Amortization Equation:
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The credit card amortization equation estimates the time required to pay off credit card debt when making fixed monthly payments. It accounts for the principal balance, monthly payment amount, and interest rate.
The calculator uses the amortization equation:
Where:
Explanation: The equation calculates how many months it will take to pay off the balance given fixed monthly payments and compounding interest.
Details: Understanding payoff timelines helps consumers make informed decisions about debt repayment strategies and compare different payment options.
Tips: Enter the current credit card balance, your planned monthly payment, and the annual interest rate. All values must be positive numbers.
Q1: Why does my payment need to exceed the interest?
A: Your monthly payment must be greater than the monthly interest (P × R) to make progress on the principal.
Q2: What if I make additional payments?
A: Additional payments will reduce the payoff time. Recalculate with your new payment amount.
Q3: How accurate is this calculator?
A: It provides a good estimate assuming fixed payments and interest rates. Actual results may vary slightly.
Q4: What's the minimum payment needed?
A: The minimum is the monthly interest (P × R). However, this will never pay off the principal.
Q5: How can I pay off debt faster?
A: Increase monthly payments, pay more frequently, or transfer to a lower interest rate card.