Current debts versus one consolidated loan.
New monthly repayment
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Interest on consolidation loan
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Your breakdown
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When one loan beats five
Consolidation is the act of clearing several expensive balances, usually credit cards, store cards, a buy-now-pay-later tab and maybe an old personal loan, with a single new loan at a lower rate. The appeal is real. Instead of juggling four due dates and four interest rates, you make one payment you can actually plan around. Credit card rates in New Zealand commonly sit near 19 to 21 percent, while a secured or well-priced unsecured personal loan can land closer to 11 to 14 percent. That gap is where the saving lives, but only if you handle the term carefully.
This tool takes the total you owe, the rate on the new loan and how long you want to take to repay it, then returns the monthly repayment and the total interest you will pay on that single loan. It deliberately does not guess your current minimum payments, because card minimums change every month and almost nobody knows their true blended rate. So treat the output as the cost of the new arrangement, and do the comparison yourself: add up what you are paying now across every card and loan, then weigh it against the figure below.
The repayment on a $25,000 consolidation
Take the default case. You roll $25,000 of debt off cards averaging 19 percent into a four-year loan at 12 percent. The calculator uses the standard amortising loan formula, with a monthly rate of 12 percent divided by 12, or 1 percent, over 48 payments. The result is a fixed repayment of $658.35 a month.
The rate cut of 7 percentage points, from 19 to 12, is what makes the $6,601 of interest bearable for a $25,000 advance. The chart shows how the loan splits: a touch over three quarters of what you hand back is principal you borrowed, and the rest is interest.
Why the term matters more than the rate
Here is the part lenders rarely volunteer. Stretching the term lowers the monthly payment but can raise the total interest, even at a lower rate. Keep the same $25,000 at 12 percent but push the term to six years and the repayment drops to a comfortable $488.75 a month. Tempting. Except you now pay about $10,190 in interest, roughly $3,590 more than the four-year version, because the balance sits there earning interest for two extra years. The headline rate fell, but the cost rose. This is why the calculator surfaces total interest, not just the monthly figure, and why I tell clients to pick the shortest term whose repayment they can sustain without slipping back onto a card.
A trap that quietly undoes the saving
The most common way consolidation backfires has nothing to do with maths. You clear the cards, feel the relief, and then the cards are still open with a zero balance and a full limit. Within a year a fresh balance creeps back, and now you carry the consolidation loan and the cards. The discipline that makes consolidation work is closing or hard-locking those accounts the day the loan settles. There is no general capital gains tax to worry about here and no Inland Revenue angle, since interest on personal debt is not deductible, so the entire decision is about cash flow and behaviour. One more practical note: read the loan contract for early-repayment fees. Many New Zealand personal loans let you pay extra or clear the balance early without penalty, which means you can take a slightly longer term for breathing room and then attack the principal whenever you have spare cash.
Does consolidating hurt my credit score?
Applying for the new loan triggers a credit enquiry, which can nudge your score down briefly. But clearing several maxed-out cards usually helps over time, because your credit utilisation falls and your repayment history on the single loan stays clean. The short-term dip is small next to the long-term benefit of getting balances under control.
Should I use my mortgage to consolidate instead?
You can fold short-term debt into your home loan at a much lower rate, but be careful. A mortgage runs for 20 or 30 years, so a $25,000 card balance spread over that horizon can cost far more in total interest than a four-year personal loan, even at 6 percent versus 12 percent. If you do it, set up a separate revolving or short-term portion and clear it on a three to five year schedule rather than letting it ride for the full mortgage term.