Quick, off the top of your head: how much debt are you in? How long is it going to take you to pay it all off?
We’re not asking for an estimate here. You should know exactly how much debt you’re in and exactly how long it’s going to take you to become debt-free if you’re serious about taking control of your financial situation.
If you don’t know these figures, don’t take it too hard, as most people don’t. You’re in luck, because it’s never been easier to figure out your debt situation.
National Debt Relief is proud to introduce a brand-new, free debt calculator. This incredible online tool can help you to get a handle on your debt and get a new lease on life. Not only does it estimate how much you’ll have to pay to get out of debt, and how long it will take you, but it also compares your options so that you can figure out your best path forward.
How the National Debt Relief debt calculator works
What’s the hardest part of solving any complex problem? Over 99% of the time, it isn’t the actual work, it’s figuring out how to solve the problem in the first place.
That goes double when it comes to issues of finances. Many people find thinking about their debt overwhelming because, well, they don’t know how to think about their debt.
Our debt calculator takes all that stress away by providing you with a simple tool that crunches the numbers for you. All you need to do is provide three simple inputs so that the calculator can do the work for you: your total unsecured debt, your average interest rate, and the length that you’d like your debt repayment program to be. With these three numbers, we’ll map your personalized debt repayment landscape.
First, let’s dive into unsecured debt to make sure you know what number to use.
1. Unsecured debt
If you’ve been researching your debt options, then this probably isn’t the first time you’ve run into the term “unsecured debt.” However, what does it actually mean?
First, let’s define secured debt. With secured debt, you put up collateral in order to gain approval from your creditor. Collateral can be any valuable asset. For most personal debt, people put possessions such as their home or car up as collateral.
If you fall behind on your payments, your creditor may be able to seize and sell the collateral that you put up. In other words, the collateral is its “security” for lending to you. If you turn out to be a bad investment, your creditor can always make a portion of its money back.
Unsecured debt, as you may have already guessed, does not require collateral. Generally, all you need to do to take on unsecured debt is sign on the dotted line and agree to keep up with your payments.
Whether your debt is secured or unsecured depends on your creditor. Generally, though, the following types of debt tend to be unsecured:
- Credit cards
- Lines of credit
- Personal loans
- Medical bills
If you’re struggling with these sorts of debts, make sure they’re unsecured and then tally them all up. The number that you come up with might be overwhelming, but you need to know it if you’re ever going to get serious about getting out of debt.
Have you figured it out? Good! Type it into the debt calculator and move on to step two.
2. Average interest rate
What makes debt so difficult to deal with? In most cases, it’s not the principal amount; it’s the interest rates.
Don’t believe us? Imagine that you have $8,000 worth of credit card debt, and your credit card has an interest rate of 15.07%.
If you didn’t have to pay interest, then you’d need to pay about $333 dollars per month in order to pay off your $8,000 in 24 months. That’s no small amount, but it’s doable.
With interest, though, you’ll end up paying much, much more than that. If you only kept up with your minimum monthly payments, you’d end up paying a whopping $14,240 in interest just to get out of your $8,000 in debt. That’s $22,264 total, according to the debt calculator.
In short, interest payments, not the debt itself, are usually what put people over the edge as they compound and compound, never seeming to end.
For our debt calculator, you’ll need to enter the average interest rate of all of your debts in order for us to map out your debt situation. To find it, add up the interest rates of all of your debts and then divide by the number of debts there are.
For example, if you have three credit cards with interest rates of 13.43%, 15.07%, and 19.8%, your calculation would look something like this:
(13.43 + 15.07 + 19.8) / 3 = 16.1%
You’d pop 16.1 into the calculator.
Sometimes, it’s not so easy to find your interest rates. Check your monthly statements and your online accounts to find your APRs. If you really can’t track them down, give your creditors a call and ask.
Once you’ve calculated your average APR, you only have one more step until our debt calculator can figure out your debt situation for you.
3. Desired program length
Finally, you’ll have to put in your desired program length. How many months will it take you to become debt-free?
You can enter any number you want here to see how it affects your options. We’ll give you some baseline numbers to get you started.
Let’s start with the worst-case scenario. The average cardholder has about $15,000 in credit card debt and an average annual percentage rate of 17%.
If that average cardholder only made monthly minimum payments, pegged at approximately $250 per month, it would take 135 months to get out of debt, just over 11 years.
