Use A Strategy To Pay Down Your Debts

How quickly could you pay off your debts if you started paying down your debt with the highest interest rate first, and then once that debt is paid off, use that payment to help pay down the next debt with the next highest interest rate? What would happen if you did this for each of your debts until the debt with the lowest interest rate is paid off last? What if you could afford to pay a little more each month? How much would that help? Find out by entering your debts into this calculator and then see if you can find a way to become debt free sooner by applying a proven strategy.

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Definitions

Payoff highest rate first
Leave this box checked to have the calculator payoff your credit card with the highest rate first. You can uncheck this box to see the results of an alternate payment method. The alternate method pays off your credit cards starting with the lowest balance.

Credit cards
Enter up to 10 credit card accounts, one on each line.

Balance
Your current balance on your credit card.

Interest rate
The annual percentage rate you pay on a credit card. The rate you enter is used to calculate the interest on all future payments for the credit card. The length of time to pay off this credit card may be much greater than calculated, if you enter a low promotional interest rate that is only good for a short period of time.

Payment
This is your initial monthly payment. If you check the "use credit card minimum payments" box, your monthly payment is calculated as 4% of your current outstanding balance. With the "use credit card minimum payments" box checked, your monthly payment will decrease as your balance is paid down. This can greatly increase the length of time it takes to pay off your credit cards. Uncheck this box to enter your own monthly payment that will remain the same until your balance is paid in full.

(We calculate your minimum monthly payment as 4% of your current outstanding balance. While your actual minimum monthly payment may be slightly different, this is one of the most common methods used by credit card companies to calculate minimum payments.)

Additional payment
This dollar amount is in addition to your monthly minimum payments that you will use to pay down your credit card debt. The higher this amount, the faster your debt will be paid off. It is important that your additional payment is one that you can afford. For the Roll-down method to be effective you must be consistent in your payments. Should you choose an amount that is too high, you may become discouraged if you are unable to meet your payment goal.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.