Readers Question: Paying Off $20,000 @$400/month

If I put $400 a month towards my credit cards how long will it take me to pay off $20,000? Interest ranging from 4% to 24%, not kidding!

Wow Brandy, you know how to challenge a guy don't you. Since, I am not a professional financial adviser I turned to some of the debt calculators that are online, to find your answer.

One thing, I must say is that with such a broad range of of interest rates, one would have to know how much is owed at each interest rate to get more specific, but you can use the sites that I will mention, to help get more specific answers.

For now I will take the worse case scenario and assume that all of the $20,000 is charging you 24%. In that assumption, I visited Money Magazine's debt calculator and got the following message, when I inputed $20,000 of debt with 24% interest and $400 a month payment.

If you pay $400.00 a month, it will take you 16 years and 7 months to pay off your credit cards.

Based on your current combined balance of $20,000.00, you will pay a total of $59,421.26 in interest

16 years? Wow, I sure hope those numbers aren't the exact numbers for your situation, because you will never get out of debt that way. I strongly suggest paying off more then the minimum wage on the debt that is at 24%, while you pay the minimum on those that are lower interest rates. You must get rid of the higher interest rates ASAP. I know, I know Dave Ramsey says pay the smallest debt is right, and I hope that the smallest debt is the highest interest rate. However, you need to get that debt paid down and then you will have more money to pay towards the next credit card, by adding the 2 payments together. Then once the 2nd card is gone, you can snowball that payment towards the third card. Meaning when you reach the 3rd debt, you will be paying not only the minimum debt there but also what had been the minimum on the 2nd debt as well as the elevated payment to the 1st debt, all on that 3rd debt. After that debt is paid, you take that payment and snowball it into the next debt, so on and so, until all the debts are paid off.

Let's look back at that previous example, and if you up the payments to $500/month then the payments time will decrease to just 6 years and 6 months. Isn't that amazing? Just an extra $100/month and you save 10 years and 1 month of the time you would be in debt. As Dave Ramsey says, you must get gazelle intense and throw everything you can at getting out of debt. That means, no vacations, no eating out, until you are debt free.

Now, lets look at the best case scenario where all $20,000 is at 4%. The same calculator came back with the following results:

If you pay $400.00 a month, it will take you 4 years and 7 months to pay off your credit cards.

Based on your current combined balance of $20,000.00, you will pay a total of $1,835.35 in interest.

---
go ahead share your thoughts with me now.

Get Paid to Sign Up, Refer Others, Read E-Mail, Complete Offers, and More!