How to Calculate Consolidation Loan Payment Savings

Consolidating your debt is when you combine all of your loan balances into one account. Instead of paying several creditors you only have to pay one. This process usually saves you money by lowering your interest rates, which leads to a lower overall monthly payment. If you know how much you are paying monthly before you consolidate your debt, you can calculate how much you will save on a monthly basis after you have consolidated your debt. You can increase the amount of your monthly savings by getting the longest loan term you can.

Instructions

1

Add up all of your monthly payments for each individual loan, or creditor that will be included in the consolidation loan. A consolidation loan can include credit cards, car loans, personal loans, student loans and even home equity lines of credit.

2

Calculate the balances owed on each debt you wish to consolidate. You can call each creditor to get this information directly or you can rely on the last statement you received. The balances will be needed when it is time to find out the terms and conditions of your consolidation loan.

3

Contact a lender and let the representative know you wish to consolidate your debt. Find out what the interest rate will be as well as the new payment. The lender will be able to provide you with this information after you submit a credit application.

4

Compare your new payment with the old payment. For example if you have 10 creditors to pay, before your consolidation loan, with monthly payments of $1,200 total, and your new payment is $500 after the consolidation loan, your savings are $700 per month.