How To Create a Debt Repayment Plan Using ChatGPT: A Step-by-Step Guide

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Paying off debt is overwhelming, especially if you have multiple debts and don’t know where to start. Luckily, we live in a day and age where you can simply ask an A.I. robot what to do, and they can give you a detailed debt payoff plan in just a few minutes.

GOBankingRates put ChatGPT to the test and asked how to pay off debts in the most efficient way possible. And it didn’t disappoint.

These are the prompts — and answers — that ChatGPT provided, so you can use them to create a customized debt payoff plan for yourself.

1. Ask ChatGPT for Help With Your Debt

The first step to create a debt payoff plan with ChatGPT is to ask it for help creating one. You can simply say:

ChatGPT Prompt

I need help paying off my debt.

ChatGPT Response

1. “Assess your debt: Begin by gathering all the necessary information about your debts. Make a list of each debt, including the outstanding balance, interest rate and minimum monthly payment.
2. Create a budget: Analyze your income and expenses to create a realistic budget. Identify areas where you can cut back on spending and allocate more money toward debt repayment.
3. Prioritize your debts: Determine which debts have the highest interest rates or the smallest balances. You can choose to tackle debts using either the debt avalanche method — paying off the highest interest rate debt first — or the debt snowball method — paying off the smallest balance debt first for quick wins.
4. Negotiate with creditors: If you’re struggling to meet your minimum payments, contact your creditors and explain your situation. They may be willing to negotiate lower interest rates, reduced payments or a modified payment plan.
5. Consider debt consolidation: If you have multiple debts with high interest rates, consolidating them into a single loan with a lower interest rate can make repayment more manageable. Look into options like balance transfer credit cards or personal loans.
6. Increase your income: Find ways to boost your income to accelerate your debt repayment. This could involve taking on a part-time job, freelancing or selling unused items.
7. Cut expenses: Review your monthly expenses and identify areas where you can reduce or eliminate costs. Consider downsizing your living arrangements, reducing entertainment expenses or finding more affordable alternatives for daily expenses.
8. Seek professional advice: If your debt situation is overwhelming or you’re unsure about the best course of action, consult with a financial advisor or credit counseling agency. They can provide personalized guidance and help you develop a plan to pay off your debt.”

2. Give ChatGPT a List of Your Debt Balances, Interest Rates and Minimum Payments

After reviewing the plan, it seems pretty straightforward. Take inventory of your debts, create a budget, pay off debts in order and negotiate as needed.

You can even make ChatGPT do the heavy lifting on these things. Here’s what to do next:

ChatGPT Prompt

Ok, can you help me make a debt payoff plan? Here’s a list of my debts:

Credit card 1: $5,000 balance, 25% interest rate, $100 minimum payment

Credit card 2: $8,000 balance, 0% interest rate (for 12 months), $100 minimum payment

Car Loan: $25,000 balance, 7% interest rate, $460 payment

Student Loan: $40,000 balance, 6% interest rate, $400 payment

ChatGPT Response

“Let’s create a debt payoff plan based on the information you provided. We’ll use the debt avalanche method, which prioritizes debts based on their interest rates. Here’s a step-by-step plan:

1. Credit card 1: Start by paying off the credit card with the highest interest rate.
   • Minimum payment: $100
   • Determine how much extra you can afford to pay each month towards this debt. Let’s say you can allocate an additional $300.
2. Credit card 2: Pay off this credit card before the promotional 0% interest rate ends to avoid higher interest charges.
   • Minimum payment: $100
   • Allocate the remaining amount from your monthly budget toward this debt. Let’s say it’s $200.
3. Car Loan:
   • Payment: $460
   • Continue making the regular monthly payment on this loan.
4. Student Loan:
   • Payment: $400
   • Continue making the regular monthly payment on this loan.

Now, let’s break down the timeline for each debt:

1. Credit card 1:
   • Balance: $5,000
   • Monthly payment: $400 ($100 minimum + $300 extra)
   • Payoff time: Approximately 14 months
   • Interest paid: Approximately $419
2. Credit card 2:
   • Balance: $8,000
   • Monthly payment: $200 ($100 minimum + $100 extra)
   • Payoff time: Approximately 47 months (including the 12-month 0% interest period)
   • Interest paid: Approximately $1,682 (after the 0% interest period ends)
3. Car Loan:
   • Balance: $25,000
   • Monthly payment: $460
   • Payoff time: According to your loan term, please refer to your loan agreement.
4. Student Loan:
   • Balance: $40,000
   • Monthly payment: $400
   • Payoff time: According to your loan term, please refer to your loan agreement.

Remember, these numbers are estimates, and the actual payoff time may vary based on factors like interest accrual and any changes in your financial situation. It’s essential to track your progress regularly and adjust your plan as needed.

Also, make sure to pay at least the minimum payment on all debts to avoid penalties or late fees. Any additional funds you can allocate towards the debts will help you pay them off faster.”

What To Keep in Mind

This is powerful. ChatGPT understands interest rates and minimum payments and focuses on the highest interest debt first. It assumes you can find $300 per month to put toward debts and, using the debt avalanche method, will have you pay off your credit cards within 47 months.

The only issue is that ChatGPT tries paying off both cards at the same time, whereas it should really focus on one at a time. It doesn’t opt to pay off the auto loan or student loans early, though, which is an interesting choice.

You should also double check ChatGPT’s calculations if you use it to create your own budget — it has been known to make math errors.

3. Ask ChatGPT for the Best Debt Payoff Strategy Based on Your Budget

Tell ChatGPT your monthly income and expenses so it can help you build a debt payoff plan based on your budget. Make sure to include the debt minimum payments in your budget.

