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How Much Should Your Debt Payments Be?
Feel like you'll never get out of debt?
Do you know when you want to get out debt but don't know how much to pay each month?
The reality is debt can truly weigh you down, but take heart – with a smart plan you can escape!
This Debt Payoff Calculator reveals how much you need to pay each month in order to be out of debt by a certain date.
Perhaps you want to be debt free before you go back to college, move to a new city, or before the new baby arrives. You'll discover exactly how much you should plan on paying each month to make that happen with the debt payoff calculator. It makes the math easy!
The Debt Payoff Plan
Getting out of debt is truly a challenge. Below is a step-by-step plan so you can reach your debt payoff goals:
- Recognize and accept that you have a debt problem –Be honest about your debt issues with friends and family – they can help hold you accountable! While embarrassing, the more people you tell, the more motivation you'll have to reach your goal.
- Stop increasing your debt – Adjusting your lifestyle isn't easy, but it is necessary to get out of debt. Live within your means! Cut up credit cards, and avoid all loans. If you can't pay with what's in the bank, don't pay at all.
- Calculate all your debt – Gather your latest statements. Make a list of all your debts, the amount you owe on each, the monthly payment for each, and most importantly, the current interest rate on each loan.
- Rank your debts –Start by ranking each debt according to highest interest rate. Some debts are more urgent than others because the consequences of not paying them are more serious. Pay the highest interest rate debt first to minimize your total interest cost.
- Figure out how much you can afford to pay every month – Review your budget to figure out how to free up some money for debt repayment. Direct all your extra money to paying off the most important debt on your list. There is no right or wrong approach for allocating money to pay off debts. Your approach will largely depend on your financial situation – and when you want to reach your goal. Just use the Debt Payoff calculator to know how much you need to allocate each month for paying off your debt.
- Organize a payment – Focus on paying off one debt at a time. When the first debt is paid off, use the cash that is freed up to pay down the next debt on the list. For more information on this process, check out the Debt Snowball Calculator.
- Stick to your debt plan and discipline yourself – Don’t acquire new debt. Toss out your credit cards. Make up your mind to buy necessities only, except for the occasional treat to reward yourself for paying off a loan.
Related: How to be a pro at growing your wealth
Debt-Free Living
Once you've paid off your debt, it's time to live debt free forever!
Buy cars outright – never take out auto loans. Dealerships make a large portion of their profits on finance charges. Surprise the salesman by whipping out your checkbook after you've negotiated your best deal!
If you're going to carry credit cards, make sure you're spending within your budget. Use your credit cards only for transaction convenience – never to extend your purchasing power. If you can't afford to pay the bill in full by the end of the month then don't buy it.
Switch from asking how much you'll have to pay monthly, to how much you'll have to pay overall – a subtle but important shift in thinking.
Final Thoughts
Paying off your debt is a truly rewarding experience. Imagine how much money you'll save on interest. Dream what it will feel like to not have debt looming over you like a dark cloud.
Related: Why you need a wealth plan, not a financial plan.
Debt freedom is an important contributing factor to building wealth. You now have the tools and a plan to make it happen – start today!
Debt Payoff Calculator Terms & Definitions
- Debt – Money that is owed or due.
- Balance Owed – The remaining amount of your debt that you need to pay.
- Annual Interest Rate (APR) –Also known as the annual percentage rate, it is the interest rate applied to your credit card purchases that were not paid in full each month.
- Payoff Date – The date you set for completely paying off your debts.
- Monthly Payment Needed – The amount of money you need to allocate to pay off your debts based on your goal date.
- Interest –The amount paid for borrowing money.
- Principal –The original amount of money borrowed, not including interest. Be aware that when interest compounds, interest is then added to that principal increasing the balance owed.
Related Credit Card Calculators For Debt Payoff
- Credit Card Comparison Calculator: Which credit card is the best deal?
- Credit Card Minimum Payment Calculator: How long will it take to pay off my credit card and how much will it cost me if I make only the minimum payments?
- Debt Snowball Calculator: How fast can the rollover method can get me out of debt and how much will I save?
- Credit Card Interest Calculator: How much of my credit card payment is interest and how much is principal?
- Credit Card Payoff Calculator: How long until I pay off my credit card debt using a variety of payment strategies? Includes printable amortization schedule.
- Credit Card Payment Calculator: Which repayment strategy will cost the least and get me out of debt the fastest?
- Debt Consolidation Calculator: How much will I save by consolidating my debts into one loan versus paying them individually?
- Debt Reduction Calculator (With Amortization Schedule): How fast can I get out debt and how much will I save by adding a fixed amount to each monthly payment?
- Debt Repayment Calculator: How fast can I get out debt and how much will I save by adding a one-time additional payment to principal?
- Debt Calculator: How long will it take to get out using my current payment plan?
The One Decision That Can Make Or Break Your Financial Future
There are only four paths you can choose from.
Click below to find out which path is best for you, and why.
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