It is difficult to manage debts. Even if you bear the debt burden,there comes a time when you cannot pay off your debts. In this situation,consolidating your debts can be a good solution for you and your family. However,it is important to know whether you should really consolidate your loans or not. In such a case,you can take help from a debt consolidation calculator.
What Is a Debt Consolidation Calculator?
A debt consolidation calculator is a financial tool designed by debt solution professionals. The main purpose of this calculator is to help you know whether you need to consolidate debt or not. It analyzes the present financial situation of a person. After that,it shows multiple options to manage the finances well.
How Does It Work?
Every debt consolidation calculator works differently from the other,depending on the financial products of every debt settlement company. But a usual debt settlement calculator that is used to consolidate debt has almost the same functionality,i.e. to determine whether you can save additional money by consolidating your loans or not.
In online calculators,you are required to enter the amounts of your debts separately. Then,the calculator will show you how many monthly payments you have to make. If your monthly payments after choosing debt consolidation are lower than that of your interest rates,then you can make a debt consolidation decision accordingly.
Contents of a Debt Consolidation Calculator
Debt settlement calculators have various financial terms. While using the calculator to reduce debt,you need to know what exactly those terms mean. In order to have a clear idea,have a look at some definitions mentioned below.
Loan Amount Payment Owed
This is the payment which you still have to make to repay your loan. If you do not know the remaining amount of your debt,then you can even insert an estimated value of your remaining debt.
Loan Payment
It is the payment you have to make in order to pay off your loan on a monthly basis.
Interest Rate
This is the annual interest rate you will have to pay on your new consolidated loan.
Income Tax Rate
This tax rate determines your income tax savings if you have used a loan for home equity to consolidate the debt.
Loan Type
There are various types of loans. The most common among them are home equity loans and personal loans. If you have to pay off any of these loans by consolidating them,then you need to insert the specific loan type in the debt consolidation calculator.