ChatGPT Prompt

Ok, here’s how much money I make and my monthly expenses. 

Income: $5,500

Rent: $2,000

Debt Minimums: $1,060

Food: $500

Insurance: $300

Utilities: $300

Other Expenses: $500

Can you update the debt payoff plan in light of this information?

ChatGPT Response

“Certainly! Let’s update the debt payoff plan based on your income and monthly expenses. Here’s a revised plan:

1. Credit card 1:
   • Balance: $5,000
   • Minimum payment: $100
   • Additional payment: $400 (remaining funds after expenses)
2. Credit card 2:
   • Balance: $8,000
   • Minimum payment: $100
   • Additional payment: $400 (remaining funds after expenses)
3. Car Loan:
   • Balance: $25,000
   • Payment: $460 (minimum payment)
4. Student Loan:
   • Balance: $40,000
   • Payment: $400 (minimum payment)

Let’s break down your revised monthly budget:

• Income: $5,500
• Rent: $2,000
• Debt Minimums: $1,060
• Food: $500
• Insurance: $300
• Utilities: $300
• Other Expenses: $500

Remaining funds for debt repayment: $5,500 – $2,000 – $1,060 – $500 – $300 – $300 – $500 = $840″

Prompted for an updated payoff timeline, ChatGPT provided the following:

1. “Credit card 1:
   • Balance: $5,000
   • Monthly payment: $500 ($100 minimum + $400 extra)
   • Payoff time: Approximately 10 months
   • Interest paid: Approximately $316
2. Credit card 2:
   • Balance: $8,000
   • Monthly payment: $500 ($100 minimum + $400 extra)
   • Payoff time: Approximately 17 months
   • Interest paid: Approximately $610 (assuming the 0% interest rate period has ended)
3. Car Loan:
   • Balance: $25,000
   • Monthly payment: $460 (minimum payment)
   • Payoff time: According to your loan term, please refer to your loan agreement.
4. Student Loan:
   • Balance: $40,000
   • Monthly payment: $400 (minimum payment)
   • Payoff time: According to your loan term, please refer to your loan agreement.

Please note that these estimates are based on the information provided and the assumption that your interest rates and minimum payments remain constant. The actual payoff time may vary depending on various factors.

By allocating $840 per month towards your credit card debts, you can significantly reduce the time it takes to pay them off. It’s important to stay consistent with your debt repayment plan and avoid accumulating additional debt during this time.”

What To Keep in Mind

ChatGPT can take your exact monthly budget and create a very specific debt payoff plan. Again, it focuses on paying off both cards at the same time, which is not necessarily ideal, but it does avoid some extra interest on the second credit card.

5. Ask ChatGPT How To Pay Off Your Debt Faster

Now that you have a plan in place, you can ask ChatGPT how to make it better.

ChatGPT Prompt

How can I pay off my debt faster?

ChatGPT Response

“Paying off your debt faster requires a combination of strategies and dedication. Here are some steps you can take to accelerate your debt payoff:

• Increase your debt repayment budget: Look for ways to reduce your expenses and increase your income. Cut back on non-essential spending, find cheaper alternatives and consider taking on a side job or freelancing to generate extra income. Allocate as much money as possible towards your debt payments.
• Prioritize high-interest debts: Focus on paying off debts with the highest interest rates first. By targeting these debts, you minimize the amount of interest you’ll pay over time. Make larger payments towards these debts while continuing to make minimum payments on others.
• Consider debt consolidation or refinancing: Explore options to consolidate your debts or refinance them at a lower interest rate. Consolidating multiple debts into a single loan can simplify your repayment and potentially lower your interest rate, reducing the overall cost of your debt.
• Use windfalls and bonuses wisely: If you receive unexpected extra funds, such as tax refunds, bonuses or inheritance, consider using a significant portion of these windfalls to make lump-sum payments towards your debts. This can help you make a significant dent in your debt balance and accelerate your progress.
• Snowball or avalanche method: Choose a debt repayment strategy that works best for you. The debt snowball method involves paying off the smallest debt first, providing a psychological boost. The debt avalanche method focuses on paying off the debt with the highest interest rate first, saving you more money in the long run. Select the method that aligns with your preferences and motivates you to stay on track.
• Negotiate with creditors: Reach out to your creditors to see if they are willing to lower your interest rates or negotiate a more favorable payment plan. Creditors may be open to discussions, especially if you’re facing financial hardship. Lower interest rates can help you pay off the debt faster.
• Avoid taking on new debt: While paying off your existing debt, try to avoid accumulating new debt. Minimize the use of credit cards and only spend within your means. Focus on changing your financial habits and living within a budget.
• Stay motivated and track your progress: Keep yourself motivated by visualizing your debt-free future. Celebrate each milestone you achieve along the way. Track your progress regularly, monitor your debt balances, and see how far you’ve come. Consider using debt tracking apps or spreadsheets to help you stay organized and motivated.

Remember, paying off debt takes time and perseverance. Stay committed to your plan, and don’t get discouraged if progress seems slow at times. With consistent effort and dedication, you can achieve financial freedom and become debt-free.” 

As you can see, there is some repeated information from the first prompt, but this is all pretty spot on.

Bottom Line

ChatGPT is the world’s most powerful AI tool right now, and you can use it to help yourself get out of debt quickly. While it’s not always 100% accurate, you can get an organized payoff plan that is specific to your financial situation, something you’d normally pay a financial planner or coach hundreds — or thousands — of dollars for.

It’s a good idea to run this plan by someone you trust with finances before blindly following it, but most of what ChatGPT put together for this example plan is pretty good.

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