instead of letting a minimum payment hold it roughly steady. Whether total cost actually falls depends on the term as much as the rate, because a lower rate stretched over a longer term routinely costs more in total than the debts it replaced.
The mistake people make. Consolidating and leaving the cards open. The balances go to zero, the limits do not, and the common outcome is a consolidation loan plus rebuilt card balances inside two years. The second issue is what the new loan is secured against: rolling unsecured debt into a mortgage or a HELOC lowers the rate and turns a debt your house was never at risk for into one it is.
Frequently asked questions
Does debt consolidation always save money?
No. It saves money only if the new loan’s rate and term produce less total interest than the debts it replaces. On the example, an 8.5% loan over 3 years saves $3,391, but stretching it to 5 years cuts the saving to $1,973, and a 20% loan saves little.
What interest rate do I need for consolidation to make sense?
A rate meaningfully lower than the weighted average of your current debts, with a term no longer than you would otherwise take. Here the balance-weighted average rate of the three debts is about 16.9%, which is why an 8.5% loan helps. If the best rate you qualify for is higher than your current rates, the FCAC says consolidation will likely increase your debt.
Why does the calculator compare against minimum payments?
Minimum payments are the baseline you are actually committed to. If you already pay more than the minimums, your real current cost is lower than shown, and the comparison flatters consolidation. Enter your real payments if they are higher.
Will consolidating hurt or help my credit score?
The FCAC says consolidation may improve your credit score if you make payments on time and reduce the number of high-balance accounts. Missed payments on the new loan would hurt it.
Are there fees I should add?
Yes: origination or application fees, and any prepayment charge on the debts you pay off. The calculator does not include them, so subtract them from the savings it shows.
Disclaimer
This calculator provides estimates for educational and informational purposes only. Actual loan terms, rates, and savings will vary based on your creditworthiness, lender policies, and current market conditions. Consider consulting a financial advisor or non-profit credit counselor before consolidating.