Credit Card Payoff Equation:
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The credit card payoff equation estimates how long it will take to pay off a credit card balance when making fixed monthly payments, taking into account the interest rate. It's particularly useful for low APR credit cards in the UK.
The calculator uses the payoff equation:
Where:
Explanation: The equation calculates how many months it will take to pay off the balance by considering the compounding interest and fixed monthly payments.
Details: Understanding your payoff timeline helps with financial planning, debt management, and evaluating whether you need to increase payments to become debt-free sooner.
Tips: Enter your current credit card balance in GBP, your fixed monthly payment amount, and the card's APR. All values must be positive numbers.
Q1: What if my payment is too low?
A: If your monthly payment doesn't cover the interest (D ≤ P×R), the calculator will show that the debt will never be paid off.
Q2: Does this account for minimum payments?
A: No, this assumes fixed payments. Minimum payments typically extend payoff time significantly.
Q3: How accurate is this calculation?
A: Very accurate for fixed payments and rates. Doesn't account for fees, rate changes, or payment variations.
Q4: What's considered a low APR in the UK?
A: Typically under 12%, though rates vary. Some cards offer 0% introductory rates.
Q5: Can I use this for other loans?
A: Yes, it works for any fixed-rate, fixed-payment amortizing loan.