Core Concepts
Understand the fundamental concepts behind BeDebtFree and debt payoff planning.
Understanding Your Debts
Before creating a payoff plan, it helps to understand the key components of each debt:
Principal Balance
This is the current amount you owe. As you make payments, this balance decreases. BeDebtFree tracks your principal balance for each debt and shows your total debt across all accounts.
Interest Rate (APR)
The Annual Percentage Rate is what creditors charge you to borrow money. Higher interest rates mean you pay more over time. Credit cards typically have rates between 15-25%, while mortgages are usually much lower.
Minimum Payment
The smallest amount you must pay each month to keep your account in good standing. Paying only minimums extends your payoff timeline significantly and costs more in interest.
The Power of Extra Payments
Making payments above your minimums is the key to getting out of debt faster. Even small extra amounts make a big difference over time because:
Extra payments go directly toward your principal balance
Lower balances mean less interest accrues each month
The savings compound over time, creating a snowball effect
Debt-Free Date
BeDebtFree calculates your projected debt-free date based on your current balances, interest rates, and payment plan. This date updates automatically as you log payments and adjust your strategy.
Interest Savings
One of the most powerful features of BeDebtFree is showing you exactly how much money you will save in interest by following your plan. Seeing this number grow as you make progress is incredibly motivating.
Households
A household in BeDebtFree represents your family or financial unit. You can invite other members to join your household, allowing everyone to see the shared debt picture and contribute to the payoff plan.
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