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Debt Snowball/Avalanche Calculator
Compare the debt snowball (smallest balance first) and debt avalanche (highest interest first) payoff strategies. See which method saves you more money and gets you debt-free faster.
Your Debts
How to Use This Debt Payoff Strategy Calculator
- Enter your Extra Monthly Payment Available ($) — This value represents your extra monthly payment available
- Click Calculate — Review your results in the output section below the form. The calculator instantly computes all values based on your inputs.
- Adjust and Compare — Modify any input to see how changes affect the result. Try different scenarios to find the optimal approach for your situation.
All calculations are performed instantly in your browser. Your data is never sent to any server or stored anywhere — your financial information remains completely private.
Formula and Methodology: Debt Payoff Strategy Formulas
Months to Payoff = -log(1 - (B × r / PMT)) / log(1 + r)
Total Interest = (PMT × Months) - B
Where:
- B — Current balance of the debt
- r — Monthly interest rate (annual rate ÷ 12)
- PMT — Monthly payment amount
- Months — Number of months until the debt is fully paid off
Worked Example
Credit card with $5,000 balance at 20% APR, paying $200/month: Months = -log(1 - (5000 × 0.01667 / 200)) / log(1.01667) = 31 months. Total paid: $6,200. Interest: $1,200. Increasing to $300/month: 19 months, $700 interest, saving $500.
Limitations and Assumptions
The avalanche method (highest rate first) minimizes total interest paid. The snowball method (smallest balance first) provides psychological motivation. A hybrid approach — targeting the highest-rate debt unless a small balance can be eliminated quickly — often balances mathematical optimization with behavioral benefits.
Key Concepts and Definitions
Understanding the following key concepts will help you interpret your results and make better financial decisions:
- Principal — The initial amount of money involved in the calculation, whether it is a starting balance, loan amount, or investment.
- Interest Rate — The percentage charged or earned on the principal amount, typically expressed as an annual rate (APR). This rate determines how quickly your money grows or how much borrowing costs.
- Compounding — The process of earning interest on previously earned interest. More frequent compounding (daily vs. monthly vs. annually) results in higher effective returns or costs.
- Time Horizon — The length of time over which the calculation applies. Longer time horizons amplify the effects of compounding and small differences in rates.
- Present Value vs. Future Value — Present value is what money is worth today; future value is what it will be worth at a specific point in the future, accounting for growth or inflation.
These concepts form the foundation of virtually all financial calculations. Understanding how they interact helps you evaluate any financial product or decision with confidence.
Real-World Example: Putting the Debt Payoff Strategy to Work
Let's compare debt repayment strategies with a real scenario.
Scenario: Jason has three debts and can allocate $800 per month total toward repayment:
- Credit Card A: $4,500 balance at 22.99% APR (minimum payment: $135)
- Credit Card B: $2,200 balance at 18.49% APR (minimum payment: $66)
- Personal Loan: $8,000 balance at 9.5% APR (minimum payment: $267)
Avalanche Method (highest rate first): Pay minimums on all debts, put extra $332 toward Credit Card A first. Debt-free in 26 months, total interest paid: $2,847.
Snowball Method (smallest balance first): Pay minimums on all debts, put extra $332 toward Credit Card B first. Debt-free in 27 months, total interest paid: $3,104.
The avalanche method saves Jason $257 in interest and one month. However, the snowball method eliminates his first debt in just 5 months, providing a motivational boost. Both methods are vastly superior to paying only minimums, which would take 94 months and cost $6,218 in interest.
Smart Strategies for Debt Payoff Strategy
1. Stop Accumulating New Debt
The first step in any debt payoff plan is to stop adding to your balances. Cut up credit cards or freeze them if necessary. No repayment strategy works if you continue borrowing.
2. Build a Small Emergency Fund First
Before aggressively paying down debt, save $1,000-2,000 for emergencies. Without this buffer, unexpected expenses will force you back into debt and undermine your progress.
3. Pay More Than the Minimum
Minimum payments are designed to maximize interest revenue for lenders, not to help you get out of debt. Even doubling your minimum payment can cut years off your repayment timeline.
4. Consider Balance Transfer Options
If you have good credit, a 0% APR balance transfer card can save significant interest during the promotional period (typically 12-21 months). Just be sure to pay off the balance before the promotional rate expires.
5. Celebrate Milestones
Debt repayment is a marathon. Set intermediate goals and celebrate when you hit them. Paying off your first card, reaching 50% of total debt paid, and making your final payment are all worthy of recognition.
