Debt Payoff Calculator

Formula: Months = −log(1 − (Balance × Monthly Rate) ÷ Payment) ÷ log(1 + Monthly Rate). Monthly rate = annual interest rate ÷ 12. Example: $5,000 balance at 22% APR, $200/month payment: Monthly rate = 0.22 ÷ 12 = 0.01833. Months = −log(1 − (5000 × 0.01833 ÷ 200)) ÷ log(1.01833) = 32 months. This calculator handles the math instantly.

The debt avalanche method: list all debts by interest rate (highest first), pay the minimum on all debts, and direct any extra money to the highest-rate debt. When that's paid off, roll that payment to the next highest-rate debt. This method minimizes total interest paid and is mathematically optimal. Example: if you have a 22% credit card and 7% car loan, pay off the credit card first.

The debt snowball method: list all debts by balance (smallest first), pay minimums on all, and put extra payments toward the smallest balance. When paid off, roll that payment to the next smallest. The snowball method costs more in interest than the avalanche, but the quick wins from eliminating small debts provide psychological motivation. Research suggests it leads to higher debt payoff completion rates for many people.

The impact varies greatly by interest rate and current balance. On a $5,000 credit card at 22% APR with $150/month payments: payoff = 49 months, total interest = $2,388. Adding just $100/month ($250 total): payoff = 24 months (-25 months), total interest = $1,065 — saving $1,323. Higher interest rates and larger balances amplify the impact of extra payments. Use the 'Extra Payment' field above to calculate your exact savings.

A common rule: if your debt interest rate is higher than your expected investment return, pay off debt first. Credit card debt at 20%+ APR should almost always be paid off before investing (except to capture any 401k employer match, which is a guaranteed 50–100% return). Mortgage debt at 6–7% and student loans below 5% are more nuanced — you may benefit from investing in an index fund with a historical 7–10% real return while making minimum payments.

Minimum payments are typically set at 1–2% of balance plus interest, or a flat amount like $25. At these levels, debt repayment is extremely slow. On a $5,000 credit card at 22% APR with 2% minimum payments: it takes over 30 years to pay off and costs over $8,000 in interest — more than the original debt. If your minimum payment barely covers the interest charge, the balance will grow each month.

Proven strategies: (1) Pay more than the minimum — even $50 extra/month makes a significant difference. (2) Use the avalanche or snowball method systematically. (3) Make bi-weekly payments instead of monthly — this results in one extra payment per year. (4) Apply any windfalls (tax refund, bonus, gift money) directly to your highest-rate debt. (5) Reduce expenses and redirect savings to debt. (6) Consider balance transfers to a 0% APR card (watch for transfer fees and the expiry of the promotional period).