If you owe $20,000 and make a 3% payment a month — $600 — it would take 45 months to pay that off and you'd accrue $6,707 in interest. If your minimum payment is 2%, or $400, you'd rack up $13,403 in interest.
Credit card issuers require borrowers to make a minimum monthly payment on their debt that's typically between 2% and 4% of the total balance owed, Experian reports. This means it could take more than 22 years to repay $20,000 worth of debt by making the minimum credit card payment.
In order to pay off $25,000 in credit card debt within 36 months, you need to pay $905 per month, assuming an APR of 18%. While you would incur $7,596 in interest charges during that time, you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
The decision of whether to pay off a car loan early depends on your budget, your loan's interest rate and your other financial goals. In general, you should pay off your car loan early if you don't have other high-interest debt or pressing expenses to worry about.
Save money
The most obvious reason you might want to consider paying off a loan early is that it saves you money on the amount of interest you pay. It's important to note that this only applies if you are paying a simple and not precomputed interest rate.
While that seems like a lot of money, it goes almost nowhere as far as paying off the balance. The average credit card interest rate in 2021 was 16.13%. With 16% interest, it would take 447 months (more than 37 years) to pay off $30,000 in credit card debt. The final bill would be $69,459.47.
Your Budget with $25,000 in Student Loans (72 percent of student loan borrowers). While no one wants to pay student loans, $25,000 in education debt is manageable for the average professional earning $30,000 to $40,000. Depending on a student's eligibility, most (if not all) of this debt would be in government loans.
On average, Americans carry $5,315 in credit card debt, but if your balance is much higher—say, $20,000 or beyond—you may be feeling hopeless. Paying off a high credit card balance can be a daunting task, but it's possible.
According to a 2020 Experian study, the average American carries $92,727 in consumer debt. Consumer debt includes a variety of personal credit accounts, such as credit cards, auto loans, mortgages, personal loans, and student loans.
Generally speaking, a good debt-to-income ratio is anything less than or equal to 36%. Meanwhile, any ratio above 43% is considered too high.
Consider refinancing your current car loan
Refinancing with a new 72-month loan is a relatively long time — that's six years. Instead, look for a shorter term and a lower interest rate. If you do refinance for a long-term loan, consider paying extra toward the principal every month to pay off the loan early.
In almost every case, it's best to pay down or pay off your auto loan before selling it or trading it in. The main concern is whether you have positive or negative equity on your loan. With negative equity, you will want to pay off your auto loan before you trade in your car.
By paying half of your monthly payment every two weeks, each year your auto loan company will receive the equivalent of 13 monthly payments instead of 12. This simple technique can shave time off your auto loan and could save you hundreds or even thousands of dollars in interest.
In general, there are three debt repayment strategies that can help people pay down or pay off debt more efficiently. Pay the smallest debt as fast as possible. Pay minimums on all other debt. Then pay that extra toward the next largest debt.
If your total balance is more than 30% of the total credit limit, you may be in too much debt. Some experts consider it best to keep credit utilization between 1% and 10%, while anything between 11% and 30% is typically considered good.
Many people would likely say $30,000 is a considerable amount of money. Paying off that much debt may feel overwhelming, but it is possible. With careful planning and calculated actions, you can slowly work toward paying off your debt.
On average, Americans carry $6,194 in credit card debt, according to the 2019 Experian Consumer Credit Review. And Alaskans have the highest credit card balance, on average $8,026.
4 Years to Pay off $35,000.