Debt Repayment Calculator

To determine your interest expenses, you’ll need to find out your APR, calculate your average daily balance, and identify the length of your billing cycle. Most of this information can usually be found by accessing your account. Now, let’s break down the math below.

First, divide your APR by 365 (representing days in a year) to get your daily periodic rate.

.02/365 = a 0.000055 daily periodic rate

Next, multiply your daily periodic rate by your average daily balance. You can calculate your average daily balance by dividing your overall balance by the number of days in your billing cycle.

0.000055 x $1200.00 = $0.66

Lastly, multiply your daily periodic rate by the duration of your billing cycle. This will help you estimate the total interest charges for that cycle.

$0.66 x 31 = $20.46 interest charged for this billing cycle

In cases where you maintain a credit card balance, interest charges are typically applied. Credit card companies may vary in their approach to charging interest for new purchases. Oftentimes, they’ll allow around a month’s time before interest starts to accrue on these transactions.

Your credit card provider will require you to make your minimum payment every month. Although specific policies may vary among lenders, the norm usually includes:

• 1% of your current balance
• All new interest charges, and
• Any late fees or amounts from prior missed payments

In addition to the minimum payment amount required, you can also pay your statement balance or current balance. The statement balance is your total balance at the end of your last billing period. Following the receipt of your credit card statement, you typically have several weeks to pay before the due date. During this time, any fresh transactions will go towards your ongoing outstanding balance. In other words, the total amount you currently owe.

To avoid incurring interest charges, make sure to clear either the statement balance or current balance before you reach your due date.

Debt consolidation involves combining multiple debts into a single loan and consequently, a single payment. This can simplify repayment and potentially lead to lower interest rates. Common methods include using a personal loan, balance transfer credit card, or home equity loan to pay off multiple higher-interest debts. Keep reading if you want more information on this, as we’ll share more below.

While there are several ways to pay off large amounts of debt, we’ve included a few of our favorite strategies below:

Debt Consolidation Balance Transfer Card

A balance transfer card is a credit card that lets you move the outstanding balances from other credit cards to it. This is often done to consolidate debt, taking advantage of a lower or 0% interest rate during a promotional period. This enables focused repayment of the principal amount without accruing high interest. Although there may be a balance transfer fee charged, the potential saving in interest accrued can make it worthwhile. After the promotional period, the regular interest rate applies to the outstanding balance. It’s crucial to make consistent payments during the promotional period and consider factors like credit limit and issuer policies. Balance transfer cards are a popular option as they can be a helpful tool to simplify debt repayment and reduce interest cost.

Debt Consolidation Personal Loan

A personal loan is an installment loan that allows you to borrow a fixed amount of money for a set period with a fixed interest rate and consistent monthly payments. A personal loan can be utilized for debt consolidation, where multiple high-interest debts are paid off using the loan. This simplifies repayment, often at a lower interest rate, resulting in savings in interest cost. The structured repayment plan of personal loans can provide predictable payments and a defined timeline for full repayment. However, careful consideration of terms, interest rates, fees, and your ability to make consistent payments is crucial before choosing a personal loan for debt consolidation.

Debt Repayment Using Snowball Method vs. Avalanche Method

The snowball method is a debt repayment strategy that involves starting by paying off smaller debts first, regardless of their interest rates. As each smaller debt is cleared, the payment amount is rolled over to the next smallest debt. This eventually creates a snowball effect that speeds up the process of debt payoff. While it may not be the most cost-effective approach in terms of minimizing interest, the snowball method offers psychological benefits by providing a sense of accomplishment and motivation as smaller debts are quickly eliminated.

The avalanche method, in contrast, is a debt repayment strategy that focuses on paying off debts with the highest interest rates first. By making minimum payments on all debts and directing extra funds toward the highest-interest debt, this method aims to minimize overall interest payments and expedite becoming debt-free. The strategy involves creating a list of debts ranked by interest rate. As each high-interest debt is paid off, the payment amount is directed to the next highest-interest debt. While it’s financially efficient, it may require more time to see significant progress compared to other methods like the snowball method. Choosing between strategies depends on personal goals, financial circumstances, and individual preferences.

 When creating a debt repayment plan, consider a few of the options below:

• List all debts, including balances and interest rates.
• Determine your available monthly funds for debt repayment.
• Choose a repayment strategy (snowball or avalanche).
• Allocate your funds accordingly, paying minimums on all debts and extra on the chosen target debt.
• Review and adjust the plan as your financial situation changes.

To negotiate with creditors for debt settlement, consider the following options:

• Communicate your financial hardship honestly.
• Offer a lump-sum payment lower than the debt amount.
• Obtain any agreements in writing.
• Be prepared for the possibility of a negative impact on your credit score.
• Consider seeking professional help from credit counseling agencies if needed.

To pay off student loan debt effectively, we’ve shared a few options below:

• Understand your loans, interest rates, and repayment options.
• Create a budget to allocate extra funds toward loan payments.
• Consider income-driven repayment plans if eligible.
• Explore student loan forgiveness or repayment assistance programs.
• Make extra payments to the principal amount when possible to reduce interest.

For more ways to pay off student loan debt, check out the free online Student Loan Payoff Calculator.

To avoid bankruptcy and manage debt, we’ve shared a few options for you to consider below:

• Create a budget to track income and expenses.
• Cut unnecessary spending and focus on needs.
• Communicate with creditors if you’re facing difficulties.
• Consider credit counseling or debt management plans.
• Explore debt consolidation options.
• Seek legal advice if you are considering declaring bankruptcy, as it has numerous consequences including long-lasting adverse impact on your credit.