'Debt-free' is a dream no more

In 29 months I can be debt free. No more $300 a month car payments. No more annual 13 percent interest-rate credit cards. No more nights spent alone while my "pre-debt" friends go live it up with dinner and a movie.

Selfish friends.

According to Bankrate.com's "Debt Pay-Down Adviser," my $14,800 car/credit card debt could soon be but a faint odor in the skeleton closet of my life.

OK, really I don't have $14,800 worth of debt, but I very well could have, and this is an illustration anyway on behalf of my devoted readers (all five of you who occasionally send encouraging e-mails).

Bankrate.com also tracks credit card rates, mortgage rates and just about any other financial service that might be helpful to non-wealthy people. It's free.

The debt planner asks a series of questions about your debts and then spits out a monthly payment plan that will guide you in paying off the most pertinent balances quickly. The plan directs you in which loans to pay off first and how much to pay.

Start by gathering the most recent statement for each of your debts. The service doesn't recommend including a mortgage or a student loan because those are not considered debt that is important to pay off quickly.

I entered these debts:

• A 5-year car loan for $9,000 that has a 6 percent interest rate and a minimum monthly payment of $300.

• An MBNA credit card with a balance of $300 that has no annual interest rate until April, then it'll spike to 11 percent, minimum monthly payment of $30.

• An American Express card with a $5,000 balance, a 13 percent interest rate (which is average for most credit cards), a minimum monthly payment of $50.

• A Discover card with $500 on it, no annual interest rate until April, then it'll increase to 13 percent and a minimum monthly payment of $20.

After asking a few questions about additional income - I was real optimistic (considering my profession) and reported that I may get three pay raises in the next six years - my debt pay-down schedule was ready.

The debt priority was the car loan. According to the plan I can pay it off a whole month early by paying nearly double the last two months. A celebratory little "CONGRATULATIONS" appears beneath the $0 balance.

The American Express plan was a little scarier, considering it was the heftier debt with the highest interest rate. The plan requires that the debtor pay four times the minimum monthly payment, and some times more, to pay the balance off by June 2007.

What's even scarier is that the plan shows you how much the balance would increase by just paying the minimum $50 payment. That means for the first four months of the payment plan the $5,000 balance actually increases. It isn't until the fifth month of payment that the balance goes back down to $4,956.

If that doesn't make you want to pray for salvation and bathe in the cool, clean waters of financial freedom, then nothing will.

To get your own debt payment plan visit www.bankrate.com, click on the credit card icon at the top of the page and scroll down to the link that says "pay off balances quickly."

This Web site's principle advertisers are credit card companies - go figure.

n Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.