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?

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Lupe · Answer

Calculating Monthly Payments for Credit Card Debt         To calculate the monthly payments needed to pay off a $2000 credit card debt in 1 year with an 18% annual interest rate compounded daily, we can use the formula for the monthly payment on a loan:         Monthly Payment = (P * r * (1 + r)^n) / ((1 + r)^n - 1)          Where:         P = Principal amount (initial balance) = $2000         r = Monthly interest rate = (18% / 100) / 12 = 0.015         n = Number of monthly payments = 12 months          Plugging in the values:         Monthly Payment = (2000 * 0.015 * (1 + 0.015)^12) / ((1 + 0.015)^12 - 1)         Monthly Payment ≈ $175          Therefore, the monthly payments needed to pay off the $2000 credit card debt in 1 year would be approximately $175.                  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.

How to Calculate Monthly Payments and Pay Off Credit Card Debt

Calculating Monthly Payments for Credit Card Debt

Time to Pay Off Debt with Monthly Payments of $125

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