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Debt may be as American as apple pie, with nearly half of all Americans carrying credit card debt every month. However, that doesn’t mean you’re stuck with the debt, either. America is also the land of opportunity, and by choosing the right path forward, you can also get rid of your debt, too.
If you’re looking to pay off credit card debt, our debt calculator can help you lay the groundwork to compare your options and make an informed decision.
How the debt payoff calculator works
The calculator is very easy to use. Here’s what to do:
- Add a debt: Click the “+ Add a debt” button to bring up a new box for each credit card and loan you have.
- Enter info about your debts: Look up your current balance, interest rate, and minimum payment in your online account or most recent statement for each credit card and loan.
- See your debt payoff details: The debt payoff calculator will estimate the total length of time it’ll take to pay off all your debts, as well as the total amount of interest you’ll pay.
The debt payoff calculator will tell you the maximum amount of time and total interest cost it’ll take to pay back all your debts if you only make the minimum payments. That’s good to write down for comparison purposes, but you can also use the calculator to help inform you about other payoff options, too:
- Pay extra each month: Play around with different extra payment amounts to see how they affect your payoff timeline and total interest cost. Even a small amount can help.
- Consolidate your debt: Write down your current total balance, and then remove each individual debt. Now, add a single personal loan with your current balance. Term lengths usually range from one to seven years, and APRs often range from 8% to 36%.
Debt payoff options
You don’t have to be rich to pay off your debt; you just have to be smart. These time-tested strategies can help.
DIY debt payoff: Snowball and avalanche methods
If you can pay extra toward your debts each month, experts often recommend trying a debt avalanche or debt snowball strategy first. Here’s how it works:
- List your debts in the order you’ll pay them off: Rank them from smallest to largest balance for the debt snowball method, or from highest to lowest interest rate for the debt avalanche method.
- Pay the minimum on all, but pay extra toward the top debt: This will eliminate the top debt on your list first.
- Roll that payment toward the next debt: Instead of freeing up that cash in your budget for other things, that old monthly payment will now go toward the next debt on your list.
- Repeat until all debts are gone: By the time you’re working on your last debt, you’ll be making a very large combined payment, helping you to make quick work of it.
0% balance transfer card
Many credit cards offer 0% interest for up to a year or longer after you open the card, including on any other credit card balances you transfer over.
Personal loans
Experts commonly recommend personal loans for consolidating debt. Featuring lump-sum financing and steady, predictable payments, they’re often perfectly suited for the job.
Home equity financing
You may be able to borrow against your home equity to pay down debt at a more affordable rate. There are three main types of home equity financing options:
- Home equity loan: Secure a lump sum at a fixed rate, perfect for consolidating debt.
- Home equity investment (HEI): Receive a lump sum with no monthly payments. You have up to 30 years to repay it along with a share of your home’s appreciation in value.
- Home equity line of credit (HELOC): Borrow and repay against an open line of credit tied to your home.
You can also consolidate debt by refinancing your home, but that’s often a better choice in a lower-rate environment than currently exists today.
Debt management plan
Nonprofit credit counseling agencies offer many services, including debt management plans. They’ll negotiate with your creditors on your behalf to offer better payment terms. In return, you’ll make a single monthly payment to the agency, and after three to five years, you should be debt-free.
Frequently asked questions
How should I divide my monthly debt budget between my accounts?
First, pay off any overdue debts to bring your balance current. Then, decide: if you want more motivation, try paying off your smaller debts first. If you want to go the faster route, pay off your highest-interest debt first. In case you’re short on funds to make the minimum monthly payments, try contacting your lenders to ask for hardship assistance.
Should I pay off the smallest balance or the highest interest rate first?
If you want to get out of debt as quickly and cheaply as possible, pay off debts with the highest interest rate first. Otherwise, choose the smallest debt first, since this will help you score quick wins that can keep you motivated for the long haul.
Should I pay off a credit card or personal loan first?
It’s usually best to pay off a credit card first because it often carries a higher interest rate. This will also help lower your credit utilization rate, which is a key factor in improving your credit.
Which debt should I pay off first to improve my credit score?
It’s often best to pay off your credit cards first. If you have more than one credit card, try paying off the one with the highest balance relative to its credit limit first.
When should I consider bankruptcy?
If you have significant unsecured debt that’s holding you back, like from credit cards, personal loans, or lawsuits, and no ability to repay it within a reasonable amount of time, bankruptcy might be worth considering.
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