💳Debt Payoff Calculator

Tackling the Buy Now, Pay Later (BNPL) Trap

ASIC Moneysmart notes that many Australians struggle with multiple BNPL accounts (like Afterpay or Zip). While often interest-free, late fees and the sheer volume of payments can cause stress. The Reserve Bank of Australia (RBA) reports that BNPL use is growing. Using this calculator to treat these as a single debt category helps you visualize their impact on your monthly budget alongside traditional credit card debt.

ASIC Moneysmart – BNPL Trends

The Power of the 'Hardship Variation'

Under the National Credit Code, Australians have the right to ask their lenders for 'financial hardship' assistance. This could result in a temporary interest rate freeze or a lower repayment plan. If your payoff timeline on this calculator seems impossible, the Australian Financial Complaints Authority (AFCA) recommends contacting your bank's hardship team immediately to negotiate a better deal for your specific circumstances.

AFCA – Financial Hardship

National Debt Helpline Resources

For Australians in deep financial distress, the National Debt Helpline (1800 007 007) provides free, confidential financial counselling. They recommend the 'debt avalanche' method to save on interest, which is particularly effective given that Australian credit card rates can exceed 20%. This tool helps you implement those professional strategies by prioritizing your debts based on the real AUD cost of the interest.

National Debt Helpline

Is debt consolidation a good idea in Australia?

Consolidating multiple high-interest debts into a single personal loan or a 0% balance transfer card can save you thousands. However, the ACCC warns that you must close your old accounts to avoid doubling your debt. Use our calculator to see if the fees associated with an Australian consolidation loan (application fees + monthly service fees) are lower than the interest you'd pay on your current individual debts.

What is a 'Part 9' Debt Agreement?

A Debt Agreement (under Part IX of the Bankruptcy Act) is a formal way to settle your debts without going bankrupt. It stays on your credit report for five years or more. Before entering such an agreement, the Australian Financial Security Authority (AFSA) suggests exploring informal payoff plans first. Our calculator can help you build an informal 3-year plan to see if you can avoid the long-term credit damage of a Part 9 agreement.

How do Australian credit card 'minimum payments' work?

Australian banks are required to show on your statement how long it will take to pay off your balance if you only make minimum payments. Often, this is 20+ years! Our tool allows you to see the dramatic difference that adding even $20 extra to your monthly repayment makes, empowering you to beat the 'minimum payment' trap set by major Australian lenders.

Step-by-Step Guide:

1. Add your debts: Enter the balance, interest rate, and minimum payment for each debt.
2. Set your budget: How much can you put toward debt each month?
3. Choose your strategy: Avalanche (highest rate first) or Snowball (smallest balance first).
4. Review your results: See how long it will take and how much interest you'll pay.

Debt Avalanche Method (Highest Rate First)

With the avalanche method, you pay the minimum on all debts and put any extra money toward the debt with the highest interest rate. Once that's paid off, you move to the next highest rate.

• Pros: Saves the most in interest, mathematically optimal
• Cons: May take longer to get first "win" of paying off a debt

Debt Snowball Method (Smallest Balance First)

With the snowball method, you pay the minimum on all debts and put any extra money toward the debt with the smallest balance. This creates quick "wins" that build momentum.

• Pros: Quick psychological wins, builds momentum and motivation
• Cons: Pays more in total interest than avalanche method

Compound vs Simple Interest

Most credit card debt uses daily compound interest, which means you pay interest on interest. If you have a $5,000 balance at 18% APR, you don't just pay $900 per year - you pay more because interest is added to your balance daily.

The Minimum Payment Trap

Paying only the minimum can make a $5,000 debt take over 20 years to pay off and cost more than $10,000 in interest. Minimum payments are designed to maximize creditor profits, not to help you become debt-free.

1. Automate Your Payments

Set up automatic transfers on payday to ensure you never miss a payment or get tempted to spend the money elsewhere.

2. Use Windfalls for Debt

Tax refunds, bonuses, gifts - put unexpected income directly toward debt. A $2,000 bonus can eliminate a small debt entirely.

3. Stop Creating New Debt

Put credit cards away or literally freeze them in a block of ice. You can't get out of a hole while you keep digging.

4. Consider Consolidation or Balance Transfer

If you have good credit, a 0% balance transfer card or lower-rate consolidation loan can accelerate your payoff. But watch out for transfer fees.

Should I pay off debt or invest?

Generally, pay off debt with interest rates above 7-8% first. Investments historically return about 7-10%, so credit card debt (15-25%) should always be paid first. Keep only a small emergency fund while attacking high-interest debt.

How much of my income should I use for debt payoff?

The 50/30/20 rule suggests 20% for savings/debt, but if you have high-interest debt, consider temporarily using 30-40% until you're debt-free. The more aggressive you are, the faster you'll be free.

What if I can't afford the minimum payments?

Contact your creditors immediately. Many offer hardship programs that temporarily reduce rates or payments. Also consider nonprofit credit counseling - they can negotiate on your behalf.