Debt Payoff Calculator - Snowball vs Avalanche
Created by: Emma Collins
Last updated:
Compare debt elimination strategies with our comprehensive debt payoff calculator. Analyze the snowball method (smallest balance first) versus the avalanche method (highest interest rate first) to determine which approach saves you more money and helps you become debt-free faster.
What is a Debt Payoff Calculator?
A debt payoff calculator is a financial tool that compares two popular debt elimination strategies: the snowball method and the avalanche method. This calculator helps you determine which approach will save you more money and time when paying off multiple debts, taking into account your specific financial situation and debt portfolio.
The debt snowball method focuses on paying off debts with the smallest balances first, while making minimum payments on larger debts. The debt avalanche method prioritizes debts with the highest interest rates first. Both strategies use any extra money available for debt payments to accelerate the payoff process.
How to Calculate Debt Payoff: Snowball vs Avalanche
Snowball Method Calculation:
- List all debts by balance (smallest to largest)
- Pay minimum payments on all debts
- Apply extra payment to smallest balance
- When smallest debt is paid off, roll that payment to next smallest
- Continue until all debts are eliminated
Avalanche Method Calculation:
- List all debts by interest rate (highest to lowest)
- Pay minimum payments on all debts
- Apply extra payment to highest interest rate debt
- When highest rate debt is paid off, roll payment to next highest rate
- Continue until all debts are eliminated
Example Calculation:
Debts: Credit Card ($2,000, 18% APR), Car Loan ($15,000, 6% APR), Personal Loan ($5,000, 12% APR)
Extra Payment: $200/month
Snowball Order: Credit Card → Personal Loan → Car Loan
Avalanche Order: Credit Card → Personal Loan → Car Loan
Result: Avalanche saves approximately $800 in interest over the snowball method.
Common Applications
- Credit Card Debt Management: Prioritizing high-interest credit card balances
- Student Loan Strategy: Optimizing multiple student loan repayments
- Mixed Debt Portfolio: Managing credit cards, auto loans, and personal loans
- Debt Consolidation Planning: Comparing payoff strategies before consolidation
Frequently Asked Questions
Which debt payoff method saves more money?
The debt avalanche method typically saves more money in interest payments because it targets high-interest debts first. However, the snowball method may provide better psychological motivation through quick wins.
How much extra should I pay toward debt each month?
Any extra amount helps, but aim for at least $50-100 monthly if possible. Even an extra $25 per month can significantly reduce payoff time and interest paid over the life of your debts.
Should I pay minimum payments on all debts except the target debt?
Yes, always make minimum payments on all debts to avoid late fees and credit damage. Only apply extra payments to your target debt based on your chosen strategy (snowball or avalanche).
What if I can't afford extra payments toward debt?
Focus on making all minimum payments first. Look for ways to increase income or reduce expenses to free up money for debt payoff. Even small additional payments make a difference over time.
Sources and References
- Ramsey, Dave. "The Total Money Makeover: A Proven Plan for Financial Fitness." Thomas Nelson, 2013.
- Consumer Financial Protection Bureau. "Paying off debt." ConsumerFinance.gov, 2023.
- Federal Trade Commission. "Paying Off Debt." Consumer.ftc.gov, 2023.