Repayment Calculator: Master Debt Payoff Strategy in 2026
Calculate loan payoff timeline and total interest. Compare fixed term vs fixed payment strategies. See how extra payments save money and accelerate debt freedom.
Understanding Repayment Strategies
Fixed Term Strategy
Fixed Term mode calculates the exact monthly payment required to pay off your debt by a specific date. This strategy provides deadline certaintyโyou know exactly when you'll be debt-free. For example, if you want to pay off a $10,000 credit card balance in 3 years, the calculator shows you need to pay approximately $400/month at 22% APR. This approach is ideal when you have a specific goal (e.g., debt-free before a major purchase or life event).
Fixed Payment Strategy
Fixed Payment mode calculates how long it will take to pay off your debt with a fixed monthly payment. This strategy provides budget flexibilityโyou work with what you can afford. For example, if you can pay $500/month on a $10,000 balance at 22% APR, the calculator shows you'll be debt-free in 26 months. This approach is ideal when your budget is fixed and you want to know your payoff timeline.
Choosing the Right Strategy
Choose Fixed Term if you prioritize timeline certainty (e.g., 'I want to be debt-free in 3 years'). Choose Fixed Payment if you prioritize budget flexibility (e.g., 'I can pay $500/month'). Both strategies benefit from extra payments, which accelerate payoff and reduce total interest regardless of your chosen mode.
The Minimum Payment Trap
How Minimum Payments Work
Minimum payments on credit cards are typically 2-3% of the balance plus interest and fees, with a $25 floor. In early months, 70-90% of the minimum payment goes to interest, with only 10-30% reducing principal. This creates a cycle where you pay interest on interest, making it nearly impossible to make progress on the actual debt.
The Decades-Long Cycle
For a $5,000 credit card balance at 22% APR, minimum payments (approximately $125/month) take over 15 years to pay off and cost approximately $6,000 in interestโmore than the original balance. This is the 'minimum payment trap' that keeps borrowers in debt indefinitely. In 2026, with rates at 22-28%, this trap is even more dangerous.
Breaking the Trap
To break the minimum payment trap, always pay more than the minimum. Even adding $50-100 extra per month can cut years off your timeline and save hundreds or thousands in interest. The calculator shows exactly how much you'll save by increasing your payment above the minimum.
The Impact of Extra Payments
How Extra Payments Work
Extra payments go directly to principal, reducing the balance faster. This means less interest accrues over time, creating a compounding savings effect. For example, on a $10,000 loan at 22% APR: paying $400/month costs $4,400 in interest over 36 months. Adding $100 extra ($500 total) reduces interest to $3,200โsaving $1,200 and cutting 10 months off the timeline.
Monthly vs. Lump Sum Payments
Consistent monthly extra payments provide steady progress and compound savings over time. Lump sum payments provide immediate principal reduction and can be strategically timed (e.g., after a tax refund or bonus). Both approaches save money, but monthly payments provide more predictable progress. The calculator allows you to model both strategies.
The Earlier, The Better
The earlier you make extra payments, the more you save due to compound interest reduction. A $1,000 extra payment in month 1 saves more than the same payment in month 12, because it reduces interest accrual for the entire remaining term. Always prioritize extra payments early in the loan term for maximum savings.
Compounding Frequency Impact
Daily Compounding
Daily compounding charges interest every day based on your average daily balance. This is common for credit cards and results in slightly higher total interest than monthly compounding. For a $10,000 balance at 22% APR over 3 years, daily compounding costs approximately $2,400 in interest, while monthly compounding costs about $2,350โa $50 difference.
Monthly Compounding
Monthly compounding charges interest once per month, typically on the statement date. This is common for personal loans and auto loans. Monthly compounding is simpler to calculate and typically results in slightly lower total interest than daily compounding.
Quarterly Compounding
Quarterly compounding charges interest every 3 months. This is less common but can be found in some personal loans. Quarterly compounding results in the lowest total interest of the three frequencies, but the difference is typically small for consumer loans.
Why It Matters
The higher the interest rate and longer the term, the greater the impact of compounding frequency. For high-rate credit cards (22-28%), daily compounding can add $50-100+ in extra interest over the life of the debt. Always check your loan's compounding frequency and use the calculator to see the exact impact.
3 Steps to Pay Off Debt Faster
Step 1: Calculate Your Current Timeline
Use the calculator in Fixed Payment mode to see how long it will take with your current payment. This shows your baseline timeline and total interest cost. For example, a $10,000 balance at 22% APR with a $400/month payment takes 36 months and costs $4,400 in interest.
Step 2: Add Extra Payments
Enter extra monthly payments or a lump sum in the Accelerator section. The calculator shows how much you'll save in interest and how many months you'll cut off your timeline. For example, adding $100/month saves $1,200 in interest and cuts 10 months off the 36-month timeline.
