T minus ??? til debt free
November 19, 2007 11:46 AM   Subscribe

How long will it actually take me to pay off this debt!?!

Current CC debt as of this month:

Credit Card #1:
Balance: $21,360 @ 11.5%
Minimum payment: $427

Credit Card #2:
Balance: $4,442 @ 15.4%
$3,146 @ 1.99%
Minimum payment: $137

Total debt: $28,948
Total due each month: $564

Currently I am paying $950 a month towards the CC's, where I'm paying the minimum payment on CC #1, and putting whatever is left of the $950 towards CC #2. Once CC #2 is paid off, 100% of the money will go towards CC #1. Right now, $950 is the absolute maximum I can put towards the cards.

Every February when I get a raise, I'll put an extra $100 towards paying them off each month.

In April 2009, my $160 a month car loan will be paid off which will then go towards the CC's. My car is in great condition, and I plan on driving the car as long as I can until it dies.

Each February when I receive my tax return, I'll be putting $1000 towards the CC's.

Here's the breakdown over the next few years:

December 2007: $950
January 2008: $950
February 2008: $1050 + ($1000 tax return)
March 2008: $1050
April 2008: $1050
May 2008: $1050
June 2008: $1050
July 2008: $1050
August 2008: $1050
September 2008: $1050
October 2008: $1050
November 2008: $1050
December 2008: $1050
January 2009: $1050
February 2009: $1150 + ($1000 tax return)
March 2009: $1150
April 2009: $1310 (car now paid off)
May 2009: $1310
June 2009: $1310
July 2009: $1310
August 2009: $1310
September 2009: $1310
October 2009: $1310
November 2009: $1310
December 2009: $1310
January 2010: $1310
February 2010: $1410 + ($1000 tax return)
March 2010: $1410
April 2010: $1410
May 2010: $1410
June 2010: $1410
July 2010: $1410
August 2010: $1410
September 2010: $1410
October 2010: $1410
November 2010: $1410
December 2010: $1410

I'm guessing it won't actually take 3 full years, but thats what the payments would look like.

If you feel more comfortable creating an Excel file, I've created a throwaway email address you can email the file to: helpmebecomedebtfree@gmail.com

Thank you!
posted by anonymous to Work & Money (17 answers total) 5 users marked this as a favorite
This calculator at bankrate.com should do this all for you.
posted by c0nsumer at 11:57 AM on November 19, 2007

The best place to ask this question, imo, is the credit card & debt forum at the Motley Fool - I assume they still have the free trial going on. They're great about debt and credit questions.
posted by restless_nomad at 11:58 AM on November 19, 2007

I'm sorry, I posted the wrong calculator. This one is the one you want. It lets you calculate, using interest rates and such, which debts should be paid off first, snowballing payments from one debt into another, etc.
posted by c0nsumer at 11:59 AM on November 19, 2007 [2 favorites]

I make it November 2009 and I have sent a spreadsheet with my workings.
posted by b33j at 12:17 PM on November 19, 2007

I agree with restless nomad - the folks at the Fool's credit card and consumer debt board have made commenting on these kinds of questions into an exact science.
posted by ikkyu2 at 12:30 PM on November 19, 2007

Using this excel debt calculator, I think your final payment will be in February of 2010.
posted by Forktine at 1:03 PM on November 19, 2007 [1 favorite]

As logical as it seems to pay the highest APR card first, in this case you do not want to. You want to pay the card that is costing you the most in finance charges:

$21360 @ 11.5% APR = $204.7/m Interest

$4442 @ 15% APR = $57/m Interest

You want to pay down that $21k as fast as you can until you are at roughly $6k, then pay them both 50%.
posted by SirStan at 1:51 PM on November 19, 2007

Also -- Ask your lenders for lower interest rates every *3* months. Watch your mail for 0% offers and take advantage of them (*read the fine print, don't pay a 3% fee, unless it makes sense). Ask for ballance increases as well (a lower utilization gives you a higher FICO score, which increases your odds of getting a 0% BT offer).
posted by SirStan at 1:53 PM on November 19, 2007

As logical as it seems to pay the highest APR card first, in this case you do not want to. You want to pay the card that is costing you the most in finance charges:

Do you have a justification for this? Paying the higher rate one means that you're making the maximum reduction per-dollar. Are you thinking of some fee that's not obvious?
posted by a robot made out of meat at 1:56 PM on November 19, 2007

It may help your FICO score to pay down the one that has the highest balance-to-credit limit, since FICO factors in percentage used of available credit.
posted by Sweetie Darling at 2:25 PM on November 19, 2007

Not trying to threadjack, but Motley Fool board access used to be pay-only (stupidly!). Did this change? Thought the poster should know if it was

I would have figured it out myself except the signup link takes me to some "top 2 picks" special report that doesn't seem to go anywhere resembling a signup.
posted by RikiTikiTavi at 3:44 PM on November 19, 2007

Have you considered trying to get a lower-interest credit card and transferring the balance (and cutting up and cancelling the old one)? What about just calling your issuer and asking for a lower rate, since you're building a record of making regular payments? What about selling some stuff, or taking in a roommate, or getting a personal loan (say, via a credit union)?
posted by dhartung at 5:25 PM on November 19, 2007

Why monkey with your FICO score when the goal is to free yourself of debt, though?
posted by Coventry at 6:22 PM on November 19, 2007

Having this level of debt on credit cards is an incredibly bad idea. A consolidation loan would reduce your interest rate, at least - although you must destroy your credit cards and live within your means henceforth.

I strongly advise you to go see a credit counsellor for advice. (Local major charities should be able to point you in the right direction.)
posted by aeschenkarnos at 6:36 PM on November 19, 2007

Also adjust your withholdings at work, and force yourself to put another $84/month to the cc payments. Instead of a $1000 lump sum every February, you will be paying down principle 2-14 months earlier. For the time frame and rates you're dealing with, you need to get the Power of Compounding Interest working for you like this.
posted by nakedcodemonkey at 6:50 PM on November 19, 2007

As someone who worked in credit cards, I'd advise you not to count on those tax returns, nor that those APRs will stay the same. Neither can be counted on, though of course your behavior will make certain outcomes much, much more likely.

I'm not trying to dash your hopes. All I'm saying is think of the plan you outlined as a best-case scenario, and plan for the worst instead, just in case.
posted by RobotHeart at 7:04 PM on November 19, 2007

Here's how to do a rough back of the envelope estimate in a couple of minutes. First just start at the beginning and add up payments until to you get to $29,000. This is November, 2009. That would be how long it would take you to pay off the principal if you were paying no interest. This turns out to be 24 months or two years.

Next roughly estimate that your average balance over the two years is about half the principal or $14,500. This isn't exactly right but close enough for an estimate. Your average interest is about 12.5%. So your interest will be approximately

$14,500 * 2 years * 12.5% = $3625 interest.

The interest will take you about three more months to pay off. So altogether you pay off the debt around February 2010.

Since a lot of factors can change, including your pay off rate and interest rates, there's not much point in spending more time trying to get a more accurate number. This is all assuming you don't put any more debt on your cards in the mean time.
posted by JackFlash at 9:30 PM on November 19, 2007

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