Repaying a loan or credit card debt can provide some much-needed financial relief. Not only that, but it also frees up some money for other goals, whether you want to build your emergency savings, start a college fund, or save for a home project.
While unburdening yourself from debt is a worthy goal, it can be difficult to come up with an effective repayment strategy on your own. Our debt payoff calculator is designed to help you along the way.
Our debt payoff calculator is designed to help you formulate a plan to pay off your debt. It takes into account your debt, interest rate, your minimum payment and any extra payments you’ll put toward your debt each month. It then estimates a payoff time frame based on the data you share.
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*Debt Payoff Calculator is for illustrative purpose only. Information is provided as a self-help tool for your independent use and not intended to provide investment advice. Calculations are estimate based on the Debt Snowball Method.
Several strategies exist for paying off your debt, and the right approach for you depends on your preferences and goals. Here are three popular options for debt repayment.
With the debt snowball method, you organize your debts based on their size. You then prioritize paying off the smallest to the largest debt and make minimum payments on the other debts. For example, if you have outstanding balances of $5,000, $3,500 and $500, you’d prioritize your repayment as follows.
Since you’re paying off your smaller debts first, this method lets you see progress more quickly. This progress could help you stay motivated as you work toward full debt repayment.
The debt avalanche method works differently. Instead of prioritizing your debts from smallest to largest, you organize them by highest to lowest interest rate. You then focus on repaying the highest-rate debt first while making minimum payments on the others. For example, if you have three debts with interest rates of 24.99%, 29.99% and 11%, you’d prioritize repayment as follows.
This method doesn’t account for debt balances, so it can be more difficult to see progress if your highest-rate debt is also your largest. That said, it could save you money on interest in the long term.
Consolidating high-rate debt with a Home Equity Line of Credit (HELOC) could also help streamline your monthly payments and reduce your interest costs. A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home's equity, offering variable interest rates and borrowing flexibility. You pay interest only on the amount used, and interest may be tax-deductible.
With this approach to debt repayment, you apply for a personal loan with an established lender and then use the loan funds to pay off your higher-rate balances. You’ll then make a single monthly payment toward your personal loan each month.
Your debt level could have a significant impact on your credit score. Popular credit scoring models consider amounts owed when determining your credit score. So, if you’re using a large portion of your available credit, it could have a detrimental effect.
Your payment history is also a major factor in your credit score. If high levels of debt are making it difficult to stay up-to-date on your payments, those missed payments may cause your credit score to drop.
Paying down your debt is difficult but not impossible. Here are some helpful tips that could help you reduce your debt faster.
FAQs
What will it take to pay off my credit card?
Paying off your credit card may seem impossible, but it may be achievable with the right plan in place. Consider building a budget and using our debt payoff calculator to develop a potential payoff strategy.
What is the quickest way to pay off credit card debt?
How do you pay off $20,000 in debt?
Creating a budget and a payoff strategy will help if your goal is to repay $20,000 in debt. While that amount of debt may seem overwhelming, it’s not impossible to pay off if you remain committed to your budget and your payoff strategy.
What’s the fastest way to pay off your student loans?
If you borrowed student loans to pay for school, consider making payments toward your loans while in school. Doing so could make it easier to repay your loans once you graduate. After graduating, work toward paying more than the minimum payment each month and consider putting any windfalls like tax returns toward your loan balances.