Step 3: Choose Your Strategy
If you have a specific deadline, use Fixed Term mode to calculate the required monthly payment. If your budget is fixed, use Fixed Payment mode to see your payoff timeline. Both strategies benefit from extra payments, which accelerate payoff regardless of your chosen mode.
Principal vs. Interest Breakdown
Early Loan Stages
In the early stages of a loan, 70-90% of your payment goes to interest, with only 10-30% reducing principal. This is because the balance is highest, so interest charges are highest. For example, on a $10,000 balance at 22% APR, the first $400 payment includes $183 in interest and only $217 in principal reduction.
Later Loan Stages
As the balance decreases, more of each payment goes to principal. In later stages, 70-90% of your payment goes to principal, with only 10-30% going to interest. This is because the balance is lower, so interest charges are lower. The calculator's pie chart visualizes this split over the life of the loan.
How Extra Payments Help
Extra payments bypass interest to hit principal directly, accelerating payoff. Since extra payments reduce principal immediately, they reduce future interest charges for the entire remaining term. This creates a compounding savings effect that grows over time.
FAQ
? If I pay an extra $100 a month on my $10,000 credit card balance, how much interest do I save and how much faster am I debt-free?
The savings depend on your interest rate and current payment. For example, a $10,000 balance at 22% APR with a $400 minimum payment takes about 36 months and costs $4,400 in interest. Adding $100 extra per month (total $500) reduces the timeline to 26 months and saves approximately $1,200 in interest. Use the calculator to see your exact savings based on your specific balance and rate.
? What monthly payment is required to pay off my auto loan in exactly 36 months?
Use the 'Fixed Timeframe' mode in the calculator. Enter your loan balance, interest rate, and set the target to 36 months (3 years, 0 months). The calculator will calculate the exact monthly payment required, accounting for compounding frequency. For example, a $25,000 auto loan at 6.5% APR requires approximately $765/month to pay off in 36 months.
? How does the compounding frequency of my personal loan impact the total cost of the debt?
Compounding frequency significantly impacts total interest. Daily compounding charges interest every day, while monthly compounding charges once per month. For a $10,000 loan at 22% APR: Daily compounding costs approximately $2,400 in interest over 3 years, while monthly compounding costs about $2,350โa $50 difference. The higher the rate and longer the term, the greater the impact. Always check your loan's compounding frequency.
? What is the total interest I will pay over the life of this loan if I only make the minimum payments?
The calculator shows total interest in the results. For credit cards, minimum payments (typically 2-3% of balance) can result in decades of payments. For example, a $5,000 balance at 22% APR with minimum payments takes over 15 years and costs approximately $6,000 in interestโmore than the original balance. This is the 'minimum payment trap' that keeps borrowers in debt indefinitely.
? How do extra payments reduce my total interest?
Extra payments go directly to principal, reducing the balance faster. This means less interest accrues over time. For example, on a $10,000 loan at 22% APR: paying $400/month costs $4,400 in interest over 36 months. Adding $100 extra ($500 total) reduces interest to $3,200โsaving $1,200. The earlier you make extra payments, the more you save due to compound interest reduction.
? Should I use Fixed Term or Fixed Payment mode?
Use Fixed Term if you have a specific deadline (e.g., 'I want to be debt-free in 3 years')โit calculates the required monthly payment. Use Fixed Payment if you know your budget (e.g., 'I can pay $500/month')โit calculates how long it will take. Fixed Term provides deadline certainty; Fixed Payment provides budget flexibility.
? What is the minimum payment trap?
The minimum payment trap occurs when minimum payments (typically 2-3% of balance) barely cover interest, leaving principal untouched. This creates negative amortization or decades-long repayment cycles. In 2026, with credit card rates at 22-28%, minimum payments can keep you in debt for 15-20 years on a $5,000 balance. Always pay more than the minimum to avoid this trap.
? How does a lump sum payment affect my payoff timeline?
A lump sum payment directly reduces principal, immediately lowering future interest charges. For example, a $2,000 lump sum on a $10,000 balance at 22% APR can save $400-600 in interest and cut 4-6 months off your timeline, depending on when you apply it. Earlier lump sums save more due to compound interest reduction. The calculator shows exact savings based on your payment timing.
? What is the difference between principal and interest in loan payments?
Principal is the original amount borrowed; interest is the cost of borrowing. In early loan stages, 70-90% of payments go to interest, with only 10-30% reducing principal. As the balance decreases, more of each payment goes to principal. Extra payments bypass interest to hit principal directly, accelerating payoff. The calculator's pie chart visualizes this split.
? How do 2026 interest rates affect my repayment strategy?
2026 credit card rates (22-28%) significantly outpace inflation (2.6-2.7%), making aggressive repayment a priority. While the 'real' value of future debt decreases with inflation, high-interest debt still compounds faster than inflation erodes it. Focus on paying off high-rate debt (above 20%) before lower-rate debt, regardless of balance sizeโthis is the 'avalanche method' for maximum savings.