If you’ve been making payments on a loan for several months and it seems like you’re not making much progress, consider increasing your payment. Many people struggling to pay off their debt don’t have much more money to spare, but you’d be surprised at the big difference $100 makes in your debt progress.
You can see for yourself using a debt repayment calculator such as the one on CNNMoney.com.
How to Use the Debt Planner
You enter the details about your debt and monthly payment into the calculator and the calculator tells you how long it will take to pay off the debt if you keep making just the minimum payment. Not only that, you’ll find out how much interest you’ll end up paying by the time you pay off your debt.
To see how much time you’ll save if you increase your payment, start by entering your loan or credit card balance, interest rate and minimum payment. Then, in the “Choose a plan” section, you can select minimum payments if you’re only paying the minimum right now. Or, if you’re paying another amount, enter that in the “Fixed payments” section. Then, press “Calculate” and see the results.
Then, to calculate the difference $100 makes, add $100 to your current payment and enter that amount in the ”Fixed payment” section and recalculate. Notice the difference.
For example, consider a $10,000 loan at 10% with $300 minimum payments. If you only pay the minimum each month, it will take 13 ½ years to completely pay off the loan. The total interest paid would be $3,552.27.
In our example, increasing the $300 payment to $400 cut down the repayment time to just 2 years and 4 months. The total interest paid on the balance would be $1,155.62. Huge difference!
One hundred dollars is a good place to start, but you don’t have to stop there. Use the calculator to see the impact of paying an extra $150 or $200 each month. Or, if you can’t quite afford to pay $100, you can see the significance of an extra $50 each month. Almost anything that’s over the minimum payment helps.
Make sure you keep paying the same amount every month, even if your minimum payment decreases (which happens when the monthly payment is a percentage of your balance).
How to Get an Extra $100 Each Month
It may seem difficult to come up with an extra $100 each month, but use the time savings as motivation to seriously explore some cost cutting measures. Take a careful look at all the expenses you pay on a monthly basis and see which ones you can reduce or eliminate.
Start with recurring payments for services you don’t use. Magazine subscriptions and gym memberships are a good place to start.
If you have a cable television subscription, call to ask about rate promotions. You might drop some of your services, like premium channels or DVR, to save some bucks each month. Did you know that by using a $10 TV antenna, you get over 60 channels free? I’m sure that will differ based on your location but it’s worth a try!
There are probably dozens of things you can do to shave $5 or $10 off your monthly bills and expenses. Do it enough times and you’ll have that $100 you need to pay off your debt much faster, saving yourself thousands of dollars.
This post was written by Eliza Collins, a guest writer specializing in personal finance topics like saving money, debt relief and credit score improvement. You can read more of her articles at the debt settlement blog.
