# Debt Repayment Calculator

The path to repaying your debts can be long, and one of the hardest things about completing that journey is finding the strength to stay the course for months on end as you rebuild your finances, one brick at a time.

One of the most motivating things you can do as you set out on this journey is to look forward to that time when you will be debt free. Visualize how your efforts will pay off and how your debt is gradually erased until you reach that moment when it is all finally reimbursed.

Visualizing the results of your efforts is known to be an effective motivating strategy when you’re looking to strengthen your resolve.

Any wall can only be built one brick at a time, but visualizing the completed wall is how you motivate yourself to keep picking up bricks.

This article provides an online tool that will allow you to draw a picture of your debt repayment journey, month by month, until everything is paid off.

## Debt Repayment Calculator: Instructions

When you click on the link at the bottom of the page, it will open the calculator in a new tab or window.

- Choose how you want to repay your debts – the smallest or the most expensive first. If you pick the smallest, you’ll be able to see progress faster. If you pick the most expensive, you’ll pay less interest overall, but it may take you a little longer to pay off your first debt.
- Enter the total amount of money you are able to dedicate each month to your repayment efforts. Make sure this is a sustainable effort you can make over a prolonged period of time.
- Enter the number of debts in the drop-down selector. The maximum the program currently handles is 10, but let me know if you need that expanded.
- For each debt, enter what it is, how much you owe, what the minimum payment each month is and what the annual interest rate is.
- Hit calculate, and the program will work out how fast you’ll be debt free. Green boxes represent the moment a debt is paid off in full, and red boxes indicate times when you have insufficient cash to meet the minimum payment on each debt.

The results sheet can be copy-pasted straight into excel if you want to keep it.

## How the Debt Repayment Calculator Works

Each month, the calculator works out how much interest is owed on each loan and adds that to the outstanding amount.

It then takes your pot of cash and pays off the minimum on each loan.

If you have any cash left after this, it will be put towards either the smallest loan, or the highest interest loan, to pay it down as fast as possible. This will depend on what you selected.

If you see any red boxes, that means you don’t have enough cash to pay the minimum in this month, and you’ll fail to make the payment. You have to either increase the amount you can put towards the loan, or you’ll have to call the lender and renegotiate the minimum to avoid any penalties

If you see any red boxes, that means you don’t have enough cash to pay the minimum in this month, and you’ll fail to make the payment. You have to either increase the amount you can put towards the loan, or you’ll have to call the lender and renegotiate the minimum to avoid any penalties.

## What Calculation Method Should I Choose?

There are two schools of thought on this question.

The mathematical, financial approach says you should pay off the highest interest loans first. These are the debts that cost you the most money each month. This approach will ensure you pay the minimum interest amount possible over the lifetime of the loans.

The second approach is psychological, and recommended by Dave Ramsay. This method recommends you tackle your loans with the smallest first. This is psychologically intelligent. The tangible success of fully reimbursing a loan provides motivation to keep saving money and pay off your remaining loans. There’s something very satisfying and encouraging to being able to cross a loan off your list.

Your choice should be governed by two things. First of all, which method will work for you? If you think the success of crossing a loan off the list will really help you stay motivated, then tackle the smallest loan first. Second, you should check whether the difference between the two methods is huge. If you have some very high interest loans that are quite large, then you might find there are a lot of savings to be made by paying those off first.

The calculator below provides you with a total amount of interest paid so you can make this comparison.

## A Disclaimer

I am not a qualified financial advisor in the legal sense of the term. Therefore, any output, and any results from this calculator or any other part of this website, is for information only. You should make your own calculations and get proferssional financial advice where appropriate.

Click here for the calculator.

If you would like additional functionality or find a bug, please comment on the payoff calculator page as it keeps them all in one place.

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