According to the most recent statistics released by the Federal Reserve (pages 830 and 1154), 75 percent of families in the United States have debt, and almost 40 percent have credit card debt. Is your family among them? If so, these four calculators will help you to gain a better perspective on your debt, as well as what it will take to become debt-free.
Calculating Total Debt
Debt can be expensive. This calculator will show you the cost of the interest you will have to pay over the life of your loans. It will also show you how many months it will take to pay the debt in full. The calculator will display this information for each debt you enter, as well as provide cumulative totals.
To get an accurate view of your overall situation, be sure to enter all of your debts, including your mortgage, student loans, credit cards, car loans, and more. By looking at the cumulative numbers, you will be able to see in one place exactly how much you owe and the amount of interest you must pay for the privilege of borrowing money.
For example, if John owes $15,000 at an interest rate of 6%, and make a monthly payment of $250, he will have to repay a total of $17,877. At that rate it will take 72 months to repay his debts, and John will have spent $2877 on interest charges.
Credit Card Debt
This calculator is specifically designed to calculate credit card debt. Assuming that Sally has three credit cards her numbers might look like this:
|Balance||Interest Rate||Monthly Payment|
|Electronics store credit card||$2,000||18 percent||$100|
|Department store credit card||$600||14 percent||$75|
|Bank credit card||$3,000||12 percent||$350|
This calculator will consider all these credit card balances, interest rates and monthly payments and report that Sally could expect to be debt-free in 17 months. At the end of that time she will have paid $394 in interest. This, of course, assumes that she make no additional charges.
Paying Off Debt
If your goal is to become debt-free, be sure to pay extra each month toward the principle of the loan. Doing this will shorten the number of months you'll have to make payments and decrease the overall interest you will have to pay. For example:
- Assume Susan owes $18,000 on a car loan at an interest rate of 3%, and she makes monthly payments of $325. At that rate she could expect her debt to be paid in 60 months, and she will pay $1,398 in interest.
- By paying an extra $50 each month toward the principle of the loan, a total payment of $375, Sally would cut the duration of the loan by eight months and save about $200 in interest.
Debt to Income Ratio
Your debt to income ratio is calculated by dividing the amount of your debt by your income. To determine your ratio, simply type your income and recurring payment amounts into the form below and press "Calculate." Your ratio will be displayed and compared against standard recommendations.
Sometimes credit cards help people to deal with emergency situations, like a flat tire on the side of the road. Problems can arise when credit cards are used for impulse purchases and the balance isn't paid off every month. Use these calculators to stay aware and help you decide whether you really want to pay 16 percent interest on those designer jeans you've been eyeing.