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Debt Reduction Calculator for All Situations

Updated: Sep 20, 2014

Highlights

  • Use the Bills.com Debt Coach to determine the best debt relief option for you.
  • Avoid making only minimum payments on your credit cards.
  • Use online calculators to find the savings on your credit card payments and loan consolidation offers.
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Debt Reduction Calculator - Finding the Right Tool

Although you can use a paper and pencil, or even an abacus, on-line debt reduction calculators are more convenient. A calculator is a great tool to provide you computations based on real numbers. Debt reduction is not a theoretical experiment or class assignment. It is important that you use a tool that is best suited to your needs and situation.

Debt reduction is a great goal. It requires a plan, which includes a starting point and positive reinforcements along the path. There is a wide choice of online debt reduction calculators. Some calculators are best for credit card payments and others for installment loan payments.

Quick tip

Even with the best tools, it is difficult to find the right solution to your problem. If you are having trouble making your monthly payments, then get a free debt consultation with one of Bills.com's pre-screened debt providers.

Learn about these online debt reduction calculator options:

  1. Bills.com Debt Coach – Online Debt Reduction Tool
  2. Credit Card Payment Debt Reduction Calculators
  3. Accelerated Payments for Mortgage Loans
  4. Personal Loan Calculator – Consolidating Debts
  5. Cash-out mortgage refinance calculator

Bills.com Debt Coach – Online Debt Reduction Tool

A calculator helps you compute the benefits of a program. It does not help you find the right program. In order to help you find the best debt reduction program, Bills.com created the Debt Coach. Debt Coach is an innovative tool that provides a debt relief recommendation, with real figures, based on your financial situation and financial goals. The possible solutions are a cash-out mortgage refinance, optimization of credit card payments, credit counseling and debt management program, debt settlement program and bankruptcy. All of these programs have one common point, which is a reorganization of your debt payment schedule.

Credit Card Payment Reduction Calculators

One of the most common types of debt is credit card debt. Credit card bills require a monthly minimum payment, between 2-4% of your balance. A minimum payment schedule has a declining payment schedule, therefore takes a long time to payoff. The most basic method to reduce your debt is by sticking with a fixed payment.

An online debt reduction calculator, based on your credit card payments, has you enter your credit card balance, interest rate, minimum payment. The calculator will figure your amortization payoff schedule, your total interest payment and the amount of time it takes to pay off the debt.

Bills.com Minimum Payment Calculator

For example, assuming you have credit card debt of $28,500, minimum payment of 2.5% ($712.50 for next month and not less than $20), and interest rate of 19%, using the Bills.com minimum payment calculator you would receive the following results:

  Minimum Payment Fixed Payment
Monthly Payment Starts at $712.50 and declines Stays constant at $250
Total Interest $46,323 $17,006
Payoff Period 37 years, 8 months 5 years, 4 months

The calculator also presents you with the full payment schedule.

The Bills.com minimum payment calculator allows you to check out your savings by either changing the fixed amount you wish to pay or the amount of years you wish to be debt free. The calculator includes a graph, which a sliding time scale and an amortization/payoff schedule for the minimum payment and fixed payment options.

The only drawback with the calculator is that it accounts for only one credit card at a time. Although this will not provide you with entirely accurate results, if you have more than one card, then you will need to take a weighted average to compute the interest rate, by dividing the balance of each card by your total debt and multiplying that result by the interest rate of the card. Then, add up all the interest rates.

Vertex42.com Debt Reduction Calculator

FInding an Online Debt Reduction Calculator The Vertex42.com  online debt reduction calculator works with Microsoft Excel, Google Documents, or Open Office. You can calculate the best debt reduction strategy including the snowball or avalanche techniques, using all of your credit card and installment debt.

After entering all of your debt, you can then choose the best strategy to pay off your debt, by applying a fixed payment (avoiding the minimum payment strategy) in one of two techniques, as follows:

  1. Snowball or Lowest Balance: This technique gives you the quickest psychological positive reinforcement, as you finish paying off at least one of your debts in the quickest period.
  2. Avalanche or Highest Interest Rate: This technique saves you the most money because you pay off the most expensive debt first.

