Paying Off a Line of Credit: Every Dollar Above Interest Counts
A personal line of credit or overdraft line is convenient because you can borrow and repay freely up to your limit, but that flexibility comes with a catch: interest accrues on your balance every day, so making only the minimum payment can leave your principal barely moving. If your monthly payment is smaller than the interest charged that month, your balance actually grows instead of shrinking, trapping you in a cycle that never resolves. This calculator assumes a steady monthly payment, adds interest to the balance each month, then subtracts your payment, repeating until the balance hits zero โ giving you an estimate of how long payoff will take and how much interest you'll pay along the way.
| Step | Formula |
|---|---|
| 1 | This month's interest = balance ร (annual rate รท 12) |
| 2 | Add interest to the balance |
| 3 | Subtract your payment from the balance |
| 4 | Repeat until the balance reaches zero |
This calculator assumes a fixed monthly payment and a constant interest rate, which is a simplification โ variable rates, additional draws on the line, and any fees will change your actual results, so use your bank's own payoff simulator alongside this estimate. Once you've set a payoff plan, avoiding new charges on the line (or on a credit card) is just as important as the payment amount itself for hitting your target payoff date.
Frequently Asked Questions
Interest accrues daily on your balance; this calculator simplifies that to a monthly calculation using your annual rate divided by 12.
The principal never decreases and the balance keeps growing โ you'll need to increase your payment or refinance to pay it off.
Applying extra cash directly to principal, or refinancing to a lower fixed rate, can both shorten the payoff timeline.
โป Estimate only. Actual results depend on rate changes and any additional draws on the line.