Many people are coping with debt and are unsure how best to clear it. Understanding how to use a debt consolidation calculator may help you maximize your dollars to achieve financial freedom.

Everyone has their most important thoughts when it comes to debt relief, and often it begins with confusion about how best to get started. There are also a lot of discussions about the best tools to use. What matters, in the end, is if you find the best solution for yourself and your family. There are many tips and tools to help you balance those variables and succeed!

Gathering the Data

Your first step is to add up all of your current debt. This means locating all of your outstanding credit card bills, loans, monthly charges, and any other required payments you make regularly. This should be pulled into a list and maybe a good time to review all of your monthly budget items.

When you review your statements, you want to locate the balance owed, your minimum required payment, and your current interest rate or annual percentage rate (APR). Pay attention to details about circumstances that may impact your APR, you will need to use that information in the following calculations.

Analyze the Data

The next step is to assess those debts and sort them by the amount that is due, the APR, and how long you expect it will take you to clear it. You can use a debt consolidation calculator to add up your charges and determine your combined interest rate. With this information, you can start to compare your options.

Here is a sample debt load (it’s a good idea to round up for these calculations) with the current interest rate and monthly payment:

• Car loan: $7,500, interest 8.9%, paying $200 each month now.
• Student loan: $15,000, interest 6.8%, paying $200 each month now.
• Credit card #1: $4,300, interest 22.1%, paying $100 each month now.
• Credit card #2: $2,800, interest 24.9%, paying $100 each month now.

These figures total $29,600 with a combined interest rate of 11.27%. Assuming you are already paying $600 each month towards these debts, if you do nothing different, you will be debt-free in 5.6 years. However, over that time you will actually pay $40,200 to clear these debts.

Understanding the Results

So, perhaps a debt consolidation loan will help you stretch your dollars now and save you money over time. When you start to work with the calculator, you will see many different options. You can play around with the numbers and try to answer these questions:

• What is the fastest way to clear these balances?
• What is the lowest monthly payment I need to clear these charges?
• How can I free up money in my monthly budget now?
• How can I save the most money in the long run?

Applying What You Learn
As you start to use the calculator you can group your bills by interest rates. Perhaps you can merge all of your credit card bills together and really improve the interest rate overall. Or perhaps you may qualify for special loans. As you consider all of your options, you should also review details about which debts to pay off first. The calculator can help you determine all of your options for achieving debt relief.
So, as you figure out how to use a debt consolidation calculator, you will begin to see how large of a loan you might need, the interest rate you will need to beat to make a difference in your budget now, and if there are ways to shift your dollars around to make the most of every paycheck. Then you will be able to make the best decision to finally achieve financial freedom.