Debt Payoff Calculator
See What It Takes to Be Debt-Free
How Debt Payoff Works
When you carry a balance on a credit card or loan, interest accrues on the remaining balance every month. Each payment you make covers two things: the interest charge for that month and a portion of the principal. The faster you pay it off, the less total interest you pay.
This calculator shows you the exact monthly payment required to eliminate your debt within your target timeframe. It uses the same amortization formula that banks use to calculate loan payments.
The Formula
- M = Required monthly payment
- P = Total debt balance
- r = Monthly interest rate (APR ÷ 12)
- n = Number of months to pay off
Debt Payoff Strategies
- Avalanche method — List all debts by interest rate. Pay minimums on everything except the highest-rate debt. Throw every extra dollar at that one. When it's paid off, move to the next highest. Saves the most money.
- Snowball method — Same idea, but pay off the smallest balance first. The quick wins build momentum and motivation. Slightly more expensive mathematically, but many people find it easier to stick with.
- Balance transfer — Move high-interest credit card debt to a card with a 0% introductory APR (typically 12-18 months). Pay it off before the promo period ends to avoid interest entirely.
- Debt consolidation loan — Combine multiple debts into one fixed-rate personal loan. Simplifies payments and often lowers your average interest rate.
- Increase income temporarily — Even a short-term side hustle generating $500-$1,000/month can dramatically accelerate your debt payoff timeline.
Frequently Asked Questions
What is the fastest way to pay off debt?
The two most popular methods are the 'avalanche' method (pay off highest interest rate first) and the 'snowball' method (pay off smallest balance first). Mathematically, the avalanche method saves the most money. Psychologically, the snowball method keeps you motivated. Both work — pick the one you'll stick with.
Should I pay more than the minimum on my credit card?
Absolutely. Making only minimum payments on a $5,000 credit card balance at 18.9% APR would take over 25 years and cost over $8,000 in interest. Even an extra $50/month dramatically reduces both the time and total interest paid.
What is the debt-to-income ratio?
Your debt-to-income (DTI) ratio is the percentage of your gross monthly income that goes toward debt payments. Lenders typically want a DTI below 36% for mortgage approval. Below 20% is considered excellent. Calculate yours by dividing total monthly debt payments by gross monthly income.
Should I use savings to pay off debt?
It depends on the interest rate. If your debt charges more interest than your savings earns, paying off the debt is usually better. However, keep at least $1,000 as an emergency fund before aggressively paying down debt. Without an emergency fund, unexpected expenses can push you back into more debt.