Separate monthly breathing room from total savings
A payment you can manage matters. But reducing that payment and reducing the total cost are two different outcomes. The CFPB explains that extending a consolidation loan’s repayment period can increase its overall cost.
A lower-rate loan that costs more
Imagine a $10,000 card balance at a fixed 24% APR, paid down at $1,000 monthly with no new purchases. Compare a hypothetical loan with a 12% contract interest rate, a 120-month term and a 5% fee deducted from its proceeds. We estimate a larger principal so the amount received covers the full card balance.
| Measure | Keep the card | Take the loan |
|---|---|---|
| Starting monthly payment | $1,000.00 | $151.03 |
| Months to finish | 12 | 120 |
| Total repayment | $11,270.32 | $18,121.75 |
The loan starts $848.97 lower per month, but costs $6,851.43 more overall in this model. Its lower rate does not offset the much longer repayment schedule and fee.
Reproduce the example
- Open the calculator and enter one card: $10,000 balance, 24% APR and $1,000 fixed monthly payment.
- Enter a 12% loan interest rate, 120 months and a 5% fee deducted from proceeds.
- Compare total repayment and months, then review the separate scenario that keeps your $1,000 monthly budget.
- Replace the example with your actual payoff balance and proposed written loan terms.
Compare your own payment plans ↗
What if the current payment is unaffordable?
A cheaper total repayment is not useful if the required payment cannot fit your budget. Record both the affordable monthly amount and the extra total cost of extending repayment. Compare other terms and ask your current issuer what assistance is available. Avoid describing the difference between monthly payments as “savings” without also showing the complete cost.
Check these details before deciding
- Will the loan’s net proceeds clear every card, including interest up to the payoff date?
- Is the interest rate fixed for the whole term?
- Are there costs beyond the origination fee entered here?
- Can you make extra payments without a penalty, and how will they be applied?
- Will the plan still work without making new purchases on the paid-off cards?
Our example uses monthly interest approximations, cent rounding and fixed payments. Real card charges and payoff dates can differ. Read the full calculation method. For the fee calculation, see how origination fees affect the money you receive.
Corrections: hello@bonusfield.com. Do not send account numbers or statements.