The Debt Payoff Planer and Calculator application exists as a tool for helping you to become debt-free. It makes creating a debt payoff plan simple in order to encourage you to get started and stay on track. The journey to become debt-free can be daunting because of overwhelming credit card debt, car loans, taxes owed, medical loans, etc. The Debt Payoff Planner and Calculator breaks it down into simple, optimal steps that can be easily followed. This page is an explanation of the features of the Debt Payoff Planner and Calculator and how best to utilize this tool.
The first section in the applications is the list of all the debts that need to be tracked. Each account will have a descriptive name for the account. In the picture below the name of the debt is ‘Visa 0090’.
Current Balance of the account is equal to the value of the Starting Balance less any recorded Principal Payments Made.
APR, short for the Annual Percentage Rate, is the interest rate of the loan. Even if there is a Promotional APR, what is shown will be the APR after the promotion period has expired.
Minimum is the Minimum Payment due for the account. The minimum payment is set by the credit card company (or other loan provider) based on your APR, your current balance, state and federal laws, and potentially other factors. It is assumed that you have enough income to cover all of the minimum payments for the debts.
Last Payment Made is the latest date recorded in the Payments Made section for this loan.
Next Payment Due is an estimate of when the upcoming payment will be due. This date is estimated only if you’ve entered the Payment Due Date in the Optional section of the Debt Details.
Payoff Progress is the percentage of the Starting Balance that has been paid and recorded in the Payments Made section.
The strategy section is the place to provide input on how you’d prefer to payoff your debts. This is the section where you can experiment with different payoff strategies and find a plan that suits you the best.
Monthly Payment is the total amount of money that you’ll be applying to all of the debts every single month.
The first number is the total of all the minimum payments for the all of the debts. It is assumed that you are at least able to make all of the minimum payments, which is why this number cannot be modified. Once you’ve completely paid off a debt, this number will still not change; this same amount will then be rolled-over into paying off the rest of the debts at an accelerated rate.
The second number is how much extra you can apply to any of your debts every month. This extra monthly payment is your most effective way to become debt-free the fastest. This number should be realistic, but it should also be aggressive. Experiment with the extra monthly payment to see how many months or years you can save with an extra $20, $50, or $100 per month.
Payoff Order can be one of APR High to Low, Balance Low to High, or As Listed.
The APR High to Low is the theoretically fastest way to payoff debt. This is sometimes referred to as the debt avalanche. By paying off the highest APR loans first you will theoretically spend less money overall in interest. The downside of the debt avalanche approach is that if the loan with the highest APR also has the highest balance it may be a long time before you see any significant progress in your debt payoff plan.
The Balance Low to High is the best plan for getting an early win. This is sometimes referred to as the debt snowball approach. With the debt snowball you’ll most quickly be able to payoff one of your loans (the loan with the lowest balance) and be able to snowball that payment into the next lowest balance. The debt snowball is a great way to stayed excited about your debt payoff plan by getting some early wins and seeing the progress when you quickly have one less bill to pay.
The As Listed will payoff the debts according to how they are positioned in the Debts section. This approach may be preferred if there are certain debts that you need to payoff off the soonest despite the fact that they are neither the lowest balance nor the highest APR. An example of when this might be important is needing to pay back a relative that has loaned you money at 0% interest.
The Payoff Summary section gives you a high-level overview of all of the debts, balances, and when you can expect to be debt-free by sticking to a plan. When you experiment with the Strategy section, you’ll look at the Payoff Summary to see the effect of various strategies.
Current Balance is the total of all starting balances for all debts, minus the total all payments for all debts. This current balance is how far you have left to go before you’re debt-free. Once all of the debts have been paid, the current balance will report $0.
Starting Balance is the total of all starting balances, but without subtracting the payments. This is where your journey started.
Monthly Payment is the value of all minimum payments plus the extra monthly payment amount entered in the Strategy section. The monthly payment is how much money you are paying to service your debts each month and the larger this number the faster you’ll be debt-free.
First Month Interest is the amount of money in the upcoming month that is used to service the debt. The difference between the monthly payment and the first month interest is how much is being applied to the principal of the loan. The monthly amount being spent on interest will go down as the current balance goes down. This means that over time more money will be applied to the principal each month and you’ll be paying off the loan faster over time.
Debt Free On shows the month and year that all loans will be paid-off if you stick to the prescribed plan. The Debt Free On date is the item to focus on when you’re experimenting with different strategies and different extra monthly payments.
Total of Payments is the total amount of money that it will cost to service your debt by the end of the debt payoff plan. The total payments include the principal value of the loan plus all of the accumulated interest.
Total Interest is the amount of money that is paid to the creditors to service the debt. The strategy is to make the total interest as low as possible because this amount is going to the credit card companies, IRS, credit union, etc.
The Current Balance section of the Debt Payoff Planner shows visualization of the outstanding balance of all loans.
The By Category pie chart shows the relative percentage of what types of loans you have. These categories are optional and can be see for each loan in the optional Debt Details section. In the picture below the majority of debt is for auto loans.
