Interest Loans to Pay Off Credit Cards: Cost Calculator

This calculator estimates the monthly payment and total interest for a fixed-rate loan used to repay a credit-card balance. Enter the amount, annual percentage rate (APR), and term in years; it returns the estimated payment and interest, not a recommendation about borrowing.

Formula

The calculator treats the credit-card balance as a fixed-rate installment loan. It assumes equal monthly payments, a constant APR, and no additional charges.

• Monthly payment: P × r ÷ [1 − (1 + r)⁻ⁿ], rounded to the nearest cent.
• Total interest: rounded monthly payment × number of payments − principal.
• Monthly rate: r = APR ÷ 1,200, converting an annual percentage rate to a monthly decimal rate.
• Number of payments: n = years × 12.

P is the loan principal in dollars, r is the monthly interest rate as a decimal, APR is the annual percentage rate in percent, and n is the number of monthly payments. The payment calculation uses the standard amortizing-loan formula: each payment covers interest due and reduces the remaining principal. The total-interest output uses the displayed, cent-rounded payment, so small rounding differences from calculations using unrounded payments are possible.

Worked Example

Using the calculator’s defaults: P = $20,000, APR = 8%, and a five-year term.

1. Convert the APR to a monthly rate: r = 8 ÷ 1,200 = 0.0066667.
2. Find the number of payments: n = 5 × 12 = 60.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = approximately $405.53 per month, rounded to cents.
4. Calculate total interest using that rounded payment: $405.53 × 60 − $20,000 = $4,331.80.

These are estimates under the stated assumptions. A real loan offer may have different payment timing, charges, or terms.

Assumptions

• The interest rate remains fixed for the full term.
• Payments are level monthly payments made at the end of each monthly period.
• Interest compounds monthly at APR divided by 12.
• No origination charges, transfer charges, taxes, insurance, late fees, or other costs are included; the calculator has no input for them.

How a Loan Can Pay Off Credit Cards

A debt-consolidation loan may provide funds that are used to pay one or more card balances. The card debt is then replaced by a loan balance with its own rate, payment schedule, and payoff date. The calculator models only that replacement balance; it does not determine eligibility or whether a particular offer is suitable.

For example, someone with $20,000 spread across cards could enter $20,000 as the principal, provided that amount accurately represents what they would borrow. If the loan has a fixed 8% APR and a five-year term, the example estimates a $405.53 monthly payment and $4,331.80 in interest. A different APR or term changes both results. A longer term generally means more scheduled payments, and can increase total interest even when each monthly payment is lower.

To model a real offer, use the amount actually financed and the lender’s disclosed APR and term. If fees are added to the loan, include them in the principal only if they are financed and the offer’s figures support that treatment. Compare the calculator’s assumptions with the offer documents: a quoted payment can differ if the amount, rate, fees, or repayment schedule differs.

Choosing Inputs and Reading the Results

The payment figure is the modeled amount due each month, not a measure of whether that payment fits a household budget. The total-interest figure is the interest paid across the modeled schedule, above the principal. It does not include fees or costs omitted from the inputs.

• Loan amount: Use the balance that would actually be repaid by the loan. Avoid counting a card balance twice if it is already included in another balance figure.
• APR: Enter the annual percentage rate from the offer, not a monthly rate. Because the formula divides APR by 1,200, entering 8 for 8% is correct; entering 0.08 would mean 0.08% annually.
• Term: Enter years. A 36-month term is 3 years, while a 60-month term is 5 years.
• Extra costs: Check whether costs are paid upfront or financed. Neither is automatically included in the result.

It can help to calculate more than one plausible term or loan amount to understand how the arithmetic changes. Treat each result as a separate estimate, not a forecast of what a lender will offer. The calculator does not account for changes in income, missed payments, additional borrowing, or a card balance that continues to grow.

Common Problems and Alternatives

One frequent misconception is that paying off cards with a loan makes the underlying debt disappear. It changes the form of the debt; the principal still has to be repaid. If card accounts remain available and new balances accumulate, a person could end up managing both the installment loan and renewed card debt. The calculator assumes no new borrowing on the cards.

Another issue is comparing only monthly payments. A smaller payment can come from extending repayment over more months, which may raise total interest. Compare the estimated total cost and payoff timeline as well as the monthly amount, and account for any charges that the calculator leaves out.

Other approaches to examine include paying more than the card minimums, contacting card issuers to ask about available repayment arrangements, or seeking help from a qualified nonprofit credit counselor. Each has different costs, terms, and consequences; this calculator does not compare or endorse them. A balance transfer is also distinct from an installment loan and may have its own rate, fees, promotional period, and repayment conditions that this formula does not model.

Use figures from actual disclosures rather than assuming a particular rate or fee. Approval, available amounts, and final terms depend on the provider and applicant, and are outside this arithmetic. If repayment is already difficult, a calculator cannot assess all options or replace individualized support.

Frequently Asked Questions

Can I use a personal loan to pay off credit cards?
A personal loan can be used for debt consolidation if its terms and permitted use allow it. This calculator only estimates payments and interest for the principal, APR, and term entered; it does not establish eligibility or suitability.

Will a loan lower my monthly payment?
It might produce a different payment, but the result depends on the loan amount, APR, and term. Extending the term can lower a scheduled payment while increasing the total interest paid. The calculator does not include fees.

Does the calculator include loan fees?
No. It models principal and interest only. Use the actual loan disclosure to identify fees and determine whether any are paid upfront or added to the amount borrowed.

Should I enter my card balance or the amount I plan to borrow?
Enter the principal amount that the hypothetical loan would actually finance. If it includes multiple card balances or financed charges, avoid adding those amounts a second time.

Why does my lender’s payment differ from this estimate?
The offer may use a different APR, principal, term, payment schedule, or fee treatment. The formula also rounds the modeled payment to cents and assumes monthly compounding and end-of-period payments.

The result is an estimate; the lender’s disclosure gives the exact figures.

Related

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• Home Loan Refinance Cashback Calculator and Break-Even
• Refinance a Personal Loan for a Lower Rate?

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2