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Note*:Put the average interest rate that you are paying or that you were paying on your accounts. This will be used to calculate how much you would end up paying when staying current on your accounts. The interest rate that you put in here, will not effect the figures that are calculated for the consumer credit counseling and debt settlement programs.
Do you carry a revolving balance on your credit card or line of credit? Are you making more than the minimum payments against your debts on a monthly basis? It may seem like you are treading water and not getting anywhere, but making regular payments towards your debt is the best way to reduce it and eventually eliminate the credit card or line of credit debt. One of the most helpful tools out there for individuals with large consumer debt is a debt calculator.
What is a Debt Payoff Calculator?
Consumer debts such as credit cards, loans or lines of credit are some of the most difficult debts to pay off. With interest rates that can range from 11% to 25%, paying it down and eliminating the debt seems like an unattainable goal for many consumers. Revolving debt refers to debt that transfers from one month to the next. For example, if you were to pay off your credit card in full, each month you would pay zero interest on your purchases.
However, as soon as the balance is not paid in full by the payment due date, the balance becomes revolving, and interest is charged on a daily basis. When it comes to cash advances on a credit card, the debt is compounded the moment the money exits the account. Because of these high-interest charges, it’s difficult to calculate how much of your monthly payment is interest and how much is paid towards the principal amount. This also makes it difficult to calculate exactly how long it will take to pay down your debt.
This is where a debt elimination calculator comes in handy. They are preprogrammed with the exact formula to calculate the principal and interest payments to give consumers an accurate idea of how long it will take to pay off their credit card or other debts.
Facts About Debt in America
Many people will tell you that debt is a part of life. Everyone has it. In the US only 20% of people are free from debt. The other 80% carries on average about $7,400 in debt, according to the Federal Reserve. Consumer debt is the second most common type of debt, the first being mortgage debt.
Most Americans consider non-mortgage debt (credit cards, student loans, lines of credit, etc.) to be negative debts, meaning they have a negative connotation attached to them. This stigma could cause people to feel ashamed of their debt, which, in turn, will only make it worse. Using a debt payoff calculator is just one easy way that Americans can take control of their debt and finally pay it off.
How to Use a Debt Snowball Calculator
These calculators are also sometimes called snowball calculators because of the tendency for debt to snowball, getting bigger and harder to manage over time. They do a job that many people would find difficult without the use of a scientific calculator and a strong understanding of mathematics. Even for those who are adept at math, it can be quite difficult to calculate compound interest on a changing balance especially when we consider that purchases and cash advances are often subject to different interest charges.
The beauty of these calculators is that they offer consumers an accurate picture of their current financial standings. The calculator is programmed to calculate compound interest on a revolving balance to let consumers know how long they will be paying off their debt. All you need to do is input your current balance, annual interest rate, and monthly payments to discover exactly when your debt will be eliminated.
What are the Benefits?
Getting into debt is not difficult, but getting out of it may take years or even decades for some. One of the benefits of a debt repayment calculator is that it gives consumers a better idea of the magnitude of their debt. For example, if you are simply making minimum payments on your debt, the calculator will show that it will take longer to pay off the debt as opposed to making more than the minimum payment each month. For many people, these calculators serve as a wake-up call to make more of an effort to pay off debts.
Other benefits include giving consumers a goal. With financial planning, debt repayment and savings, it’s much easier to do it if you set yourself a goal. A debt repayment calculator will help create attainable goals that will keep you motivated on your path to debt elimination.
What About Debt Settlement?
Another option for consumers with large amounts of debt is debt settlement. This term refers to making an agreement with your debtors or creditors to pay a reduced amount that will be considered as a payment in full. In these cases, consumers are able to reduce their monthly payments, save on interest and get their debts paid off faster. Many consumers avoid debt settlement or debt arbitration because of the perceived costs of the program. Using a debt calculator, consumers can plainly see that debt settlement is the better option to get out of debt sooner and save thousands in interest charges.
In addition to providing positive reinforcement and giving consumers a push in the right direction, using a debt payoff calculator allows individuals to compare their payments and actually visualize how small changes to their payments can make a huge difference. For instance, let’s say you owe $10,000 on a credit card with an interest rate of 19%.
Your minimum payment for this card would be about $250 per month. At this rate, it would take you five years and four months to pay off the card. However, if you make an additional $50 payment per month, bringing your total payment per month to $300, it will only take four years to pay off the balance. This saves you over a year of interest payments, which ends up equaling almost $2,000.
Seeing these savings printed in black and white is enough to give consumers hope that a debt-free life is not a dream, but an attainable reality. A debt elimination calculator will also allow consumers to play around with their monthly payments to see exactly what they can afford.
Consumer debt is nothing to be ashamed of. If 80% of our population has it, it’s safe to say it’s a common reality for many of us.
The best thing you can do to get out of debt is to use a debt calculator, set yourself some goals and keep up the great work. Checking your payoff time on the calculator multiple times as you make payments is another great way to stay motivated since you will continue to see the numbers get smaller and the amount of time required to pay off the debt go from months to weeks to days. Get on the right path to eliminating your consumer debt today by calling 888-835-4088 to speak with one of our trained debt specialists.