The By Debt pie chart displays each debt individually. In the picture below the Toyota Loan, which is the auto loan, has the largest balance of all the debts. Over time this distribution will change once the loans continue to be paid off. Note that in By Debt figure the Visa 0090 loan isn’t shown in the pie chart because it’s already 100% paid off.
The Payoff Plan shows a detailed month-by-month plan of how much to pay on each debt until you are debt-free. The plan ensures that all of the minimum payments are being made and that the additional monthly payment is being applied according to your chosen strategy.
The Step is a way to track where you are in your plan. For a given step you will be making the same payment amounts on the specified debts each month.
The Duration is the number of months to repeat this step.
The Debt is the name given to the debt as reported in the Debts section.
The Payment is the recommended amount to pay of debt according to the specified Strategy. This Payment amount will include the minimum payments for all debts plus the additional monthly payment.
At the end of each step will be a section reporting the Debt Paid. This means that the debt is completely paid off and will no longer be included in the subsequent steps. All of the money that was being applied to that debt will be rolled-over in the next step to more quickly pay down the remaining loans.
The Paid Off On shows when this loan will be completely paid off assuming that the recommended strategy is followed.
The Resources section lists a number of articles to try and take your debt-free journey to the next level.
The Debt Details section is accessed by clicking on any of the accounts listed in the Debts section. This section is how you insert and update the detail information about each debt.
Position is the order of the account in the Debts section. If you’d like to use the ‘As Listed’ payoff order, the Position way to change how the debts are listed.
Name is the name that will be used for this account throughout the application. The name should be unique so you’re able to distinguish between the various debts.
Starting Balance is the amount owed on the debt when you first start tracking it in the application. The Starting Balance shouldn’t need to be changed as your debt payoff plan progresses. When you make a payment, this should be updated in the Payments Made section, not by changing the Starting Balance.
Minimum Payment is the minimum amount you can pay on the debt every month without being changed late fees. This value is explicitly reported by the credit card company.
APR is the Annual Percentage Rate associated with the account. This number is set by the creditor and you should be able to find this number in your account statement.
Category is where you can specify what type of account this is. In order to see the By Category pie chart in the Current Balance section this needs to be filled in.
Payment Due Date is the day of the month on which the payment must be made in order to avoid any late fees. The advantage of inputting the Payment Due Date is so you can have one place where you can quickly see all of the due dates.
Payment Reminder sets the number of days prior to the due date that you’ll receive a reminder email.
Anniversary is the month and day of the anniversary of the credit card. Because many credit cards have an annual fee on their anniversary date, it helps to keep track of when this is. You many want to transfer a balance and cancel the card before incurring a fee on the anniversary.
Annual Fee is the amount charged each year for the ‘privilege’ of having the credit card. You can provide this information in order to track all upcoming fees and be able to plan for them accordingly.
Promotional APR is a temporarily reduce annual percentage rate that are sometimes offered in order to incentivize people to sign-up for a credit card. If your account is offering a promotional APR check the box and fill in the details.
Promotional APR – Expires is the date in which the Promotional APR reverts to the regular APR.
Promotional APR – APR is the reduced APR that is offered during the promotion, expressed as a percentage.
The Payments Made section is the place to record each payment for each debt. By updating the Payments Made section the Payoff Summary, Current Balance, and Payoff Plan are updated to reflect the current balance.
Principal Paid is the amount of the payment that is applied to principal of the loan. The Payments Made feature only tracks changes to your principal and you typically will NOT enter the full amount paid to your creditor.
Each billing cycle the current balance of your debt (principal) will increase by
- interest accrued
- new expenses
and will decrease by
- total payment to creditor
Therefore, the amount you should enter for “Principal Paid” each cycle is:
– Interest Accrued
– New Expenses
Date is the date in which the payment was made.
The Principal Paid Calculator is provided because the Payments Made section can be a bit confusing. The confusion is due to the fact that only the principal should be included in the payment. In order to access the calculator click on the button to the right of the payment entry.
Total Paid is the total amount paid to the creditor.
Interest Accrued is how much of the payment is being used to pay off the interest. The amount of the payment that’s being applied to the interest should be found on the credit card statement itself.
New Expenses is the amount of any new charges to the account. This could be additional purchases, annual fees, late fees, etc. If you’re sticking to the debt payoff plan this number is ideally going to be zero each month, but realistically it’s important to have a place to put any new charges.
The Use Payoff Plan Estimate will try to automatically fill in the Principal Paid Calculator based on the suggested payment form the Payoff Plan and the Debt APR. This is not as accurate as getting the Interest Accrued value directly from the credit card statement, but is much simpler.
By selecting the button, the right panel will open up and you’ll have the ability to create an account. The advantages to creating an account include access for multiple devices, a larger number of debts, a secure login, a secure backup, and access to email features.
The Account Preferences section contains information specific to your account. You can access the Account Preferences by clicking on the button.
Currency Symbol can be changed to support the currency specific to your region. For example you can change the currency symbol to the Euro and all of your values will be reported in Euros.
Weekly Summary Email allows you to specify whether you’d like to receive a summary each week on your progress toward becoming debt-free.