Three current debts total $25,000 at a balance-weighted APR of 17.8%. Offer A uses a 9.5% APR, 36-month term, and 2% upfront origination fee; it produces $5,428 savings versus the modeled current payoff. Offer B lowers the required monthly payment further, but its 72-month term, 13.5% APR, and 6% fee produce $3,353 additional cost.
The offers demonstrate why a payment quote is incomplete. Payment answers a monthly cash-flow question. Total out-of-pocket cost answers a different question by including principal, interest, and fees across the entire term.
Scenario at a glance
- Current principal
- $25,000
- 17.8% weighted APR
- Current monthly budget
- $790
- 3 yr 8 mo modeled payoff
- Offer A total effect
- $5,428 savings
- $801 monthly
- Offer B total effect
- $3,353 additional cost
- $508 monthly
The current debts and loan offers
| Debt | Balance | APR | Minimum payment |
|---|---|---|---|
| Credit card | $8,000 | 25.0% | $240 |
| Mastercard | $5,000 | 20.0% | $150 |
| Personal loan | $12,000 | 12.0% | $400 |
| Input | Offer A | Offer B |
|---|---|---|
| APR | 9.5% | 13.5% |
| Term | 36 months | 72 months |
| Origination fee | 2.0% | 6.0% |
| Fee handling | Paid upfront | Paid upfront |
| Repayment plan | Contractual payment | Contractual payment |
Worked example
Compare cost, payment, and term separately
Find current principal
$8,000 + $5,000 + $12,000 = $25,000
This is the amount each offer must consolidate before fees.
Measure the current path
$790 per month; $9,758 interest; 3 yr 8 mo
The calculator simulates the existing debts using their individual APRs and payment rollover.
Calculate Offer A fees and repayment
$25,000 principal + $3,830 interest + $500 fees = $29,330
All three parts belong in the total-cost comparison.
Calculate Offer B fees and repayment
$25,000 principal + $11,610 interest + $1,500 fees = $38,110
The longer term lowers the payment but leaves interest accruing much longer.
Compare against the same current payoff
Offer A: $5,428 savings; Offer B: $3,353 additional cost
Positive savings mean the offer’s total out-of-pocket cost is lower than current total payments.
Monthly payment comparison
| Path | Monthly payment | Payoff term | Interest | Fees | Total out of pocket |
|---|---|---|---|---|---|
| Current debts | $790 | 3 yr 8 mo | $9,758 | $0 | $34,758 |
| Offer A | $801 | 36 months | $3,830 | $500 | $29,330 |
| Offer B | $508 | 72 months | $11,610 | $1,500 | $38,110 |
Why weighted APR is only a screening number
The balance-weighted APR is 17.8%: each debt’s rate is weighted by its share of the $25,000 balance. It helps show whether a new nominal rate is meaningfully lower. It does not capture the current payoff order, declining balances, term, or fees, so it cannot replace amortization.
The calculator’s break-even APR holds the submitted term, fee, and fee treatment constant and searches for the highest modeled offer rate whose total cost does not exceed the current payoff. For Offer A, the result is 21.8%. A quoted APR below that threshold can still be a poor fit if the borrower changes the term, fee treatment, or payment plan.
Total cost split into principal, interest, and fees
How balances change under Offer A
Current debts versus Offer A over time
Check the offer document against the calculator
A prequalification screen and a final loan disclosure may not show the same rate, fee, or amount. Re-enter the final terms before making the comparison. If the origination fee is deducted from proceeds, the household may receive less than $25,000 and need cash to finish paying the old debts even though the calculator shows an upfront fee.
Payment frequency and first-payment timing can also matter. This example assumes monthly payments beginning in September 2026. A lender using a different first due date or daily interest may produce a nearby but not identical payoff total. The article therefore rounds display values while tests reconcile the underlying raw calculator numbers.
Offer A reduces modeled total cost even though its contractual payment is slightly above the current $790 budget. The household should confirm that payment fits before preferring total savings. The calculator’s current-budget repayment option is more relevant to offers with a lower contractual payment; it tests whether continuing the old budget would shorten the loan, provided there is no prepayment penalty and extra money is applied to principal.
Limits and actions to test
This model assumes fixed rates, on-time payments, no new debt, and the exact fee handling entered. It excludes taxes, credit-score effects, prepayment penalties, late fees, and lender-specific compounding. An offer should be checked against its actual disclosure. For the decision framework behind break-even analysis, read the debt consolidation fundamentals guide.
- Enter each current balance, APR, and payment from the latest statement.
- Match whether the fee is paid upfront or added to principal.
- Compare total out-of-pocket cost before celebrating a lower payment.
- Test the same offer with the current monthly budget to see whether faster repayment changes the answer.
- Plan how paid-off revolving accounts will stay at zero.