Debt payoff plan

What is a Debt payoff plan?

Finally, we are ready to introduce one of PocketGuard’s killer features - Debt payoff plan! The debt payoff plan is a premium functionality for prioritizing your loans and building a payoff strategy with minimum losses or with maximum progress. Thus, a debt payoff budget is an amount you are ready to spend on paying your debts every month.

How does it work?

While creating your personal debt payoff plan, it is necessary to enter minimum payment, an annual percentage rate, and set up a debt payoff budget, so we can allocate enough money from your IN MY POCKET. Thus you would always have enough money to pay off debts each month and keep track of the progress.

Glossary

• Current balance - the current debt of the selected loan;
• Minimum payment - the minimum monthly payment for the selected loan;
• APR (minimum percentage rate) - annual interest rate of the loan;
• Debt payoff budget - monthly budget for debt payments (allocated from IN MY POCKET);
• Promotional rate - grace period when you do not receive interest for the loan;
• Forbearance - a temporary period when you pay a lower payment or postpone loan payments.

Debt payoff strategies

There are 2 financial strategies available to set a debt payoff plan. Choose the most you like, pay on time, and become debt-free:

• Snowball 
• Avalanche 

Snowball

Choose Snowball to see your debt payoff progress as soon as possible. In this case, the priority is built based on the lowest account balance. That means your loans would be sorted by balance from lowest to highest. The loan with the smallest balance gets the highest priority and must be paid off first. For all other loans, you would pay the minimum payment, and for the loan with the smallest balance: the minimum payment + the payoff budget leftover.

Once a particular loan has been paid off, you will need to restart the algorithm and recalculate payments, relying on the same “lowest balance first“ rule.

Example:

• credit card: debt balance = $1300, minimum payment = $35
• car loan: debt balance = $10750, minimum payment = $175
• student loan: debt balance: $6400, minimum payment = $100
• debt payoff budget = $400

Payoff plan:

• credit card - $125 ($35 + $90, where 35 - minimum payment, 90 - debt payoff budget leftover after minimum payments deduction)
• car loan - $175 (minimum payment)
• student loan - $100 (minimum payment)

Avalanche

Choose Avalanche in case you don't want to pay extra APR fees. That means your credits will be sorted by APR in descending order. The loan with the highest interest rate must be paid off first. For all other loans, you will make the minimum payment, and for the selected loan - the minimum payment + the payoff budget leftover.

Once a particular loan has been paid off, you will need to restart the algorithm and recalculate payments based on the “highest interest first” rule.

Example:

• credit card: minimum payment = $35, interest rate = 16%
• car loan: minimum payment = $175, interest rate = 7%
• student loan: minimum payment = $100, interest rate = 6%
• debt payoff budget = $400

Payoff plan:

• credit card - $125 ($35 + $90, where 35 - minimum payment, 90 - debt payoff budget leftover after minimum payments deduction)
• car loan - $175 (minimum payment)
• student loan - $100 (minimum payment)

How to set up a debt payoff plan?

To set up a debt payoff plan, please complete the following steps:

1. Hit Set up my payoff plan;

2. Select all accounts you’d like to pay off (credit cards, loans, cash credit accounts);

3. Fill in the accounts info:

• Minimum payment
• Annual percentage rate
• Promotional rate (optional)
• Forbearance (optional)

4. Hit Save;

5. Hit the green arrow in the upper right corner;

6. Move the slider to set up your payoff budget;

7. Choose when you'd like to start;

8. Select a debt payoff plan strategy;

9. Hit Complete.

See payoff schedule

Once you’ve completed setting up the debt payoff plan and its strategy, you can dig deeper into the details and view how many payment cycles are left to pay until debt-free. Review your payoff schedule, follow the plan, and you’ll succeed.

How to edit my payoff plan?

To edit the payoff plan, please complete the following steps:

1. Go to Debt payoff plan;
2. Hit the ⋮ icon;
3. Select Edit payoff plan;
4. Make changes and complete setting up the debt payoff.

Show me magic?

The “Show me magic” option may come in handy if you want to play with the payoff budget amount to see how your strategy changes and visualize the possible progress. You are always able to apply a new payoff budget.

To start playing with numbers and get a more detailed picture of the possible progress, please follow the steps:

1. Go to Debt payoff plan;
2. Hit the ⋮ icon;
3. Select Show me magic;
4. Move the slider to see how your strategy changes.

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