Yes, consolidating saves you $3,523 over 36 months. The 11% loan costs $2,209 in interest plus a $371 fee, while the 29% cards cost $6,103 in interest. Your monthly payment also drops by $97.85.
The math
Inputs
| Credit card balance | $12,000 |
|---|---|
| Card APR | 29% |
| Loan APR | 11% |
| Loan term | 36 months (3 years) |
| Origination fee | 3% |
The formula in words
Monthly payment = amount × r ÷ (1 − (1 + r)^−n), with r = APR ÷ 12 and n = 36 months. Work it out for the cards at 29% and for the loan at 11%. Total interest = payment × months − amount. Saving = card interest − (loan interest + fees).
Step by step
| Option | Monthly payment | Time | Interest | Fee | Total paid |
|---|---|---|---|---|---|
| Keep the cards at 29% | $502.87 | 36 months | $6,103 | $0 | $18,103 |
| Consolidation loan at 11% | $405.02 | 36 months | $2,209 | $371 | $14,581 |
| Keep the cards, pay $405.02 | $405.02 | 53 months | $9,352 | $0 | $21,352 |
Result
- Loan amount needed to net the balance after the fee: $12,371
- Origination fee: $371
- Loan monthly payment: $405.02
- Loan total interest: $2,209
- Cards paid off in the same time: monthly payment: $502.87
- Cards paid off in the same time: total interest: $6,103
- Saving from consolidating: $3,523
- Monthly payment difference: $97.85
- Cards at the loan's $405 payment: time to pay off: 53 months (4 years and 5 months)
- Cards at the loan's $405 payment: total interest: $9,352
Assumptions
- Both options pay the debt off over the same term with fixed monthly payments and no new card charges.
- The 3% origination fee is taken out of the loan, so you borrow $12,371 to clear $12,000.
- Loan approval and your actual rate depend on your credit and income.
- The 3% origination fee is taken out of the loan, so the loan has to be bigger than the balance to clear the cards. That larger amount is what the payment and the interest are based on.
- These are estimates that show how the math works, not financial, tax or legal advice. Lenders, card issuers and the IRS can calculate slightly differently.
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What the $3,523 saving actually means
The saving of $3,523 is the difference between what the cards would cost you and what the loan costs you, once the fee is included. On the cards you would pay $6,103 in interest. On the loan you pay $2,209 in interest plus a $371 origination fee. That gap is real money staying in your pocket.
It also shows up in your monthly budget. The loan payment is $405.02, compared with $502.87 on the cards over the same 36 months. That is $97.85 less each month for three years. If cash flow is tight, that difference matters as much as the total saving.
One thing to be clear about: the loan is bigger than your card balance. You borrow $12,371 so that $12,000 clears the cards after the $371 fee comes out. The payment and interest are based on that larger amount, and the saving figure already accounts for it.
Why the saving is so large
The driver is the rate gap. Your cards charge 29% APR and the loan charges 11% APR. Over 36 months, that difference compounds into thousands of dollars of interest.
The fee is small relative to the interest you avoid. A 3% fee on the amount you borrow comes to $371, while the interest difference is far larger. That is why the deal still works after the fee is counted.
The trap to avoid
The saving only holds if you actually pay the loan off over 36 months and don't add new card charges. If you keep using the cards, you end up with a loan payment plus new card balances, and the math falls apart. The assumptions here are fixed payments, no new charges, and both options paid off over the same term.
There is also a slower path worth understanding. If you kept the cards but only paid $405 a month, the same as the loan payment, it would take 53 months to clear the balance and cost $9,352 in interest. The loan finishes in 36 months for far less. The lower payment on the cards stretches the debt out and lets interest pile up.
What could change the outcome
Using only the numbers here, a few things move the result:
- The rate you're actually offered. The 11% loan APR is an input, not a guarantee. Approval and your real rate depend on your credit and income. A higher rate shrinks the saving.
- The fee. The 3% origination fee is taken out of the loan, so you borrow $12,371 to net $12,000. A larger fee means a bigger loan and more interest.
- The term. The comparison is over 36 months. Stretching the loan longer lowers the payment but usually raises total interest.
- New charges. Any new card spending breaks the no-new-charges assumption and erodes the saving.
Notice that the monthly payment difference of $97.85 is not the main prize. The main prize is the $3,523 in avoided interest. If you can afford the higher card payment, the loan still wins on total cost, but the cash-flow benefit is smaller.
Practical next steps
Before you sign anything, get the real numbers in writing:
- Ask the lender for the actual APR, the origination fee, and the exact monthly payment for the amount you need. Confirm the loan nets enough to clear the $12,000 balance after the fee.
- Check whether the loan has any prepayment penalty. The figures here assume fixed payments over 36 months; confirm the terms with your lender.
- Plan how you will stop using the cards. The saving depends on no new charges. Keep one card for emergencies only if you can pay it off monthly, or set the cards aside.
- Set up automatic payments so the $405.02 goes out on time. A missed payment can cost you and may affect the rate.
- Confirm the payoff with your card issuer once the loan funds, and keep the confirmation.
These are estimates that show how the math works, not financial, tax or legal advice. Lenders, card issuers and the IRS can calculate slightly differently, so verify the final figures with them before you commit.
Frequently asked questions
Does the 3% fee wipe out the saving?
No. The fee is $371, and the interest you avoid is much larger. After counting the fee, you still save $3,523 over 36 months. The fee is already included in that figure, so the comparison is fair.
What if I can't get an 11% loan?
The 11% rate depends on your credit and income. A higher rate reduces the saving, and at some point the loan stops being worth it. Ask the lender for the actual APR before you decide, and compare it with your card rate.
Should I take a longer loan term to lower the payment?
A longer term lowers the monthly payment but usually raises total interest, which shrinks the $3,523 saving. The figures here assume 36 months. If you need a lower payment, ask the lender for the total interest at each term before choosing.
Will this hurt my credit score?
Opening a new loan can affect your credit, and closing cards can too. The calculation here doesn't cover credit scoring. Ask the lender and card issuer how the change is reported, and avoid closing cards you might need.
What happens if I keep using the cards?
The saving assumes no new card charges. If you run up new balances, you'll have the loan payment plus card debt, and the math no longer holds. Stop using the cards or pay them in full each month.