Debt Payoff Calculator: How to Get Debt-Free Faster
6 MIN READ
Published September 27, 2023 | Updated October 27, 2023
A debt payoff calculator is a tool that can help you figure out how long it’ll take you to pay off your debt. Once you have that information, you can choose a strategy that suits your budget and your financial situation to get out of debt. Debt repayment strategies like debt avalanche, debt snowball, and debt consolidation can help.
In Q3 2022, Americans had an average personal loan balance of $18,255 and an average credit card balance of $5,910. Being proactive can help you get out of debt faster and avoid late fees, damaged credit scores, and financial stress. It will also free up more money that you can set aside to build an emergency fund.
How To Calculate Your Debt Payoff
To calculate how long it will take you to pay off your debt and how much you’ll need to pay each month, use an online debt payoff calculator. You’ll find several easy-to-use and free tools online, which can be used from your browser. If you’re specifically interested in paying off credit card debt, use a credit card payoff calculator.
How To Use a Debt Payoff Calculator
Debt payoff calculators can help you estimate how much you’ll have to pay each month and when you’ll be able to pay off your debt, such as personal loans, credit cards, student loans, and auto loans. You’ll also be able to see how much total interest and principal you’ll pay over the life of the loan.
It’s important to remember that these are just estimates based on the interest rate, loan balance, and other information you provide. Here’s how to use the calculator:
- Find an online debt payoff calculator you’d like to use and review the different fields.
- Check what information you’ll need to provide to use the calculator.
- Gather important information about your debt, such as the balance owed, interest rate, desired payment each month, desired payoff date, and any additional amount you plan to pay towards your debt.
- Enter the relevant information in each field.
- Click submit to check the results, such as how much you’ll pay each month, a breakdown of principal and interest, and months to pay it off.
Brad Reichert, Founder and Managing Director of Reichert Asset Management LLC, offers further advice for this tool. “When using a debt payoff calculator, make sure you have all of the interest rate information entered correctly for each of your accounts,” Reichert says. “A small difference of just 3%-4% in interest can mean a difference of 4-6 months in estimated payments, depending on the amount you owe.”
The Debt Snowball Method
Debt snowball is a popular debt repayment strategy that can help you get out of debt faster. With this method, you’ll pay off your smallest debt first, regardless of the interest rate. You’ll continue making minimum monthly payments on all other debts. Once you’ve paid it off, you’ll move on to the next smallest debt and repeat the process until you’ve paid off each debt in full.
A debt snowball payoff calculator can help you figure out exactly how much you need to pay each month on each credit card or debt to reach your goal of becoming debt-free in a reasonable amount of time. You can add details about all your debts, like your current balance, minimum payment, interest rate, and compounding frequency, along with how much you can afford to pay each month to get a personalized repayment plan with the help of a debt calculator.
The Debt Avalanche Method
With the debt avalanche method, you’ll start by paying the debt with the highest interest rate while making minimum payments on the rest of the debts. Once you pay it off, you can move on to the debt with the next highest interest rate. This debt repayment method allows you to save the maximum amount of money on interest charges because it prioritizes paying off your most expensive debts first.
A debt avalanche calculator is a tool that can help you figure out how much to pay on each debt to become debt-free in a short amount of time. Many calculators can provide customized recommendations based on your income to take the guesswork out of your debt repayment.
4 Steps After You’ve Used a Debt Payoff Calculator
Once you’ve used a debt payoff calculator and know exactly how much you’ll need to pay each month to clear your debt, the next step is to figure out how you’ll achieve your goal. Follow these steps to start tackling your debt:
1. Create a Budget
The first thing you’ll need to do is to create a detailed budget so you’ll have a clear idea about your income and expenses. You won’t be able to pay off your debts if you don’t know how much you’ll have at the end of each month. Use budgeting techniques like zero-based budgeting or the 50/30/20 budgeting technique to keep track of your income, fixed expenses, and variable expenses. See if you’ll have enough left at the end of the month to pay down your debts.
2. Track Your Expenses
The last thing you want is to rack up more debt while you’re trying to pay off what you already owe. This is why you should track your expenses so you can avoid overspending and accumulating debt. Use online apps or a simple notebook to write down all your expenses. Other than the major expenses like utilities, mortgage, rent, and groceries, don’t forget to track smaller expenses like dining out, buying coffee, and subscriptions.
3. Cut Unnecessary Expenses
After tracking your expenses, identify areas where you can save more money. Consider canceling subscriptions you don’t use, avoid dining out often, and make coffee at home. All of these can add up quickly, and you’ll free up money each month. Make extra payments whenever possible so you can get out of debt faster.
4. Explore Debt Repayment Options
The next step is to review your options and pick a debt repayment method that works for you. Depending on how much debt you have and what you can afford to pay each month, there are several options to choose from:
- If you have multiple credit cards, choose from debt snowball and debt avalanche methods to prioritize repayment. Both of these payoff strategies work well if you’re disciplined and determined to stick to repayment until you manage to pay off all your debts.
- Consider getting a debt consolidation loan to combine multiple high-interest debts into a single loan at a lower interest rate. If you have good credit, you may be able to save on the amount of interest with this method.
- If you have multiple credit cards, apply for a balance transfer credit card. You can move your existing balance to a new card with a 0% introductory annual percentage rate (APR). This is one of the best credit card debt relief options if you want to tackle the principal quickly and avoid having to pay interest for a specific period on the outstanding balance.
- If none of the options listed here work for you, or if you’ve already missed several payments, consider debt settlement. This is a cost-effective way to tackle large amounts of unsecured credit when you’re finding it difficult to make loan payments each month. A debt settlement company can negotiate with your lenders to settle your account for less than you owe. You may be able to save as much as 50% of your original debt before fees.
The Bottom Line on Debt Payoff Calculators
If your goal is to pay off debt, make a list of your financial obligations and your income. Use a debt payoff calculator to determine a paydown strategy. Most importantly, make a budget, track your expenses, and find ways to reduce them so you can pay off your debt faster. If all else fails, it may be time to get in touch with a debt relief company to explore your options.