Debt Payoff Calculator: Interest Savings & Velocity Model

• Who it helps:
  Anyone carrying multiple debts, credit cards, car loans, student loans, personal loans, who wants to find the fastest or cheapest path to debt freedom.
• What it does not do:
  It does not negotiate rates, factor in balance-transfer fees, or model variable-rate changes over time. For consolidation analysis, see the debt consolidation calculator linked below.

Which Method Should You Choose?

• Choose Avalanche if:
  You want to save the most money and can stay motivated without quick wins.
• Choose Snowball if:
  You need psychological momentum and quick wins to stay committed.
• Hybrid Approach:
  Start with Snowball for 2-3 quick wins, then switch to Avalanche for maximum savings.

Worked Example

• Edge Case, Equal Rates:
  When two debts share the same APR, Avalanche and Snowball diverge only if balances differ; paying the smaller one first frees cash flow sooner
• Limitation, Variable Rates:
  The calculator uses current APRs; if a credit card rate rises mid-payoff, re-run the comparison with updated rates

• Add your debts:
  Enter each debt with its name, current balance, APR, and minimum monthly payment. Include credit cards, car loans, student loans, and personal loans, anything with a required payment.
• Set your extra monthly payment:
  Enter the total extra amount you can put toward debt each month beyond all minimums combined. Even $50–$100 extra can shave months or years off your payoff timeline.
• Compare methods:
  The calculator runs both Snowball (smallest balance first) and Avalanche (highest rate first) simultaneously. Review the debt-free date, total interest, and payoff order for each.
• Read the timeline chart:
  The month-by-month visualization shows when each individual debt reaches zero and how the roll-over effect accelerates later payoffs.

Variable Rate Risk

• Impact:
  A 1% rate increase on a $10,000 balance adds approximately $100/year in interest
• Strategy:
  Prioritize variable-rate debts in your Avalanche strategy or consolidate to fixed rates
• Timing:
  Rate changes typically take effect within 1-2 billing cycles after Fed announcements

• The minimum-payment trap:
  Minimum payments typically cover interest plus 1–2% of principal. Early in the payoff, 60–80% of your payment goes to interest, not debt reduction. This is why payoff timelines stretch to 15–25 years on minimums alone.
• The $50 rule of thumb:
  Every additional $50/month beyond the minimum on a $5,000 balance at 20% APR saves roughly $2,000 in interest and shortens payoff by 3–4 years. Small increases in extra payments have outsized effects.
• When to use this calculator:
  Enter your actual balances and minimums to get an exact timeline. The comparison view shows how much faster you become debt-free with Avalanche ordering versus minimum-only payments.

• When Avalanche wins big:
  If you carry a high-rate credit card ($8,000 at 24%) alongside a low-rate car loan ($12,000 at 5%), Avalanche targets the card first and can save thousands compared to Snowball.
• When the difference is small:
  If all your debts have similar APRs (e.g., three cards between 19–22%), the ordering matters less and the psychological benefits of Snowball may outweigh the modest interest difference.
• The hybrid approach:
  Start with Snowball to eliminate 1–2 small debts quickly and free up cash flow, then switch to Avalanche for the remaining larger balances. This captures motivational momentum and long-term savings.
• What the research says:
  A 2016 Harvard Business Review study found that people who focused on paying off small accounts first were more likely to eliminate their overall debt, suggesting that behavioral motivation can matter as much as mathematical optimization.