When Will You Be Debt-Free? How to Find Your Payoff Date
"How long until this is paid off?" is one of the most useful questions you can ask about a debt, and one that statements rarely answer clearly.
The answer comes from three numbers: the balance, the interest rate and your monthly payment.
Where each payment goes
Every month, interest is added to the balance first. Your payment covers that interest, and only what's left lowers the balance.
Take a $5,000 credit card balance at 24% APR. That's 2% a month, so the first month's interest is $100.
- Pay $150 and only $50 lowers the balance.
- Pay $100 and the balance never goes down at all.
That second case is worth saying plainly: if your payment doesn't cover the interest, the debt is never paid off, no matter how long you pay.
The same debt, three ways
| Monthly payment | Paid off in | Interest paid |
|---|---|---|
| $100 | Never | Keeps growing |
| $150 | 56 months (4 years, 8 months) | About $3,320 |
| $250 | 26 months (2 years, 2 months) | About $1,450 |
Paying $100 more a month gets you out two and a half years sooner and saves almost $1,900. The extra money goes straight to the balance, so it pays off twice: less owed, and less interest on what's left.
Your debt-free date
With more than one debt, your debt-free date is when the last one is paid off. Two common ways to choose where extra money goes:
- Highest interest rate first (the "avalanche"): saves the most money.
- Smallest balance first (the "snowball"): clears whole debts sooner, which keeps some people going.
Either way, keep making at least the minimum on every debt.
Fixed-term loans are different
Car loans, student loans and mortgages have a set term, like 60 months. Pay the scheduled amount and the loan ends on schedule. Paying extra still ends it sooner and cuts the interest, as long as your lender applies the extra to the principal.
See yours
IncomeSync works this out for every debt you add: the payoff date at your current payment, the interest still ahead, and your household's debt-free date. If a payment doesn't cover its interest, it tells you. Each payment you log covers the interest since your last payment first, then lowers the balance, the way your statement does. Get IncomeSync.
New to tracking debts separately from bills? Start with why bills, debts and expenses aren't the same thing.