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Actions Debt Payoff Calculator: Taking control of your debt
If you feel like you’re being overwhelmed by a debt avalanche, relax. With some planning and patience, you can manageably and methodically pay off debt until it’s gone. Our Debt Payoff Calculator can help you figure out if you’re paying off the right debt, which debt to pay off first, and how to decide. Just answer a few simple questions and we’ll provide some insights that can help you figure our what steps you need to take and put you back in control.
Getting organized is the first step. A number of variables will determine your debt picture and affect your repayment plan. For example, the more you set aside as your monthly payment, the faster you can pay your debt down. But is that necessarily the right strategy? And how do you know? For example:
…on a credit card balance of $1,798 at an APR of 14.24%
If you make no additional charges and pay $35 each month (the minimum) you would pay off the balance in 7 years pay a total of $2,768.
But by increasing the payment to $62 each month, you would be finished paying your balance in 3 years and would pay a total of just $2,223 – a savings of $545.
So, what’s next? Start by taking a closer look at your debts.
Using the Debt Payoff Calculator
- 1. Start by Making a List. You'll need to include at least two debts to generate a plan.
- 2. Include another debt. Add at least one more debt (you can add more than one you want to pay down).
- 3. Here’s Your Get Out of Debt Plan. Your debt with the highest interest rate is Retail credit card debt, so that's probably a good place to focus extra payments. But it’s important for you to keep minimum payments on all your other debts, too.
What kind of debt are you carrying?
Most of us carry various types of debt -- student loan, credit card, home equity, auto loans, etc. A number of factors will determine which ones take priority: balance, interest rate (APR), tax deductibility, and term all have an impact. Let’s start by identifying what kind of debts you have.
- Debt Type (i.e., credit card, student loan, auto loan, home equity loan)
- Debt Holder (name of company holding your loan)
- Current balance
- Interest rate
- Minimum monthly payment
FAQs: Choosing a debt repayment strategy
When it comes to paying off debts there are a lot of things to think about — and the more you know, the more successful you’ll be. Here are some of the most commonly asked questions.
Should I pay off debt before saving for retirement?
When deciding the right strategy for paying off debt, it’s important to also factor in your retirement savings goals. Prioritizing your debt may seem like the best approach, but it could come at the cost of your long-term financial goals.
Need help determining the best balance for your situation? Check out our article, Pay Off Debt or Save for Retirement? Making the Case for Each
Avalanche method vs. snowball method – which strategy is better?
The avalanche method and the snowball method are two simple repayment strategies that can help you tackle your debts. If your goal is to save as much money as possible, then you may want to consider the avalanche method, which prioritizes your debts with the highest interest rates. If you’d rather focus on small wins and pay off your smallest debts first, then the snowball method might be your best bet.
Learn more about each strategy in this 5-minute read, Get out of debt…for good.
How do I get (and stay) out of debt?
Getting out of debt takes both time and diligence. It also requires taking a closer look at your financial habits to identify the spending behaviors that may have derailed your finances in the first place. Luckily, there are steps you can take to get on the right track, including creating a budget, improving your money management skills, and setting tangible financial goals.
Check out our guide to getting and staying out of debt for more information.
What are my options when it comes to paying down student loan debt?
Navigating student loan repayments can be overwhelming. The good news is that you have a number of options if you find yourself struggling to make payments.
If you have federal loans, you may want to consider switching to an income-based repayment plan or apply for a deferment. If your loans are private, you should look into your options for consolidation and refinancing.
To find out more about your options, check out our article, Paying Off Student Loan Debt During COVID-19 and Beyond.
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