So last night I wrote my ah-ha post. The ah-ha moment is still true and I’m not taking anything back. However, this morning, while still obsessing over my debt, I found this awesome, free, ad-free, no sign-up How soon could I pay off my debts? calculator. This was obviously the absolute worst thing for a debt obsessive person like me to find. However, in the era of COVID-19 and Saturdays spent at home, it could obviously have been a lot worse.
The calculator is no-muss, no fuss and is great for someone with a lot of individuals lines of debt because it allows you to enter up to 20 creditors. To calculate a repayment plan, it ask for: the creditor, the balance, the minimum payment, the actual payment, and the interest rate. Additionally, you can enter how much additional you plan to pay each month and any on-time payments you expect to make (like a bonus or tax refund). Again, the absolute best and worst thing for a debt obsessive person to find. After entering in this information it spits out what your repayment would look like using a roll-over method of repayment (also referred to as the “snowball”), and you can have it compute the results based on paying the debts in 1) lowest to highest balance, 2) highest to lowest interest rate, or 3) shortest to longest payoff period.
Other cool things: It also tells you how much you would have saved over the same period of time as your original payment plan if you invested the amount you would have paid (you can also adjust the interest rate and below I adjusted it to a very modest 2% savings rate). AND, while I have only included the tables below, it also produces a very awesome debt payoff calendar for each creditor so it shows you which month you will pay off each creditor.
Note: These payment plans assume a January 2021 start since I still plan to pay of PSL 1 and then save for a used car through the end of this year unless my income increases significantly. This means, the debt balance and repayment plan does not include PSL1 or my car lease/car payment but does include estimated minimum payments on my federal student loans which will resume in January 2021.
1) Lowest to Highest Balance
2) Highest to Lowest Interest Rate
3) Shortest to Longest Payoff Period
Unsurprisingly, the “Highest to Lowest” interest rate resulted in the greatest amount of savings in terms of both money and time saved. However, whereas with the “Lowest to Highest Balance” and “Shortest to Longest Payoff Period” eliminate creditors/loans in the very first month and then consistently every couple of months, it takes 11 months before the first debt is eliminated under the “Highest to Lowest” interest rate payoff plan. Ugh.
And just for fun, I calculated what my repayment plan would look like if I increased the extra payment each month up to $1500.00. For the sake of space here, I will only include the updated “Highest to Lowest Interest Rate” and “Lowest to Highest Balance” below.
1) Highest to Lowest Interest Rate
2) Lowest to Highest Balance
While the “Highest to Lowest Interest Rate” still results in the greatest amount of savings between the two methods, paying $1500.00 more each month still shaves off more than a year of repayment than if I am only paying an extra $1000.00 each month regardless of which method I choose…
I will admit to being torn. While I very much would like to stick to the most mathematically efficient way to pay off debt, I will admit that the “Lowest to Highest Balance” method does hold some appeal at this current moment when it has been almost a year since I had the psychological reinforcement of paying off a debt, and I still have three more months until I payoff the next one…
So…thoughts? Am I entirely nuts for finally for finally wanting to swallow the Ramsey kool-aid and go “Lowest to Highest Balance?”