How much do you really understand about your debt? You might look at your billing statements each month and notice your balances inching down, but that doesn’t mean you truly understand the impact of what’s going on or why you’re not paying your debt faster. Using CNN Money’s free credit card payment calculator, you can get some valuable understanding about what’s going on with your debt. All you need to do is plug your debt numbers in the calculator and evaluate different payment scenarios.
The Impact of Paying the Minimum
You’ve probably heard that paying the minimum on your debts is extremely costly – more costly than any other type of payment plan. To find out how costly, put your balance, interest rate, and minimum payment in the CNN Money’s calculator and choose the minimum payment plan option. You’ll see that it’s going to take several years and lots of interest before your debt is finally repaid. You can save hundreds, maybe even thousands of dollars, by increasing your monthly payment.
Save Money By Paying More
It sounds counterintuitive that you can save money by paying more money, but test it out. Use the calculator to see how much time and money you’d save paying off your debt if you increase your monthly payment by $100. In the fixed payment section, enter your current combined minimum payment plus an extra $100 and calculate. The result will undoubtedly surprise you.
What Does it Take to Meet a Date?
What if you want to be debt-free by a certain date or a certain age? You can see what monthly payment is required to make it happen by entering a time into the debt-free deadline option. The monthly payment may be steep depending on your debt and the amount of time you’d like to be debt-free, but it gives you a better idea of what you have to do to speed up your debt progress.
Using CNN Money’s calculator puts things into perspective. If paying off debt quickly is a major financial goal, you can learn exactly what it takes to make that happen. That probably means upping your payment by $100 or more each month. In that case, you have a little more work to do figuring out where extra money’s going to come from.
What if You Can’t Afford to Pay More?
You may comb through every nickel of your budget and not find a way to increase your monthly payment. For many people, paying the minimum is difficult enough, but that may be a starting place. As long as you don’t make any new charges on your accounts, your minimum payment will go down a little bit every month. But, if you keep making the same total monthly payment, instead of the ever-decreasing minimum payment, your debt will go down faster than if you’d paid the minimum. Try it out in the calculator. Enter the amount of your combined minimum payment in the fixed payments section and calculate. You’ll see that you still save time and money over paying the minimum payment listed on your credit card statement.
This post was written by Eliza Collins, a guest writer specializing in personal finance topics like savings, debt relief as well as credit score improvement. You can read more of her articles at the debt settlement blog.