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If you’re looking for ways to get out of debt fast, but don’t know where to start, Bankrate’s debt calculator can help. With just a few details about your income and debts, our calculator will craft a personalized payment plan, complete with a paydown schedule.
How our calculator works
To use this calculator, you’ll need to gather the most recent statements for the debts you want to pay down and find the following:
Current amount owed.
Minimum monthly payment.
Next, enter this information for each of the debts you want to include in your debt pay-down schedule, along with its type — credit card, retailer charge card, auto or boat loan, home equity loan or another kind — up to a maximum of 10. You’ll also need to enter your current tax bracket, as well as any additional income you’re expecting to receive for the remainder of the year.
Using this information, our calculator will create a customized payment plan, which will tell you which debts to prioritize, where additional payments should be made and for how much, as well as your debt paydown schedule.
Techniques to pay down debt
Consider the following strategies to pay down debt faster, while saving money in interest.
The snowball repayment method consists of listing all your debt balances and tackling them from lowest to highest. This method is designed to help you stay motivated through small wins. Because this strategy prioritizes debts by balance owed — not by interest rate — it is best suited for those who have multiple debts with similar interest rates.
With the avalanche payoff strategy, you’ll focus on repaying debts based on their interest rate. This method focuses on paying down the account with the highest interest rate first and working your way down from there.
The avalanche payoff strategy is ideal for those juggling multiple kinds of debt, such as credit card debt, auto loan debt or student loan debt. Although this debt repayment method is slower than the snowball method, you’ll save more on interest by getting rid of your most expensive debts first.
A debt consolidation loan is a type of personal loan designed to help you get out of debt faster by combining multiple debts into a single account, potentially with a lower interest rate. But for this method to be worthwhile, you’ll need to have good-to-excellent credit and solid financials. Otherwise, you won’t be able to save on interest.
A balance transfer consists of moving existing balances from multiple credit cards into a new card with a 0 percent introductory APR. This can help you pay off your debt faster by allowing you to tackle your principal, without having to pay interest for a specific period — typically 15 to 21 months.
That said, balance transfer cards tend to have lower limits than debt consolidation loans, plus are limited to credit card debt only. You’ll also likely be charged a balance transfer fee of between 3 and 5 percent of your overall balance. And if your offer expires before you’ve paid off your balance in full interest will apply to any remaining amount on your account.
If your goal is to reduce debt, take inventory of your financial obligations, as well as your assets and monthly gross income. This will allow you to see where there’s room for improvement and help you determine which paydown strategy is the best for you.