Paying Off Debt
Getting out of debt requires a mathematical strategy. Without knowing your interest rates and how extra payments affect your timeline, you could end up paying thousands of dollars more than necessary.
Use these tools to calculate how long it will take to pay off your loans or credit cards, and see exactly how much time and interest you can save by making extra payments.
Essential Calculators
Use these tools to run the numbers for this scenario.
Action Plan Checklist
- List all your debts, including total balance, minimum payment, and interest rate.
- Choose a payoff strategy: Debt Snowball (smallest balance first) or Debt Avalanche (highest interest first).
- Automate your minimum payments so you never miss a due date.
- Apply any extra cash directly to the principal of your target debt.
Required Reading
Deep dive into the strategies behind this use case.
Key Terminology
Understand the financial and mathematical terms involved.
Worked Examples
Real-world scenarios with step-by-step calculations.
Finance
Buying a $400,000 Home with 20% Down
By putting 20% down, the buyer avoids Private Mortgage Insurance (PMI). However, over the 30-year term at a 6.5% interest rate, the buyer will actually pay more in interest ($408,144) than the original loan amount itself ($320,000).
View in Calculator →Frequently Asked Questions
Does making extra payments really help?
Yes. Extra payments go directly toward your principal balance, which reduces the amount of interest that can accrue in the future.
Snowball vs Avalanche?
Avalanche saves the most money mathematically. Snowball gives you quick psychological wins by clearing out small accounts fast.