How to Calculate Monthly Payments and Pay Off Credit Card Debt
What is the monthly payment needed to pay off a $2000 credit card debt in 1 year with an 18% annual interest rate compounded daily? How long will it take to pay off the same debt with monthly payments of $125?
Calculating Monthly Payments for Credit Card Debt
Time to Pay Off Debt with Monthly Payments of $125
To determine how long it will take to pay off the $2000 credit card debt with monthly payments of $125, we can rearrange the formula and solve for the number of monthly payments (n):
n = -log(1 - (P * r) / M) / log(1 + r)
Where:
M = Monthly payment = $125
Plugging in the values:
n = -log(1 - (2000 * 0.015) / 125) / log(1 + 0.015)
n ≈ 17
Rounding up to the next highest integer, it will take approximately 17 months to pay off the credit card debt with monthly payments of $125.