Free tool for brokers
Debt consolidation break-even calculator
The break-even term is the longest term over which consolidating a client’s debts into a secured loan costs them no more in total than keeping the debts. Enter the debts and the loan to see it, and what a longer term costs.
The debts being consolidated
Use the client’s current monthly payment for each debt. Include only the debts the loan will pay off.
Clears in 4 years 5 months · £22,452 paid in total
Clears in 3 years 6 months · £14,390 paid in total
Clears in 3 years 2 months · £11,122 paid in total
The secured loan
Break-even term
5 years 7 months
Consolidating costs the client no more than keeping the debts for terms up to 5 years 7 months. At 20 years, it costs £31,227 more in total.
030 years
- Monthly now
- £1,074
- Monthly over 20 years
- £330
- Total, keeping the debts
- £47,965
- Total, consolidated
- £79,192
Adding £2,450 of fees to the loan costs about £2,649 in extra interest over 20 years.
For intermediary use. Illustrative only: it assumes the rate stays the same for the whole term and doesn’t include early repayment charges or changes to the client’s payments. It isn’t advice.
How it’s worked out
Two totals, compared term by term.
- 1
Keeping the debts
Each debt is repaid at the client’s current monthly payment until it clears. The APR is converted to a monthly rate, so the total is what the client would actually pay if nothing changed.
- 2
Consolidating
The balances being cleared, plus any fees added to the loan, are repaid monthly on a capital and interest basis at the loan rate, for each possible term.
- 3
The break-even term
The longest term at which the consolidated total is no more than the total for keeping the debts. Beyond it, the lower monthly payment is bought with a higher total cost.
The FCA has asked second charge firms to show that debt consolidation is in the client’s interests, not just that it lowers the monthly payment. Read our summary of what the FCA’s second charge review found.
Break-even questions
What the numbers mean.
Have it worked out on every case.
Archway calculates the break-even term from the debts on a second charge case and keeps the workings with the file.