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Question 16

When paying down a high-rate revolving balance, knowing how long a steady monthly payment will take to eliminate the debt helps planning and motivation. The repayment timeline depends on the balance, the APR (converted to a monthly rate), and the fixed monthly payment. Small increases in the monthly payment can shorten the payoff period significantly because more of each payment moves to principal earlier in the schedule. This question uses a realistic card-balance example so you can see how many months remain at a clear, fixed payment level — useful when deciding whether to pay a little extra or stick with the minimum.

If you owe $2,500 at 18% APR and make $150 monthly payments, about how many months until the balance is paid off?

Did You Also Know...

By Wise Wallet

Roth IRAs are funded with after-tax dollars so qualified withdrawals are tax-free, while traditional IRAs offer tax-deferred contributions.