Debt Payoff Calculator

How the calculator pays off several debts

Most people with more than one debt pay each one separately and hope for the best. A payoff plan works differently: you commit to one fixed monthly amount, cover the minimum on every debt, and send everything left over to a single target debt. When that target is cleared, its minimum payment does not disappear from your budget — it rolls into the next target. Each debt therefore falls faster than the one before it, which is why this approach is sometimes called a debt snowball or avalanche.

The calculator simulates that plan month by month. Interest is added to each balance at its annual rate ÷ 12, minimums are paid, the extra goes to the current target, and the timeline shows exactly when each debt reaches zero.

Avalanche or snowball?

The only difference between the two methods is the order of the targets:

• Avalanche targets the highest interest rate first. Money goes where it is most expensive to owe, so the avalanche always costs the least interest overall.
• Snowball targets the smallest balance first. It usually costs slightly more, but the first debt disappears sooner, and that early win keeps many people going.

If you already know how much you want to put toward each debt, choose My own split and enter an extra amount for every debt. The results show how your plan compares with the avalanche for the same total extra, so you can see what your preferred split costs. Tick the rollover box to move a cleared debt's payment to the remaining debts (highest rate first), or untick it to keep each debt on its own payment.

Research published in the Harvard Business Review found that people who concentrated their repayments on one account at a time, especially the smallest, paid off more debt overall than people who spread payments thinly. The best method is the one you will actually stick with, so compare both and look at the size of the difference.

A worked example

Take four debts: a credit card of 60,000 at 36% with a 3,000 minimum, a personal loan of 200,000 at 14% (6,500 a month), a car loan of 450,000 at 9% (9,500 a month), and a store card of 15,000 at 28% (750 a month). Paying only the minimums, the last debt is cleared in 4 years 11 months, with about 195,700 of interest.

Add 5,000 a month on top and use the avalanche, and you are debt-free in 2 years 11 months with about 121,700 of interest — two years sooner and roughly 74,000 cheaper. The snowball finishes at the same time but costs about 900 more, because it clears the small store card first; in exchange, that first debt is gone in month 3 instead of month 10.

What the calculator assumes

• Fixed rates and minimums. Real credit card minimums usually shrink as the balance falls. The calculator keeps your entered minimum fixed, which is the habit that actually clears debt.
• No new borrowing. Adding to a debt while repaying it makes any plan meaningless.
• Monthly interest, no fees. Interest is charged monthly at the annual rate ÷ 12. Late fees, annual fees and penalty rates are not included.
• Same total every month. Your monthly outlay stays at the sum of all minimums plus the extra until everything is paid.

Making the plan work

Keep a small emergency buffer before throwing every spare amount at debt, so one surprise bill does not send you back to the credit card. Then automate the payments, stop using the cards you are clearing, and re-run the calculator every few months with your real balances. If one of your debts has a far higher rate than the rest, a balance transfer or consolidation loan can lower the cost — but only if you close the door on the old debt.