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A Guide to Debt Payoff

January 11th, 2017 by Michael Gardon

Did you know the average credit card debt in the U.S. is more than $15,000? That debt costs us money and prevents us from doing things we want to do. Perhaps more importantly, debt creates too much worry, fear and stress.

At INFINITI HR, we like to be a go to resource for our employees, clients, and social media followers. This blog is brought to you by our friends at The Simple Dollar. One of their missions is to help people break free from debt and get on the road to financial independence. Whether it’s medical bills, student loans, or credit card debt, they have some suggestions and a cool calculator tool that can help you eliminate your debt quickly.

The Debt Calculator Tool – Create a Payoff Plan

See how making a few extra payments will get you debt-free faster than you think.

How to Use This Debt Calculator

This calculator is set up to help you get a handle on all of your debt. There are three main parts:

Understand Your Total Debt

First, enter your debt balances, interest rates, and the monthly payments you’re making, and hit “calculate.” Add as many accounts as you need by clicking “add debt” below each module. The calculator will show you how much interest you’ll pay overall and when you’ll pay off each account if you stick to your current payment plan.

Use the Sliders to See What Happens When You Pay a Little Extra

Next is where you can play around a bit and create a plan to tackle your debt. Use the sliders to see how paying even a little extra each month can drastically hasten your payoff date and reduce the total interest you’ll pay over time. You can also select a desired payoff date and see what kind of monthly payments you’d need to make to be debt-free by that time.

Compare Your Current Approach to Your Accelerated Debt Payoff Plan

When you’re done tweaking numbers, check out the two summary tables below each debt, which give you a side-by-side comparison of the approaches. The table on the left tells you how much your debt will cost you and when you will pay it off if you stay on your current payment schedule. The table on the right takes into consideration the extra payments you used with the slider tool to show you how much your accelerated payoff plan can save you, and when you can realistically be free from that debt.

When Does a Balance Transfer Credit Card Make Sense?

A powerful tool that some people may be able take advantage of is a 0% balance transfer credit card. This type of credit card lets you transfer a portion of your high-interest balance and take advantage of a 0% interest offer for a specific period of time, usually 12 to 18 months. If you qualify, you can eliminate interest while paying off your debt, which can help you make progress more quickly.

If you primarily have credit card debt, use the calculator above to see if you could feasibly pay off your balance in 18 months or less if the interest rate were zero — as it would be during an 18-month introductory period. If you can make those payments without adding new charges to your card in that time, you won’t incur any interest charges and you’ll eliminate that high-interest debt! But once that introductory period is over, the interest rate will shoot upward again.

What Are My Other Options for Getting Out of Debt?

If your debt is too overwhelming to take on without outside help, you have other options. Some common options are below, but keep in mind that these methods have downsides — sometimes significant ones — that should make them a last resort for most people.

Debt Consolidation

With debt consolidation, you take out a single, bigger loan at a lower interest rate and use it to pay off your existing smaller debts. This has several advantages. Chief among them: A longer-term, lower-rate loan can dramatically lower the total amount you pay each month, giving you some financial breathing room. It’s also easier to stay on top of one payment instead of several, keeping you organized and more likely to pay on time. Finally, you’ll still be paying everything you owe, so your credit won’t take a hit.

Unfortunately, you’ll be able to get a lower payment because you’re simply spreading out the pain of paying off your debt for a long time — sometimes a very long time. That means more time for interest to accumulate, leaving you with a bigger total bill. Debt consolidation can also be especially risky for those who overspent their way into debt in the first place. If you suddenly have extra room in your budget, it’s tempting to fall back into bad habits and start accumulating more debt.

Debt Management

With debt management, you sign up with a company that pays off your debts for you with money you deposit into a special account. The company attempts to negotiate lower interest rates or payments with your creditors, but you’ll still ultimately owe the same amount.

The chief benefits here are the same as with debt consolidation: You pay less every month and you’re better able to stay organized. Also, signing on for debt management may give you some relief from constant calls and letters from creditors.

Debt management plans can take several years to finish, however, and it’s common for participants to drop out. You’re also trusting a company in a very precarious financial situation, and your credit can suffer if they ever flub a payment. You’ll usually be prohibited from opening any new credit accounts while you’re signed up. Finally, perhaps the biggest downside is that you’re paying someone to do something you can do yourself — there’s nothing to stop you from trying to negotiate with your creditors on your own.

Debt Settlement

With debt settlement, you also sign up with a company that negotiates with your creditors on your behalf, and pays back your debt with money you deposit into a special account. The major difference is that the debt settlement company tries to reduce the principal, or overall amount you owe, instead of simply trying to lower your payments or interest rate. You’ll need to show significant financial hardship to qualify for a settlement program.

Debt settlement has one main advantage (ultimately paying back less than you owe) but a whole lot of disadvantages. First, you will pay a significant percentage of the money the company saves you in fees — and you’ll probably be on the hook for taxes on forgiven debt, too. Next, you will need to save enough money to begin settlement, which could take away from money you need to stay afloat with your debts. Finally, if your debt is marked as “settled” on your credit report, that can make future creditors less likely to take a chance on you.


If you’re considering something as drastic as debt settlement, bankruptcy may be on your radar, too. There are two main options: Chapter 7, which essentially blasts away your unsecured debts, and Chapter 13, which puts you on a payment plan for several years. Your assets and income will dictate which kind of bankruptcy you can file. To learn more about the difference, see the article on Seven Things to Know When Filing for Bankruptcy.

The biggest advantage of bankruptcy is that it can mean a fresh start. In the case of Chapter 7, you can even be free of crushing debts in as little as a few months. Collection calls and letters will stop. And depending on your situation and the type of bankruptcy you file, you may not lose property or other significant assets.

However, bankruptcy exacts a high toll: It will stay on your credit report for up to a decade, which can make it very hard to get a loan, buy a house, or simply get a new credit card. Landlords and future employers may consider bankruptcy a black mark when you’re looking for an apartment or a job. And bankruptcy may not wipe your slate completely clean if you owe student loans, back taxes, or other non-dischargeable debts.

Click the link to view the recent INFINITI HR blog: The Gift of Work Life Balance or check back for more on human resources, payroll, insurance and benefits.

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