This is a great tool for credit card debt, but mixing it with secured debt and student debt is confusing and makes comparing and deciding a difficult process. Keep it simple by comparing your credit card separately. It is better to create a plan that you can understand and easily follow.

Accelerated Payment Calculator for Mortgage Loans

The easiest way to pay off your debts is to make larger payments. There are different methods depending on the type of the type of debt, long-term (mortgage home loans, student loans or auto loans) or short-term (credit card debt, installment retail loans).

Mortgage payments are based on a long-term contractual agreement between you and your lender. Your payments are set based on the interest rate and payment plan chosen. In general, you pay back your mortgage loan over a 15 – 30 year period. If you want to reduce your debt faster, then consider an accelerated payment schedule. You can make larger monthly payments, bi-monthly payments, or large periodic (annual, semi-annual, etc.) payments.

In order to see how much you can save use the mortgage-x.com extra payment calculator. You enter the loan amount, interest rate, starting date, term of the loan. The calculator lets you choose whether you want to make monthly payments (1/12 of monthly payment or you set the amount), or annual payments.

Here is an example based on mortgagex.com extra payment calculator:

Term of Loan 30 years
Amount $200,000
Interest Rate 5.5%
Monthly Payment $1,136
Extra Payment $94.63
   
Interest Savings $41,051
Time Reduction 5 years, 1 month

The calculator does not include a time line to show the cumulative savings. Most likely, you will not have the loan for the full time, as you pay off your mortgage when you move. Remember, your savings are a direct result of putting more money into the loan. As long as you do not increase your interest rate, the shorter time you hold on to a loan, the less interest you will have to pay.

Personal Loan Consolidation Loan Calculators

Another debt reduction strategy is to consolidate loans. One method of paying off debt faster is to take out a personal loan at a lower interest rate, paying off higher interest rate credit and retail cards. Once again, using the fixed payment instead of minimum payments works to your advantage. You will need a good credit score and stable income to qualify for a lower interest personal loan.

Wells Fargo Personal Loan Consolidation Calculator 

Wells Fargo, along with most big banks and credit unions, offers personal loans. The Wells Fargo Personal loan calculator helps you determine your monthly payments and savings by paying off your credit and retail cards. They base their savings on the interest rate they offer to their best borrowers.

Example: In order to see the benefits of a personal loan, the example shows a borrower with different credit and retail cards balance at $28,500, an interest rate of 19.0% (weighted average), and monthly payment of $712.5 (2.5% of balance). The Wells Fargo calculator savings are compared against you keeping a fixed monthly payment. Your total interest is $17,007 paid over a 5 year 4 month period.

Here is your savings as shown on the Wells Fargo personal loan calculator:

  Well Fargo Personal Loan Wells Fargo Personal Loan
Total Balances $28,500 $28,500
Interest Rate 10.28% 10.28%
Term 4 years 3 years
Monthly Payment $727 $923
Total Interest $6,380 $4,741
     
Interest Savings $10,627 $12,666
Time Reduction 16 months 28 months

It is very hard to qualify for a personal loan. The calculator does not specify what the basic qualifying requirements are. If you decide to take a loan, shop around for the best personal loan.

Cash out Mortgage Refinance Loan or Home Equity Loan

If you have equity in your house then you can consider a cash-out refinance loan. This is especially effective if you can refinance your whole mortgage to a lower interest rate. A mortgage loan offers you the benefit of a long-term payment schedule.

The Mortgage Professor offers a comprehensive calculator to determine if taking out a cash-out refinance or a second loan is the best alternative. The calculator takes into account your interest rate, term of loan, tax bracket, and savings rate. Although it is difficult to follow, the calculator does present a bottom line. You have to check carefully the assumptions you make regarding the costs of the loan and the time you think that you will stay in the house.

Debt Reduction Calculator - Choose the Debt Relief Option and the Right Tool

There are many tools and online debt relief calculators to help you figure out the types of savings you can gain from each option. The Bills.com Debt Coach will help you find the best debt relief option. Then use the different calculators to figure out exactly how much you can save.

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