If you’re reading this article, you probably aren’t interested in waiting 11 years to free yourself from debt.
We suggest checking your budget to see how much you can afford to put toward paying off your debts each month. Take your total monthly income, subtract your monthly bills and expenses, give yourself a bit of a buffer for entertainment and for emergencies, and then see what’s left. That number is your monthly surplus income.
Next, play around with the debt calculator. Start by putting 24 months in for “desired program length” and weigh your options. If you feel like you can afford more, shorten the length. If you couldn’t afford the payments listed, extend the length of your program. The calculator makes it easy to sketch out your different options and get a better idea of what you can handle.
Interpreting your results
You’ve entered all the values you need to get the debt calculator going. Now the fun part happens: getting your results.
Once you hit “Calculate,” you’ll see four graphs pop up, namely Total Amount Paid, Total Interest Paid, Monthly Payment, and Months to Payoff. You’ll also see a table that compares all of your options. What does it all mean? We’ll break it down.
Four points of comparison
On each graph, you’ll see the four options that the calculator compares: consolidation loans, credit counseling, making minimum payments, and enlisting the services of National Debt Relief.
- Consolidation loans refer to personal loans that debtors take out to deal with their debts. They use the loan to pay off all of their debts at once, and then concentrate on paying down the loan.
- Credit counseling is a bit different. Credit counselors are often, but not always, nonprofits that work with individuals who are deep in debt to help them to avoid bankruptcy. They offer basic financial education and often negotiate with creditors to reduce interest rates and payments. They also charge fees for their services.
- As we’ve already covered, making minimum payments is usually your worst option if you want to get out of debt anytime soon and save on your interest payments. These numbers, compared to your other options, are generally unfavorable.
- Finally, we estimate how National Debt Relief’s services might be able to help you. We have a good track record of helping people to get out of debt as fast as possible and for the least amount possible.
Now that you understand the points of comparison, let’s dive into the charts.
Total amount paid
Here, the total amount paid refers to how much you’ll pay over the entire lifetime of each of these debt relief options. That includes the principal of your debt along with any interest payments that you’re projected to have to make. It doesn’t necessarily reflect potential fees that might go along with each option (as in the case of credit counseling). Those will vary from provider to provider, although you should be aware that they are a possibility.
Total interest paid
As the title suggests, this is the total amount that you’d be projected to pay in interest with each debt relief option. You might be surprised at how high this number is, especially in the case of minimum payments. It doesn’t seem too outlandish, though, when you realize that this is how creditors make their money. They charge interest, and more than that, they’re incentivized to get as much interest out of each borrower as they possibly can. That’s why it takes so long to get out of debt when you’re only making minimum monthly payments. Your creditors would rather keep you in debt for as long as they can instead of making all of their money back at once.
Here, we project your approximate monthly payment for each of the debt relief options listed. How much would you have to pay each month to pay off your debt and associated interest? Again, you’ll probably be surprised at how much you’d have to pay each month if you choose not to engage in debt relief; interest can really drag you down.
Months to payoff
We’ve pegged the average length of a credit-counseling program and a debt consolidation loan at 60 months. The number of months projected to pay off your debts with your minimum monthly payments is a function of your total debt amount and your average interest rates, and it’s likely to be high. For the National Debt Relief option, we take the desired program length you entered above.
Our example case
Let’s run an example using $24,000, a 17% interest rate, and a 24-month desired program length.
As we can see from the above, the type of debt relief you choose really affects how quickly and affordably you can get out of debt.
With a five-year consolidation loan at an 11% interest rate, you’ll be making monthly payments of $325 to pay it all off. That includes the $15,000 principal along with a projected $4,500 in interest. All told, you’ll pay just under $19,500.
With a credit counselor and a five-year program, you’ll fare a little better. You’ll get a projected 9% interest rate, paying $312.48 per month and $3,750 in interest for a total of $18,750.
If you do nothing and make your minimum payments, you’re really in for it. It’ll take you 382 months to pay off your debt at a 17% interest rate. You’ll pay $26,700 in interest over time and end up paying your creditors $41,745 just to pay off a $15,000 debt.
Finally, if you choose National Debt Relief, you’ll be out of debt in 24 months with no added interest. Your monthly payments will be a bit higher at $478.60, but you’ll pay much less than with any other options, a projected $11,486.40 which a good deal less than even your original principal.
Are you ready to try it out? Get your numbers together and get calculating today!