Loan payoff calculator

How this debt payoff calculator works

Put in every debt you owe, the rate it charges and the minimum you must pay, then add whatever you can find on top of those minimums. The calculator pays the minimum on everything, throws your spare money at one debt until it is gone, and then moves that whole payment onto the next one. That rolling is the part that does the work, and it is the part most people miss.

The most common mistake is this: someone clears a card, feels the relief, and quietly absorbs that freed-up $110 a month back into normal spending. The debt that was meant to go next now takes years longer. Keeping your total payment level after a debt clears costs you nothing extra, because you were already living on the rest of your money. It is the cheapest decision available to you.

Every figure on the page updates as you type, and nothing leaves your browser.

How do you calculate debt payoff by hand?

Work out one month, then repeat it. For each debt, the monthly interest is the balance times the annual rate divided by twelve. Subtract that interest from what you pay, and the rest comes off the balance. The new balance starts the next month.

That single sum explains why high-rate debt feels like running in sand. At 24.99% the minimum payment is almost entirely interest, so the balance barely moves and you can pay for years without the number changing much. Anything above the minimum goes straight at the balance.

Doing this by hand for three debts over three years means a few hundred rows of arithmetic, which is all the calculator above is really doing. The value is not the sum. It is seeing the date.

Snowball or avalanche: which order should you pay first?

There are only two sensible orders, and the argument between them is older than any calculator.

• Highest rate first, often called the avalanche. You attack the most expensive debt, whatever its size. In pure arithmetic this always costs the least, because you are killing the fastest-growing interest first.
• Smallest balance first, the snowball. You attack the debt closest to zero, whatever its rate. You clear a whole debt sooner, and that matters more than accountants like to admit.

How much the choice costs depends entirely on your debts, which is why the calculator shows you both instead of picking for you. Sometimes the gap is a rounding error. Sometimes it is real money.

So the honest answer is that $338 buys you an eighteen-month head start on feeling like this is working. If you have abandoned a repayment plan before, that is money well spent. If you have the patience of a filing cabinet, take the cheaper order. Either beats the thing that actually ruins people, which is paying minimums for seven years.

What the research says about clearing the smallest balance first

This is not just motivational talk. David Gal and Blakeley McShane, then at Kellogg, looked at data from a debt settlement company covering 6,000 people who cleared their credit-card debt. They found that people who paid off their smallest balances first were more likely to eliminate their debt entirely, even though paying the highest-interest card first is the better financial choice. What predicted success was closing whole accounts, regardless of the dollar amounts involved. The paper ran in the Journal of Marketing Research in August 2012.

It is worth reading that carefully rather than treating it as a licence. It does not say the snowball is cheaper, because it is not. It says that finishing things keeps people in the game, and a plan you abandon in month nine costs far more than the $338 in the example above. Pick the order you will still be following next spring.

Using it as a personal loan payoff calculator

You do not need several debts for this to be useful. Clear the table, enter one loan, and it works as a personal loan payoff calculator: it will tell you the date you finish and what the loan costs you in interest along the way.

Before you do that, check two things in your loan paperwork. First, whether there is a prepayment penalty, they are uncommon on personal loans now but not extinct. Second, whether extra money is applied to the principal, because some lenders will treat it as an early next instalment unless you tell them otherwise. A one-line instruction when you pay, saying to apply it to principal, settles it.

What one extra payment actually saves you

The extra-payment box is the most useful field on this page, and it is worth a minute moving it up and down before you do anything else. Interest is charged on what is left, so every dollar you put in early stops charging you for every month that follows. The effect compounds in your favour for once.

Going from $200 a month extra to $250 on the three debts in the example above pulls the finish date forward by three months and saves $269. That is not a dramatic number, but it is a $50 decision, and it is the kind of change people can actually make.

Two things are worth doing before you promise yourself a big figure. Keep some cash aside for emergencies first, because the fastest route back into credit-card debt is a car repair with nothing behind you. And if your employer matches retirement contributions, taking the full match usually beats overpaying a mid-rate loan, since a match is an immediate return that no loan rate touches.

Where a debt repayment calculator can mislead you

Any debt repayment calculator, including this one, is a model. It is right about the arithmetic and incomplete about life. These are the gaps worth knowing.

So treat the debt-free date as a target under today’s conditions, not a promise. Come back and re-enter your real balances every few months. The plan that survives is usually the one you revisit, not the one you print once and pin to the fridge.

One last thing. If the calculator tells you the debt will never clear, that is not a glitch and it is not a judgement. It means the minimums you entered are at or below the monthly interest. That situation does not improve on its own, and it is worth talking to a non-profit credit counsellor rather than waiting.