Debt consolidation involves taking out a new loan to pay off multiple smaller debts. The goal is to secure a lower interest rate, reducing your monthly costs. However, personal loans often come with "Origination Fees" (typically 1-8% of the loan amount). This calculator tells you how many months it takes for your interest savings to pay back that fee.
The biggest risk in debt consolidation is behavioral, not mathematical. Many people pay off their credit cards with a consolidation loan, feel relief, and then immediately start charging up the empty cards again. This leaves them with the new loan plus new credit card debt. Only consolidate if you have a plan to stop using debt.
Be careful if you are using a Home Equity Line of Credit (HELOC) to consolidate. While the rates are lower, you are converting unsecured debt (credit cards) into secured debt (your house). If you default on credit cards, you damage your credit score. If you default on a HELOC, you lose your home.