A Debt Roll Down Calculator helps individuals manage and accelerate debt repayment by calculating the minimum payments required for each outstanding debt. This tool is particularly useful for those using a debt roll-down strategy, which prioritizes repaying smaller debts first while continuing to make minimum payments on other obligations. By rolling freed-up funds into the next debt, individuals can systematically eliminate debt more efficiently.
This calculator simplifies the process by determining the required minimum payments, allowing users to plan their finances effectively. It is often used alongside debt repayment strategies like the snowball method, which focuses on clearing small debts first for motivation, or the avalanche method, which targets high-interest debts to reduce overall costs.
Formula for Debt Roll Down Calculator
The formula used to calculate the minimum payment required for each debt is:
Minimum Payment = Debt Balance × Minimum Payment Percentage
Where:
Debt Balance = Outstanding balance for each debt
Minimum Payment Percentage = Required minimum percentage set by the lender
This formula helps determine the lowest amount required to keep debts in good standing while allocating additional payments toward targeted debts to accelerate repayment.
Debt Roll Down Reference Table
To simplify debt repayment planning, the following table provides estimates of minimum payments for different debt balances based on common minimum payment percentages.
| Debt Balance ($) | Minimum Payment Percentage (%) | Minimum Payment ($) |
|---|---|---|
| 1,000 | 2 | 20 |
| 5,000 | 3 | 150 |
| 10,000 | 4 | 400 |
| 15,000 | 5 | 750 |
| 20,000 | 6 | 1,200 |
This table allows individuals to estimate their required minimum payments based on common lender requirements, aiding in budgeting and debt reduction planning.
Example of Debt Roll Down Calculator
Suppose an individual has a credit card debt of $5,000 with a lender-imposed minimum payment percentage of 3%.
- Apply the values to the formula:
Minimum Payment = 5,000 × 0.03 - Compute the result:
Minimum Payment = $150
This means the individual must pay at least $150 per month to keep the account in good standing. By allocating additional funds toward this debt, they can accelerate repayment and reduce interest costs over time.
Most Common FAQs
A debt roll-down strategy involves making minimum payments on all debts while aggressively paying off one targeted debt. Once that debt is cleared, the freed-up payment amount is rolled into the next debt, accelerating the repayment process.
Yes, prioritizing high-interest debts (debt avalanche method) reduces the overall cost of borrowing. However, some people prefer clearing smaller debts first (debt snowball method) for psychological motivation.
Yes, making only minimum payments can significantly extend the repayment period and increase total interest costs. It is advisable to pay more than the minimum whenever possible to reduce overall debt faster.