Regular credit card use can make it tough to pay off your balance. You have to make payments that will reduce your current liabilities and offset any regular charges. By adding a few details to the calculator, you can figure out how long it will take to reduce your debt. You can even set a timeline to reach your goal. Taking control of your finances can improve your credit score and change your quality of life. To factor in multiple cards or loans, please see our minimum payment calculator.
When is the right time to pay off debt?
Credit cards are easy to get and simpler to spend. Even if you are careful, life you can throw you into some stressful situations. It may be more comfortable to ignore your debt than to face the reality of how much money you owe. Eventually, you will have to confront your finances. Making just the minimum payments won’t be enough.
Maybe you’ve grown tired of living between paychecks and merely want to improve your life. Or it’s possible that unexpected events have pushed you past your limits. Whether it was a costly trip to the hospital or a series of expensive repairs to your car, the monthly payments can get exhausting. It’s okay not to want to struggle anymore.
No matter how much debt you have built up, there are numerous strategies to help you take control. First, you have to get a clear indication of where you stand – no matter how difficult that may be. Becoming debt free may not happen instantly, but with time and the right plan, it is possible.
How debt affects your credit score
While many factors account for your credit score, your credit card use can account for up to 30% of the score you receive. Your credit use is defined by how much debt you have compared to how much credit is available to you. Keeping a ratio of 10% debt to credit is ideal.
To raise your credit score, you must either increase your credit limit or reduce your debt to credit ratio. If you have large balances on your credit cards, it will make the first option very difficult. That leaves you with the latter- paying off your debt.
Now that you know what it will take to reach your payoff goal, you can make the right steps to reduce your credit balance. As you get more efficient at managing your debt you can start to allocate more to your savings plan.
Remember to save the credit card payoff calculator in your bookmarks or on the homes screen of your smartphone. You can return as you negotiate your interest rates or as your finances change. If you found this page useful, you can promote us on social media by using the share feature.
What is the best way to reduce credit card debt?
A lot of people want to get out of debt, but just don’t know how. While there are many methods, there is no perfect solution. It often takes a multi-faceted approach to get the upper hand in your situation. You have to put a payment strategy into place and try to increase your budget for repayments.
When it comes to paying back your debts you only have a few options. Pay off the loan with the highest balance or interest, or consolidate everything into one payment. The following methods require you to pay more than minimum charges.
1. The snowball effect: With this method, you pay off your smallest debts first. After paying the minimum on all your cards and loans, allocate the rest of your budget to the lowest balance. Once the smallest balance is paid off, continue putting that money towards the next smallest debt. Using this method can give you a rewarding boost. It feels great when you get to close an account that once gave you a headache.
2. The debt ladder: With this method, you will pay off your debts with the most significant interest rates instead. After making the minimum payments, allocate the additional funds to the loan or card with the highest rate. This method is more efficient than the snowball effect. The interest rate determines how much your debt will grow and how much more you will have to pay each month. Paying off the loans with the most interest will considerably reduce your total interest charges.
3. Consolidate your debts: You may be able to get a loan from your bank to help you merge your consumer debts into one repayment at a lower rate. Or, if you own a home you may have enough equity to refinance your debts into your mortgage. If you take this approach, it is vital to put the money you save from your current payments into a savings plan. Otherwise, you may find yourself right back where you started.
Increasing your payments
Once you have a payment strategy in place, you may want to explore some options to increase the funds you have for your debt repayment. There are a few simple lifestyle changes that can make a big difference on your budget.
Drop expensive habits: If you feel like you are struggling to make ends meet, evaluating your spending habits is a great start. You can check out your regular purchases and look for common expenses from past statements. Then you can decide which purchases are worthwhile and which ones you can do without. It can be beneficial to cut down on social vices like smoking and drinking. Even buying coffee on your way to work is much more expensive than making it at home. Eating out at restaurants can get costly, so its best to opt for homemade meals instead.
Become a one-car household: If you have two vehicles in your family, you can reduce your monthly expenses by getting rid of one. Instead, you can walk, longboard, ride your bike to work, carpool, or try transit. Plus, you can make some extra money from the sale of your car to buy down your balance.
Try a balance transfer card: Balance transfer cards give you a grace period of up to 15 months with a 0% APR. Essentially, you will be transferring your debt to another credit card company. If you have a balance that you know you can pay off in that time, you can save a lot of interest with a 0% introductory APR.
Pick up odd jobs on your spare time: Earning extra money can give a boost to your debt payments, even if it’s just dog walking. There are numerous sites that offer odd tasks and jobs like Craigslist, TaskRabbit and Upwork that are worth keeping an eye on. Even virtual companies like Uber, Rover, Favor, and Postmates allow you to work as much or as little as you want for some extra cash on your free time.
Why use the payoff calculator?
The debt payoff calculator is designed to help you analyze your current financial situation. You can include any debt from a credit card to a car loan, and even a student loan. You just have to provide some information about the balance and interest rate.
Then, you can try out different payoff strategies or view our payment suggestions. With this information, you can create a plan to become debt-free that is tailored to your circumstances.
How to use the calculator
The credit card payoff calculator has two parts: an information intake and an integrated results section. Once you have reviewed your bank statements, you can begin using the calculator.
Your credit card information
Step 1: On the first line of the calculator add your current credit card balance. You can use the up or down arrows to make this input even easier.
Step 2: You should add your interest rate or annual percentage rate for the credit card on the second line of the calculator.
Step 3: Next, set a pay off goal in months on the third line of the calculator. This is the number of months that you would like the card entirely paid off.
Step 4: On the fourth line of the calculator identify your current monthly payment.
Step 5: Then, you should add any planned additional monthly charges such as balance protection or any regular monthly purchases on line five. Also, include any annual fees for credit card use on line six.
Planned major purchases
In this subsection, you can include up to two major purchases to factor into your credit card pay off.
Step 6: On line one of this subsection identify in dollars one major purchase you are planning to make. This charge should be separate from your panned additional monthly charges.
Step 7: Then, on line two distinguish how many months from now the purchase will be made.
Step 8: If you think you will be making any other major purchases add it to the third line of the subsection, along with the months from now that the purchase will be made.
Once this information is added to the calculator, you can view your results.
Your credit card payoff results are split into information prompts and integrated reports below the data inputs.
Immediately below the inputs, you can view how much you should pay each month to meet your payoff goal. The total payments tab can provide you with some other repayment scenarios if this is not within your means.
The principal balance graph shows your current monthly payment on your credit card in blue, compared to our suggested monthly payment in green. The proposed monthly payment is formulated to reach your payoff goal.
If your current monthly payment does not exceed your additional monthly charges, you may see the principal balance rising instead of declining, like this example. If your graph looks like this, continuing your current approach can result in maxed cards and damaged credit.
The total payments bar graph shows monthly payments for different payoff goals relative to your card balance. Here you can see what your monthly payment obligation would be if you wanted to pay off your credit card in 12 months, 24 months, 36 months, 48 months, or 60 months.
Finally, you may view a detailed summary of the payment schedule with your current payment. This table shows a breakdown of your principal and interest payments. You can consider the ending principal balance on the credit card each month.