Understanding debt consolidation
Why a fixed loan beats minimum payments
The reason credit card debt is so sticky isn't just the high APR — it's the structure of the minimum payment. Minimums are a small percentage of your balance, so as the balance falls, the payment falls too. That keeps you in debt far longer than the rate alone would suggest. A balance that feels manageable at $200 a month can take decades to clear when the payment keeps shrinking.
A consolidation loan flips that. You borrow a fixed amount, at a fixed rate, repaid over a fixed term — and the payment never shrinks. That single structural change forces the balance to zero on a schedule, and because the rate is usually lower, you pay far less interest along the way.
Personal loan vs. HELOC
Two common consolidation tools work differently. A personal loan is unsecured: no collateral, a fixed rate, and a fixed term, usually two to five years. A HELOC — home equity line of credit — is secured by your house. That security usually buys a lower rate, but it comes with real risk: miss payments and your home is on the line. HELOCs are also often variable-rate, so the number can move on you.
This calculator works for either. Enter the APR and term you've actually been quoted, and compare the total interest against your cards. Just remember the calculator can't price in the risk of putting your home up as collateral — that's a judgment only you can make.
Consolidation doesn't erase debt — it restructures it. The win comes from a lower rate and a payment that actually finishes the job.
The catch nobody mentions
Consolidation has a behavioral trap. Once your cards are paid off by the loan, they're sitting there with a zero balance and full available credit. The single biggest reason consolidation fails is that people run the cards back up — and now they have a loan payment plus new card debt. The math in this calculator only works if you stop adding to the cards.
That's exactly the kind of drift the Pay Down app is built to catch. It tracks every card balance continuously, so if the debt starts creeping back after you consolidate, you'll see it long before it becomes a problem again.