💳Debt Payoff Calculator

Breaking the 'Minimum Amount Due' Cycle

In India, credit card interest rates (APR) can reach 40-45%. The Reserve Bank of India (RBI) frequently warns consumers that paying only the 'Minimum Amount Due' leads to a debt trap because interest is charged on the total outstanding amount, and no interest-free period applies to new purchases. This calculator helps you see the true cost of 'revolving' credit and how much you need to pay to clear it within a specific number of months.

Reserve Bank of India (RBI)

Prepayment Strategies for Indian Loans

Most personal and home loans in India allow for prepayments. While some banks charge a small fee for fixed-rate loans, floating-rate loans have zero prepayment penalties as per RBI guidelines. Making 'part-prepayments' can significantly reduce your tenure and total interest. Use this tool to calculate how much interest you save by allocating your Diwali bonus or annual increments toward your outstanding principal.

RBI – Consumer Protection

Understanding the CIBIL Score Impact

Your debt-to-income ratio and repayment history are the biggest factors in your CIBIL score. TransUnion CIBIL data shows that timely repayments improve your chances of getting lower interest rates in the future. A structured payoff plan generated by this calculator ensures you never miss a payment, helping you maintain a healthy credit profile for future Indian home or car loan applications.

TransUnion CIBIL India

Should I take a Personal Loan to pay off Credit Cards?

In India, personal loan interest rates (10-15%) are much lower than credit card rates (36-45%). Consolidating your card debt into a personal loan can reduce your EMI burden. However, you must avoid the temptation to use those cards again. Use our calculator to compare your current monthly interest outflow with a potential EMI for a consolidated personal loan to see your real monthly savings.

What is 'Debt Restructuring' for individuals in India?

During times of extreme financial stress (like the COVID-1 pandemic), the RBI allowed banks to offer debt restructuring to retail borrowers. This might involve extending the loan tenure or a moratorium. If you cannot meet your current payments, you should approach your bank (e.g., SBI, HDFC, ICICI) for a 'One-Time Settlement' (OTS) or restructuring, though this may negatively impact your credit score.

How do I handle debt from Instant Loan Apps?

The Ministry of Electronics and Information Technology (MeitY) and RBI have taken strict action against illegal loan apps. If you have debt from such apps with exorbitant interest, ensure they are RBI-registered. If they are harassing you, you can lodge a complaint on the RBI Sachet portal. For legitimate digital loans, use this tool to build a strict repayment schedule to avoid high late-payment penalties.

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.