NFCU Statement Payment Timeframe Not Correct?

[ldkcivilservant]

Hey guys!

My brother-in-law has a $25k NFCU Visa Plat @ 5.99% that is basically maxed out, he is currently carrying a $24k balance with them that he plans to pays off at $500 a month against a minimum payment of about $475.

He showed me the statemnet last night so that I could help him with a plan to address his debts, and it's telling him that if he only pays the minimum payment it won't be paid off for 24 years. I cannot figure out how they are arriving at that math.

Assuming he makes no further charges, and made only the minimum payment, all the online credit card calulators I have tried suggest that this balance should be paid off in more like 5 years (60 months) not 24 years. I realise this is dependant on the variable interest rate remaining at 5.99% that entire time, which is unlikely, but even if it rose to 8.99% in the next couple of years it still would not be anywhere near 24 years.

Or am I missing something here? I don't want to give him wrong information and get his hops up. He really wants out of this debt.

Thanks!

[OmarGB9]

I'm not sure how they're getting 24 years either, but regardless, if you've run the numbers repeatedly and your B-I-L can keep up with those $500/mo payments and even pay extra sometimes, he should be fine.

[203bravo]

Are you basing your calculations on paying 500$ a month until the entire balane is 0$?

Remember that the minimum payment is based on a percentage of the current balance. Assuming monthly payments only with no additional charges other than the interest - the required minimum payment will decrease as the balance decreases. This is the bases of their formula to calculate the time frame.

If you continue to pay the same 500$ as the minimum payment decreases then over time you would be paying significantly more than the requierd minimum payment thus increasing the speed in which the debt would be paid off. As the months pass you will also see these changes in their calculations and notice that the time frame will also start to decrease on the statement but it will never match the payoff calculators. 

Currently you are paying 25 more than the required minimum payment -- when the balance is around 20,000 then based on the assumption that you continue to pay the same 500/month then you would paying approx 100$ more than the required minimum payment. 

[Brian_Earl_Spilner]

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@203bravo wrote:

Are you basing your calculations on paying 500$ a month until the entire balane is 0$?

Remember that the minimum payment is based on a percentage of the current balance. Assuming monthly payments only with no additional charges other than the interest - the required minimum payment will decrease as the balance decreases. This is the bases of their formula to calculate the time frame.

If you continue to pay the same 500$ as the minimum payment decreases then over time you would be paying significantly more than the requierd minimum payment thus increasing the speed in which the debt would be paid off. As the months pass you will also see these changes in their calculations and notice that the time frame will also start to decrease on the statement but it will never match the payoff calculators. 

Currently you are paying 25 more than the required minimum payment -- when the balance is around 20,000 then based on the assumption that you continue to pay the same 500/month then you would paying approx 100$ more than the required minimum payment. 

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This, right here. Online calculators don't factor in the minimum payment dropping. You either set your monthly payment or timeline and the calculator spits out the answer. 

[ldkcivilservant]

Aaah I see. Yes I believe we have arrived at the answer.

The statement (IIRC) actually said 'Only the minimum payment' - It did not say 'this minimum payment every month' Of course, this would significantly increase the length of time to pay down the balance.

Yes, he intends to continue the $500pm until the balance is paid in full.

Thanks guys!

[ocheosa]

Since $475[480] is the minimum, I would pay $500+whatever the finance charge is on the statement. Otherwise you are not quite paying enough forward and the interest begins to compound. And I would advise that on months when he has addt'l funds, he should throw an extra $300-500 at the balance. Just another opinion.

[ldkcivilservant]

I apprecaite the suggestion, and of course you are right, however he has other CC debt that has MUCH higher interest rates than the 5.99% on the Plat, so those will get the majority of the attention first.