Quickest Way to Pay off your Debt.
The easiest way to pay off you debt is to pay for the debt that has the highest interest rate first. If you have 3 credit cards, the fist being $1,000 with an interest rate of 12% per year, the second at $2,000 at 36% per year and the third car is at $3,000 at 24% per year. If you pay the minimum payments for the two credit cards with the lowest interest rates and put as much as you can towards the credit card with the highest interest rate, you will pay off all you debt in no time.
You could pay off the lowest debts first. It would feel better because you are paying off credit cards, but it will take longer to pay off all of them. Try and change around the payments in this example and see the difference.
If you take the following example, each month the annual percentage rate is divided by 12 then add 1. You will get what to multiply to your balance every month. If you take the same example and on a separate sheet of paper write down what you owe to your credit cards and other loans, subtract what you can afford to pay every month, then you will have a rough estimate to how long it will take you to pay off your own debt.
| Debt | $1,000 | $2,000 | $3,000 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.03 | 1.02 |
| Minimum Payment | $10.00 | $20.00 | $20.00 |
| Debt + Interest | $1,010.00 | $2,060.00 | $3,060.00 |
| Payments | $10.00 | $470.00 | $20.00 |
| Month 1 | $1,000.00 | $1,590.00 | $3,040.00 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.03 | 1.02 |
| Minimum Payment | $10.00 | $20.00 | $20.00 |
| Total After Interest | $1,010.00 | $1,637.70 | $3,100.80 |
| Payment | $10.00 | $470.00 | $20.00 |
| Month 2 | $1,000.00 | $1,167.70 | $3,080.80 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.03 | 1.02 |
| Minimum Payment | $10.00 | $20.00 | $20.00 |
| Total After Interest | $1,010.00 | $1,202.73 | $3,142.42 |
| Payment | $10.00 | $470.00 | $20.00 |
| Month 3 | $1,000.00 | $732.73 | $3,122.42 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.03 | 1.02 |
| Minimum Payment | $10.00 | $20.00 | $20.00 |
| Total After Interest | $1,010.00 | $754.71 | $3,184.86 |
| Payment | $10.00 | $470.00 | $20.00 |
| Month 4 | $1,000.00 | $284.71 | $3,164.86 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.03 | 1.02 |
| Minimum Payment | $10.00 | $20.00 | $20.00 |
| Total After Interest | $1,010.00 | $293.25 | $3,228.16 |
| Payment | $10.00 | $293.25 | $297.75 |
| Month 5 | $1,000.00 | $0.00 | $2,930.41 |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $2,989.02 | |
| Payment | $10.00 | $490.00 | |
| Month 6 | $1,000.00 | $2,499.02 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $2,549.00 | |
| Payment | $10.00 | $490.00 | |
| Month 7 | $1,000.00 | $2,059.00 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $2,100.18 | |
| Payment | $10.00 | $490.00 | |
| Month 8 | $1,000.00 | $1,610.18 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $1,642.38 | |
| Payment | $10.00 | $490.00 | |
| Month 9 | $1,000.00 | $1,152.38 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $1,175.43 | |
| Payment | $10.00 | $490.00 | |
| Month 10 | $1,000.00 | $685.43 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $699.14 | |
| Payment | $10.00 | $490.00 | |
| Month 11 | $1,000.00 | $209.14 | |
| (Interest Rate divided by 12)+1 | 1.01 | 1.02 | |
| Minimum Payment | $10.00 | $20.00 | |
| Total After Interest | $1,010.00 | $213.32 | |
| Payment | $286.68 | $213.32 | |
| Month 12 | $723.32 | $0.00 | |
| (Interest Rate divided by 12)+1 | 1.01 | ||
| Minimum Payment | $10.00 | ||
| Total After Interest | $730.55 | ||
| Payment | $286.68 | ||
| Month 13 | $443.87 | ||
| (Interest Rate divided by 12)+1 | 1.01 | ||
| Minimum Payment | $10.00 | ||
| Total After Interest | $448.31 | ||
| Payment | $448.31 | ||
| Month 14 | $(0.00) |
Go back to the How to Eliminate Your Debt Page.
