Here's a breakdown of how long it would take to pay off $10,000 making minimum payments at different interest rates: At 15% interest – 26 years, 3 months. At 20% interest – 28 years, 6 months. At 25% interest – 30 years, 3 months.
1% of the balance plus interest: It would take 29.5 years or 354 months to pay off $10,000 in credit card debt making only minimum payments. You would pay a total of $19,332.21 in interest over that period.
If you only make minimum payments, a $10,000 credit card balance will cost you $16,056.59 in interest and take 346 months to pay off. Minimum payments on a $10,000 balance would start at $267 and decrease as you paid down what you owe.
For example, say you have a credit card account that charges 18% interest, and you have $10,000 in credit card debt. If the minimum payments are equal to interest plus 1% of the balance, it would take 342 months to pay off the debt by making minimum payments alone.
"This means that for most, the fastest way to pay off debt is to dramatically reduce spending, stick to spending only on necessities, and focus all excess income on your debt." Selling your car, cutting down restaurant expenses and adding income from a side hustle are all possible ways to improve your cash flow.
“It might hurt some aspects of credit scoring analytics, such as credit utilization,” Sherry says. “If you only pay the minimum, you're going to take longer to pay off outstanding balances.”
When you pay only the minimum payment on Credit Card, the remaining outstanding balance is carried forward to the next billing cycle. This balance attracts interest charges, which can quickly accumulate and lead to a cycle of debt if not managed properly.
2.5% of the balance (inclusive of interest): It would take 505 months to get rid of your $5,000 credit card balance making just minimum payments at 2.5% of your balance. That's over four decades of payments.
A $10,000 credit card balance may seem daunting, but you could pay it off faster than you think. With a 20% interest rate, you could get rid of that debt in 25 months if you're able to pay $500 per month. And that's without lowering the interest rate at all.
$10,000 with a 20% APR: Your minimum payment would be $266.67 per month and it would take 346 months to pay off $10,000 at 20% interest.
What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.
The simplest way to make this calculation is to divide $10,000 by 12. This would mean you need to pay $833 per month to have contributed your goal amount to your debt pay-off plan. This number, though, doesn't factor in the interest on your debt.
3 tips to pay down your credit card debt quickly
About 14 million Americans are at least $10,000 in credit card debt, according to a new survey. Here's what you can do to pay yours down.
Minimum payments themselves may not affect your credit score. But paying the minimum due on credit cards can lead to utilization problems.
Yes, you can make partial as well as excess payment for your credit card bill. Although not paying the due-amount in full before the last date of payment may attract late fees and rolling credit charges.
In fact, by making just minimum payments, you'll set yourself up to owe more interest over a longer period of time. You can find the minimum payment amount clearly labelled on your credit card statement and you're required to pay it by the due date shown as part of every 30-day billing cycle.
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
It's a good idea to pay off your credit card balance in full whenever you're able. Carrying a monthly credit card balance can cost you in interest and increase your credit utilization rate, which is one factor used to calculate your credit scores.
While there are no government debt relief grants, there is free money to pay off debt in that it will help you pay bills, giving you more income to pay on credit card and other debt. The biggest grant the government offers may be housing vouchers for those who qualify.
Some debt reduction options work the best for people with no money and credit that ranges from fair to bad. Those options include: Debt Management Program – Nonprofit credit counseling agencies can help you put together a budget and discuss options, including a debt management plan.