You will find a lot of options online to use a debt repayment calculator. The input fields may vary from one website to another. Mostly, you may be asked to fill in the following details:

• The amount you wish to borrow or borrowed
• Term of the loan
• Interest rate
• Annual percentage rate

Post entering the details, the calculator will show you how much you will have to repay every month towards your loan.

Generally, a debt repayment calculator is used to have an estimate of the amount that you need to repay to your lender or bank.

Listed below are the few benefits of using a debt repayment calculator:

•     You can plan your budget beforehand
•     You can stay on track with your finances
•     It will help you in knowing the repayment amount beforehand, which will reduce the probability of loan default

Calculating the repayment amount of your debt becomes easier with a calculator. Let us delve deeper to find out how it will help you in managing your finances smoothly when you are about to or have already borrowed a loan that you have to repay.

Determining the total debt amount owed 

The amount you need to borrow is not the same as what you owe back to the lender or the financial institution. The loan amount you owe will be calculated after taking the interest rate, annual percentage rate, term of the loan, and the repayment period you choose to pay back the loan.

Factors affecting debt repayment calculations 

There are various factors affecting debt repayment calculations. Mostly, the factors that influence your monthly repayment amount are:

• Type of loan you have borrowed
• The amount you have borrowed
• Loan term or duration you have chosen
• The interest rate of the loan
• Annual percentage rate of the loan

Different repayment strategies and their impact on calculations 

How you repay the loan has an impact on the debt repayment calculation and also on the interest rate the lender, bank or any other financial institution will charge you. For example, if you choose to repay the loan over a longer period of time, the interest rate will be high, however, the monthly repayment amount will be lower.

Similarly, if you choose to pay the loan quickly, you will have to pay more in monthly repayments, but you can save on the interest in the long run.

You may be able to pay off your debt faster and free up cash for other uses by managing your repayments strategically. Which method do you choose — the debt snowball or the debt avalanche? These are two very popular methods for paying off credit card debt and other types of borrowing. Both are efficient, but they function differently and might not be appropriate in all situations.

Here, we go into greater depth about these two debt repayment strategies so you can decide which is best for you.

Understanding the debt snowball and debt avalanche methods 

The Snowball Method of Paying the Debt 

The main goals of the Snowball approach are to inspire and build momentum. Pay the minimal amount due on everything but the smallest debt from the list of debts you have just filled out. Try to allocate as much extra cash as you can to the least debt. After you have paid off the smallest debt, add the amount you were paying on it to the next biggest loan. And so on till you have finished each of your debts!

Let us take an example to understand how the method works:

The Avalanche Method of Paying the Debt 

Making minimal payments on all of your debt obligations except the one with the highest interest rate. When you pay off your debts in this approach, it is called the avalanche method. Any extra funds from your budget will be used to increase your payments on this debt.

The goal is to prioritize paying off the account with the highest interest rate while making payments on your other debts. It can take some time before you entirely pay off this loan because it’s possibly one of your larger ones. But if you go with this strategy, you will typically end up saving money on interest over time.

Assessing the benefits and drawbacks of each method 

Pros of Debt Snowball Method 

• It gives you a confidence boost and a feeling of accomplishment in the beginning because you will probably be able to pay off the smaller bills very fast.
• It’s an easy process to comprehend and use.

Cons of Debt Snowball Method 

• With this strategy, you might not be paying off the most expensive debt first, so you might end up paying more interest over time than if you had utilised the avalanche method.
• It typically takes more time than the avalanche technique to pay off your obligations with this method.

Pros of Debt Avalanche Method 

• Focusing first on the debt with the highest interest rate could result in long-term financial savings.
• If you don’t employ the debt snowball strategy, you can pay off your debts more quickly.

Cons of Debt Avalanche Method 

• It will take some time. In comparison to the snowball approach, it could take longer for you to experience the confidence boost and sense of success that come with paying off a debt in full.
• You may initially be sacrificing money from your budget or disposable income for a considerable amount of time because it can take some time for you to return your first loan in full.

Here are some signs that indicate financial trouble or a debt problem:

• Your Recurring monthly debt amount is high.
• You’re struggling with debt collectors.
• Frequent use of balance transfer cards or refinancing to avoid sinking.
• You often use cash advances.
• Your loan and credit card applications don’t go as planned.
• You don’t have and aren’t building an emergency fund/savings fund.
• You’re avoiding your debt problems or don’t know how much you owe.
• You have never used a free debt repayment calculator to get a purview of your monthly liabilities.
• You do not have a budget, and you’re constantly in debt.
• Your card gets declined as you’ve maxed it out.
• Your debts are impacting your relationships.

There’s no one rule when it comes to controlling debt. What works for one may not work for the other. So approaching financial planning with a ‘one size fits all outlook will not benefit you. However, there are some common pointers that all of us could learn a thing or two from:

• Contemplate your spending habits and change them if required.
• Make a budget to plan your expenses.
• Prioritise your repayments. Use a paying-off debt calculator in UK
• Keep making minimum repayments if you’re struggling to repay the full amount.
• Build an emergency fund to be your financial cushion.
• Avoid taking on new debt.

Debt is a necessary evil. We all owe one of the other forms of debt. What’s important is the way you deal with it. If you continue to spend over your limits and make debt a habit, it’ll deteriorate your financial health. Your credit score takes the biggest hit if you fail to demonstrate responsible credit behaviour. This could also ruin your chances of getting a loan in the future.

We understand how difficult making repayments can be in this post-COVID-19 period. With layoffs and wage cuts, making ends meet takes a lot of work. The best you can do is structure your finances into a budget and adhere to it. Even making minimum monthly repayments can build you a compelling case.

Use our free debt repayment calculator to assess your affordability and plan your finances accordingly.

If you need help bridging some of your financial gaps, LoanTube can help. Compare rate-locked loans from multiple lenders to find your ideal loan.