While some debt can be an essential part of building a strong financial future, no one likes having it hang over their head. Whether you owe on student loans or credit cards, paying off debt can feel endless. Use our debt payoff calculator to see how long it will take to become debt-free and set a clear finish line to work toward.
Getting started with the debt payoff calculator
To calculate, you will need your:
Balance owed
Annual Percentage Rate (APR) for each debt (Not sure what this is? More on that below)
Expected monthly payment
Drop these numbers in the debt repayment calculator below to find out how long it could take to pay off your balance.
Understanding key terms
You may come across these terms as you work through your debt payoff plan:
APR: APR, or Annual Percentage Rate, represents the total cost of a loan over one year. It includes charges like interest paid and other fees to give a more accurate cost comparison between loans.
Interest rate: The percentage rate a lender charges on your outstanding loan balance over a stated period. To put it simply, it’s the price you pay to borrow money.
Minimum payment: This is the smallest amount you can pay toward your debt each month without incurring penalties.
Total interest: Total interest is the cumulative amount of interest you pay over the life of the loan, until it is fully paid off.
Debt repayment strategies
Now that you have your finish line, figure out how you’re going to get there. While consistent monthly payments are all that’s needed, finding the right debt repayment approach can help keep you on track.
Read more: Save and spend smarter with Ally Bank buckets and boosters
Snowball method
With the snowball method, you start small by quickly paying off your lowest balance. To try this approach, list your debts in order by amount. Make all your minimum payments on each of them every month and then put any extra funds toward your lowest balance.
Avalanche method
The avalanche method focuses on reducing your total interest paid by paying off the highest balances first. Pay the minimum amount on each debt, and put any extra income toward the balance with the highest interest rate. Once that’s paid off, send those payments to the next highest rate, and so on. The avalanche method is especially effective if you’re racking up high-interest debt with credit cards.
Debt consolidation
If you’re struggling to manage a multitude of loans, debt consolidation may help by streamlining your payments. It also has the potential to decrease your interest rate, but be sure to check the terms of the lower rate. Although the monthly payment may end up being lower, it could mean you're paying back the debt over a longer period of time. This approach also usually includes upfront fees that should factor into your decision.
How long can it take to pay off debt?
To get an understanding of how long it may take to pay off debt at a glance, the table below shows typical payoff timelines based on different debt amounts.
If you pay $250 per month …
Debt amount | APR% | Time to pay off |
|---|---|---|
$3,000 | 22% | 1 year 2 months |
$6,000 | 22% | 2 years 8 months |
$12,000 | 22% | 9 years 9 months |
If you pay $500 per month …
Debt amount | APR% | Time to pay off |
|---|---|---|
$10,000 | 8% | 1 year 10 months |
$20,000 | 8% | 3 years 11 months |
$30,000 | 8% | 6 years 5 months |
Use buckets to boost debt payoff
The right tools can make all the difference in paying down debt. Tools that help you set aside money for debt payments can help you better manage those monthly expenses. With an Ally Bank Spending Account, you can set up spending buckets to organize your debt payments.
Name your buckets after the debts you want to track, and decide how much money is needed for each. This will give you a snapshot of your debt payments all in one place, plus you'll know how much of your monthly income needs to go toward your debt.
You can pair your spending buckets with savings buckets in an Ally Bank Savings Account to help you set aside any additional funds for extra debt payments.
Navigate your financial journey
With a debt-payoff strategy that includes a specific timeline and consistent payments, you can take better control of what’s next and keep your debt in check.
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