Manage your debt like a pro with Digital Advisor

Read time: 3 to 4 minutes

There’s a good chance you know something about debt—around 80% of Americans are paying off a mortgage, car, credit card, or other consumer loan.1 No matter how much you owe, or who you owe it to, Vanguard Digital Advisor® can help you manage your debt like a pro. Find out how below.

Understanding your debt

Debt is a part of everyday life for most people. The average amount that Americans owe is $104,215.2 That sounds like a lot, and it is, but some of that could be “good” debt.

A common example of “good” debt is a mortgage on a house. With a mortgage, you start taking ownership of a home. And when you make your monthly payments on time, you can improve your credit score. Paying down this type of debt gets you closer to your financial goals, like building your net worth.
But what if your debt is dragging you down?
Carrying any type of debt can give you a lot to think about. Consider each debt and how it’s helping or hurting you. Think about things like the debt’s interest rate, how long it could take to pay off the debt, and how much risk you’re taking on by carrying it.

For example, if your credit card balance is high and you can only make the minimum payment every month, it’ll take you longer to pay it off since the interest will keep adding up. And when your money is tied up in paying off just the interest every month, you can't put that money to work for you by saving more for your retirement or other financial goals.

And if you’re juggling multiple types of debt—like a mortgage, credit card balance, student loans, or car loans—your financial situation may start to feel out of control. No matter how you feel about your debt, though, Digital Advisor can help you manage it.

Put our debt calculator to work for you

When you update your Digital Advisor investor profile , you’ll get access to our Debt Payoff Calculator. This tool can:

Help you organize your debt, so you can see the big picture on your finances. 

Compare 2 payment strategies, so you can get an idea of how to be debt-free sooner.

Recommend a strategy that can offer the fastest way to pay off your debts.

Saving money—one debt at a time

Vanguard recommends the “avalanche” method for paying off debt. This method prioritizes paying off your debt with the highest interest rate first, while continuing to make your minimum monthly payments on the rest of your debt. Then once you pay off the debt with the highest interest rate, you start paying off the debt with the second-highest interest rate using the extra money you’ve freed up from paying off the first debt. With the avalanche method, you’ll pay less interest in the long term—which will save you money compared with spreading out your monthly payments between your various debts. 

Let’s see the calculator in action
Angela is a hypothetical investor who enters all her debt information into the Digital Advisor debt calculator, which totals her monthly minimum payments for all her debt as follows.
For illustrative purposes only.
As she continues using the calculator, it shows her the amount of interest she’d pay if she only makes her minimum payments each month. It also tells her the amount of time it would take to become debt-free.
For illustrative purposes only.
Next, the calculator asks Angela to estimate how much extra money she can afford to pay toward her debt with the highest interest. Why? Because the calculator assumes that once Angela pays off that debt, she can roll her extra payments over to the debt with the next-highest interest, until all her debt has been paid off.

So the calculator is using the avalanche method. And in this example, Angela could save over $53,000 in interest and be out of debt more than 10 years earlier.
For illustrative purposes only.

Let’s handle your debt together 

Paying off debt is a critical step toward building your net worth and saving for the retirement you deserve. Digital Advisor’s Debt Payoff Calculator can make this process easier and less costly for you. Once you complete your profile, you’ll get access to this powerful tool. We’ll also create a personalized saving and investing plan to help you reach your retirement goal. And you’ll have ongoing access to other financial planning tools that can help you prepare for a financial emergency, save for nonretirement goals, and estimate your Social Security benefit.

Want to unlock the power of smart financial planning? Complete your Digital Advisor profile today.
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Whenever you invest, there’s a chance you could lose the money.
1Source: Drowning in Debt: The Hidden Tsunami Engulfing American Households. InvestorPlace, 2023.

2Source: Jenifer Streaks, Average American Debt in 2024: Household Debt Statistics. Business Insider, 2024.

Vanguard Digital Advisor’s Debt Payoff Calculator helps you project the impact of different fixed-rate debt payments over time. You'll use a third-party aggregation service to analyze your debt payments. There are limitations to the aggregated information, including inability to carve out any escrow payments. There also could be missing or inaccurate information, such as taxes and insurance, which you’ll need to closely review in using the calculator.
 
Vanguard Digital Advisor's services are provided solely by Vanguard Advisers, Inc. (VAI), a registered investment advisor. Please review the Vanguard Digital Advisor brochure  for important details about this service. Vanguard Digital Advisor's financial planning tools provide projections and goal forecasts, which are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.