How to calculate your debt-free date (with interest)
Short answer: each month, add one month of interest (APR ÷ 12) to the balance, then subtract your payment. Count the months until the balance reaches zero. Dividing the balance by the payment ignores interest and gives a date that is too early.
The monthly math
- Monthly interest = balance × APR ÷ 12.
- New balance = balance + monthly interest − payment.
- Repeat until the balance is zero. The number of months is your payoff time.
Example: $1,000 at 12% APR, paying $100 a month. Month one adds $10 of interest, so only $90 comes off the balance. It takes 11 months, not 10, and you pay about $59 in interest.
With several debts
It gets harder with several debts, because when one is paid off its payment moves to the next. You have to run the math for every debt every month, in the right order. A spreadsheet can do it, but it breaks easily when you add a payment or change a rate.
The quick way
Owlow runs this month-by-month math for all your debts at once, including the roll-over when a debt is paid off. Enter balance, APR and minimum for each debt plus your monthly budget, and the debt-free month shows up on the Plan tab. Log a payment and it updates.
FAQ
Why is my payoff date later than balance divided by payment?
Because interest is added every month. Part of each payment goes to interest, so less of it lowers the balance.
What if my minimum payment is less than the interest?
Then the balance never goes down. You need to pay more than the monthly interest to make progress.
Does paying a little extra really matter?
Yes. Extra money goes straight to the balance, which also lowers next month's interest. The effect grows over time.