Calculator: The Fastest Way To Pay Off Debt

Lets do a little dance, shall we? It goes like this...1 step forward, 100 steps back, 1 step forward, 99 steps's known as the Interest Dance. I've been doing it for about 1.5 yrs now with my mega student loan, but am seeing light at the end of the tunnel! Eep! SO EXCITED!

I'm only 6 MONTHS away from debt burden freedom!!!! I've paid it down to the point where instead of my interest accruing at $5/day, it's accruing at $2.50/day. This means that instead of paying $150/month in interest, I'm paying $75/month in interest. 

But, although I'm paying less in interest (and am closer than ever to freedom!) I'm just more and more determined to pay them off even faster. 

What's the fastest way to pay off loans?

Pay them before interest accrues...or at least make as many payments as frequently as possible. You don't have to pay more just make payments more often. 

In other words, since I accrue interest everyday, then if I paid my loan every day then I'd get ahead of the interest before it counts against me too badly. Let me show you what happens if I pay...

If I paid monthly (made one payment per month) then I'd finish by 4/15/15 and have paid $276.97 in interest. 

If I paid twice per month (made two payments per month) then I'd finish by 3/30/15 and have paid $258.36 in interest. 

If I paid daily (made a payment every day) then I'd finish by 3/15/15* and have paid $243.66* in interest. 
*Note: Since I'd have the amount for the last payment on 3/15/15, then I'd just pay it all on that day, rather than 3/29/15 shown below. I also added the interest I'd save to the amount by paying 15 days prior to what's shown below. 


To summarize...

MONTHLY = finish 4/15/15, interest $276.97 
TWICE PER MONTH = finish 3/30/15, interest $258.36
DAILY = finish 3/15/15, interest $243.66

As you can see in each I pay the same amount per month; the same amount goes from my bank account to my loan. But, the more frequently I pay, the less interest I accrue. In other words, I earn time. If I pay daily I finish 30 days earlier than if I pay monthly. So, even though I'll make my goal, I can earn more time in which I'm free of my burden by paying more frequently. That's less time with debt, and more time sipping smoothies.

But, you can also see that there's a sweet spot. On one extreme I extend my debt by 30 days and lose about $30 (if paid monthly), but on the other end (if paid daily) I gain 30 days, earn about $30, but also go insane from the neurotic compulsion of scheduling daily payment. Eww! That said, for me (not everyone) the sweet spot is to pay twice per month. I feel accomplished when I see the balance go down in one big swoop, and, the monetary return on paying more frequently is negligible for me personally (hence the personal within "personal" finance). 

Now, if the cards were different, and there were more cards stacked against me -- I owed more at this point, my interest rate were higher, my term were longer, I wouldn't come out ahead on my goal -- then I might opt for paying more frequently (like weekly perhaps). However, twice per month works for me. 

See what works for you: here's the calculator I used for the charts above. But, remember, the key is to not let it drive you mad, so that you prioritize your sanity. If you just stick to a plan, then you'll get there. Really.  

What's your plan? How frequently do you pay down your debt burden?

Thanks Anna I. for inspiring this post! :) 


  1. Almost there - I have been revising my debt payments to keep with my goal of paying it off at a certain time frame. I think I am driving myself crazy sometimes editing the spreadsheet but like you said, I am just sticking to a plan =)

    1. That's great Ciel! I know it can be super overwhelming, but you will get there. Here's my current strategy:


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