How Do Debt Payoff Apps Work?

Quick Answer

Debt payoff apps are a tool for managing your debt. Features can include a clear view of your income and expenses, tools for automating your monthly debt payments and learning resources for budgeting and reducing debt.

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It can be confusing to sort out what you owe when you're working on reducing your debt. Perhaps you've tried spreadsheets, pencil and paper, or other methods for corralling your debts, but they just aren't right for you.

If this sounds like you, then you might want to look into debt payoff apps. Debt payoff apps may help you pay off your debt in a fast, tech-friendly way. Some of these apps charge a subscription fee, while others are free.

Follow along to learn what debt payoff apps are, how they work and whether you should use them.

What Are Debt Payoff Apps?

A debt payoff app essentially creates a one-stop shop for monitoring and managing your debt. Among other things, a debt payoff app might:

  • Provide an overview of your income and expenses
  • Automate payments for credit cards, student loans and other debts
  • Recommend payoff strategies, such as which debt you should tackle first
  • Offer tools for learning more about personal finance, including how to manage credit card debt

How Do Debt Payoff Apps Work?

All debt payoff apps aren't the same. Therefore, it's important to understand how a debt payoff app works before downloading and perhaps paying for it.

Income and Expense Tracking

A debt payoff app may let you connect to your bank accounts, credit card accounts and other financial accounts. This can allow you to keep an eye on your income and expenses, and better manage your debt payoffs.

Automatic Payments

Some debt payoff apps enable you to automate several monthly debt payments. This can streamline the debt payoff process and help you avoid late fees.

Payoff Strategies

Debt payoff apps might recommend different strategies for tackling debts. One app might steer you toward the snowball method, which focuses on paying off your smallest debts first. Another app might guide you toward the avalanche method, which focuses on paying off your highest-interest debts first. And yet another app may give you the option to come up with your own payoff strategy.

Financial Education

In addition to empowering you to reduce your debt, a debt payoff app might provide tools that can help you manage debt over the long run and improve your financial management skills.

Pros and Cons of Debt Payoff Apps

As with any technology, debt payoff apps come with pros and cons.

Pros of Debt Payoff Apps

  • If you choose the right app, you may be able to create a full-fledged hub for managing your debts.
  • A debt payoff app may be an easier-to-use tool for managing debt than, say, a spreadsheet.
  • Some debt payoff apps are free. For example, the Debt Payoff Planner app offers a free basic subscription and a $2-a-month, feature-rich subscription. "Be sure the app will save you more money than you'll spend. Otherwise, you'll be working against your financial goals," the Better Business Bureau advises.
  • Most apps for iOS and Android devices incorporate encryption technology that helps keep your data out of the hands of hackers. "However, read reviews and practice diligence before sharing sensitive financial information," says InCharge Debt Solutions, a nonprofit credit counseling agency.
  • Some apps don't let you connect to your financial accounts, meaning that information must be entered manually. This might appeal to some people who are concerned about sharing a lot of personal data.

Cons of Debt Payoff Apps

  • Some debt payoff apps offer limited features. For instance, the app is essentially a bare-bones loan calculator that's capable of devising a debt payment plan.
  • Not all debt payoff apps are free. Some charge subscription fees that may be a turnoff. For example, it costs nearly $250 to download the Debt Manager Pro App from ZilchWorks.
  • Although debt payoff apps are generally considered safe, there's always the possibility a hacker might be able to steal your personal data.
  • Some apps might not be compatible with your technology. For example, the desktop-only debt payoff apps from ZilchWorks require that Microsoft Windows be installed on your computer.
  • You can't just set it and forget it. These apps won't do all the debt payoff work for you. You'll need to invest some time and energy to achieve success with a debt payoff app.

Should You Use a Debt Payoff App?

Using a debt payoff app may be a good idea if you could benefit from a tech-powered boost in your quest to reduce or eliminate debt. It might be just the tool you need to supercharge your debt payoff goals.

However, it might not be wise to use a debt payoff app if you constantly struggle to pay bills. An app isn't a substitute for professional guidance that you may need from a nonprofit credit counseling agency.

How to Find the Right Debt Payoff App

To find the the right debt payoff app for your needs:

  • Figure out your preferences. You might, for instance, embrace the avalanche method for slashing your debt. However, some apps might focus on a different method. Make sure the app you choose aligns with the way you want to approach debt payoff.
  • Check out online reviews. What do users say about the app? Are they satisfied? Are they disappointed? Take these comments into consideration when selecting an app.
  • Look at the app's ratings. Go over the app's star ratings from iOS users (App Store) or Android users (Google Play).
  • Investigate the costs. If you can find a reputable free app that'll do the job, then choose that one. Or if a reputable app with a paid subscription offering would better suit you, pick that app—as long as it won't drain your bank account.

The Bottom Line

A debt payoff app can be a great addition to your debt payoff toolbox. It might help you consolidate financial information, automate payments and design a payoff plan, among other things. Before you pick a debt payoff app, be sure it includes the features you want and doesn't strain your budget. And don't forget to explore the app's reputation and limitations. To stay on top of your credit, obtain your Experian credit report at no cost.