A debt consolidation calculator is a tool used to determine if debt consolidation is an effective way to reduce one's debts. Many banks, consolidation companies, and websites offer debt consolidation calculators free of charge; usually because debt consolidation itself is not free. By plugging some numbers into a form, the calculator can quickly and easily tell you the feasibility of consolidation.

Before you use a debt consolidation calculator, gather all of your loan information into one place. You will need to know the amount of your mortgage, along with the monthly interest rate and payment amount. If you have any home equity loans, or home equity lines of credit, you will need the same information for those as well. In addition, you will need to know your car payment amount and interest rate if you have an auto loan. Finally, you will need to state the term of the loan; i.e., the number of months you have remaining to pay off the loan.

Next, take stock of any other debts you have. This includes credit card debt, student loans, personal loans, income tax, etcetera. For all of your debts, you need to know the remaining balance and the interest rate you pay, in addition to any late fees that are accruing. Once you have all of this information, you can enter it into the form that has been provided by your bank, debt consolidation company, or free website. The debt consolidation calculator will take all loan balances and interest rates into account.

After you have entered your information into the debt consolidation calculator, the company will generally be able to tell you how they can help. This might be reducing your total debt, reducing your interest rate, or even suggesting bankruptcy. They might offer a quote to give you an idea of what debt consolidation will cost you, along with some advice for saving money. For most people, a debt consolidation calculator is the first step toward reducing debt and gaining a more realistic understanding of their options.

Keep in mind that most debt consolidation companies are for-profit companies, and that consolidating your debt or reducing it in this manner will generally have a negative impact on your credit score. Some debt consolidation companies will request that you stop making payments on credit cards, or other loans, so they can negotiate with the company. Stopping payments, however, will affect your credit report. Non-profit credit counseling services exist as well, which should be another option to check into that will not negatively affect your credit.