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By changing how you prioritize credit card and loan repayments, you can save a lot of money and become debt-free faster. Use our calculator to find out how.
The repayments you make on credit cards, mortgages and loans every month affect how much disposable income you have available to spend each month. With our debt payoff calculator, you can determine the best order for paying off debts to achieve the fastest path to financial freedom.
This is the financial institution or lender to which you owe money.
Include the current outstanding balance for each of your credit accounts. The balance on personal loans, auto loans, mortgages and home equity loans is the amount you still owe, excluding future interest or other fees.
This is the lowest amount you can pay in dollars each month to your credit provider to keep your account in good standing. For credit cards, this may be a percentage of the outstanding balance, a minimum amount in dollars, or both. This is the fixed amount you pay each month for loans and mortgages.
This is the monthly amount you pay off to bring down your credit card and loan balances. Many lenders allow you to overpay on mortgages and loans to reduce your balance faster.
This is the amount lenders charge to borrow money. It’s what you pay on top of the principal amount of a loan.
These are the amounts you pay in addition to the required amounts each month. To help you pay down your credit balances faster, the calculator also considers extra money you can set aside every month to pay lenders.
That may not be possible for everyone. However, you may be able to make a one-time lump-sum payment to bring down your credit balances if you sell an asset or receive inheritance, for example.
For this calculator, debt ordering is used to determine the best order for repaying debts.
You have three choices:
Whichever way you choose to prioritize paying down debt, you’ll free up cash over time as you pay less servicing debt each month. The calculator determines how much interest you’ll earn on those savings if you invest them.
Here’s how the calculator works:
Here are some other popular strategies for paying off debt:
The debt snowball method focuses on paying down debts with the smallest balances first.
Using balance transfer credit cards can significantly reduce the interest you pay. This approach can be particularly suitable if you’re managing multiple credit cards, mainly if many of them charge high interest rates.
Many balance transfer cards offer a promotional period, ranging from a few months to a couple of years, with low or zero interest. Once you have opened your account, you transfer all of your other credit card balances onto the card. Instead of paying the high interest as you were before, you pay low or zero interest on those balances for the promotional period.
Before doing this, you should ensure you know what the standard interest rate on the balance transfer card will be once the promotional period expires. It might be higher than the interest rates you’re paying now, meaning that if you stick with the card, the savings you make during the promotional period will be eroded over time.
With a debt consolidation loan, you arrange a new loan to pay off your current debts.
There are three major benefits to this approach:
If you secure a debt consolidation loan against equity in your home, you may benefit from an even lower interest rate because you’ve provided collateral to your lender. The disadvantage of this, however, is that your home may be at risk of repossession if you default on the loan.