See when you'll be debt-free and how much interest you'll save by making extra payments above the minimum.
How Debt Payoff Is Calculated
Each month, interest accrues on your remaining balance. Your payment covers the interest first, with the rest reducing the principal. Extra payments go entirely toward principal, which reduces future interest charges.
Monthly Interest = Balance × (APR / 12)
Principal Reduction = Payment - Monthly Interest
New Balance = Balance - Principal Reduction
Frequently Asked Questions
On a $15,000 balance at 18.9% APR with $300 minimum payments, adding $100/month saves about $5,500 in interest and pays off the debt 2+ years earlier. The higher the rate, the more dramatic the savings.
Generally, pay off high-interest debt first (anything above 7-8%). Credit card debt at 18-25% APR costs more than typical investment returns. Exception: always contribute enough to get your employer's 401k match — that's an immediate 50-100% return.
Pay minimums on all debts, then put extra money toward the highest-interest debt first. This mathematically minimizes total interest. The alternative is the debt snowball (smallest balance first), which can be more motivating psychologically.
Minimum payments are often set to cover interest plus only 1-2% of principal. On $15,000 at 18.9%, your first month's interest alone is $236. A $300 payment only reduces principal by $64. That's why it takes 8+ years with minimums alone.