⛓️ Debt Payoff

How it works

When you carry several debts, the order you attack them in changes how much interest you pay and how motivated you stay. The two classic strategies: the avalanche (pay minimums on everything, throw every extra dollar at the highest interest rate first — mathematically cheapest) and the snowball (attack the smallest balance first for quick wins that keep you going — psychologically strongest).

This calculator lays out a month-by-month payoff plan: which debt gets the extra payment, when each hits zero, and total interest paid. Seeing the finish date in black and white is often what turns a vague plan into action.

The formula

Each month, every balance accrues interest = balance × (APR / 12). Your payment first covers that interest; whatever is left shrinks the principal. For a single debt, months to payoff at fixed payment P is n = −ln(1 − B×r/P) / ln(1+r), with B the balance and r the monthly rate. Once a debt clears, its whole payment rolls into the next target — that rollover is the "snowball" or "avalanche" in motion.

Worked example

You owe $8,000 on a card at 19.99% APR and $3,000 on a line of credit at 9.99%, and you can pay $450/month total. Minimums are roughly $160 on the card and $60 on the line of credit. With the avalanche, the extra $230 attacks the card first: at $390/month it clears in about 24 months (~$1,760 interest); then the full $450 finishes the line of credit a few months later. Total interest ≈ $2,000, debt-free in ~30 months. The snowball costs a few hundred more in interest but kills the smaller debt first — pick the one you'll stick with.

Frequently asked questions

Avalanche or snowball — which should I pick?
If rates are far apart, avalanche saves real money. If they're close, the snowball's quick wins may keep you on track longer. Consistency beats optimization.

Should I consolidate into one loan?
Consolidation helps when it genuinely lowers your average rate and you stop adding new debt — a cheaper loan you run back up is worse than doing nothing.

What if I can only afford minimums?
Then stop the bleeding: minimums barely cover interest on high-rate cards. Even $50/month extra on the highest-rate balance shortens payoff dramatically.

Order matters, but the amount decides

Every payoff strategy shares the same first rule: pay the minimum on everything, so no account goes delinquent, then aim every spare dollar at one target. The avalanche method targets the highest interest rate first, which is the mathematically cheapest route. The snowball method targets the smallest balance first, which produces a finished account sooner and keeps some people motivated. Both beat the common default, which is spreading extra money thinly across every balance and finishing none of them. In practice, the size of your monthly payment moves the finish date far more than the order does, as the example below shows. Pick the order you will actually stick to for a year, because a perfect plan abandoned in March loses to a decent plan finished in December.

A worked example

Suppose you owe $14,000 across three accounts: a store card with $1,800 at 11.99 percent (minimum $40), a Visa with $5,200 at 22.99 percent (minimum $110), and a line of credit with $7,000 at 9.45 percent (minimum $140). Minimums total $290 a month. You commit $700 a month instead, leaving $410 of extra firepower.

With the avalanche, the extra $410 attacks the Visa first. You are debt free in 23 months and pay $1,774 of interest along the way. With the snowball, the extra money clears the little store card first for the quick win. You are also debt free in 23 months, and the interest totals $1,965. The avalanche wins, by $191. That is real money, but notice what produced it: the decision to pay $700 instead of $290 saved thousands. The ordering decision saved hundreds. Argue about order for an evening if you enjoy it, then set the $700 and start.

Where payoff plans break

• Robbing one minimum to feed another. A late fee plus a penalty rate on the neglected account can erase months of careful extra payments.
• Consolidating and re-spending. A consolidation loan only works if the cleared cards stay cleared. Balances that creep back leave you with the loan payment and the card payments.
• No buffer at all. Sending every spare dollar to debt leaves nothing for the first car repair, which goes straight back on a card at 23 percent. A small starter emergency fund, even $500 to $1,000, protects the plan.
• Closing the oldest card in celebration. Closing accounts can shorten your credit history and raise your utilization on what remains. Keep the oldest card open with a token purchase now and then, once its balance is zero.

Frequently asked questions

Which saves more money, the snowball or the avalanche method?

The avalanche always saves at least as much interest, because extra money attacks the highest rate first. In the worked example on this page it saved $191 on $14,000 of debt. The snowball still wins for many people, because its quick early victories are what keep them paying month after month.

Should I empty my savings to pay off debt faster?

Usually not all of it. Keep a small buffer, often $500 to $1,000, then aim the rest at high interest debt. Without any cushion, the next surprise expense lands back on a card charging 20 percent or more and quietly undoes the payoff. Savings earning 3 percent cannot compete with debt costing 23 percent.

Does the order I pay my debts in affect my credit score?

Only slightly. Your score cares most about paying every account on time and keeping balances low compared with their limits. Paying any card down lowers its utilization, which helps. Either order, followed consistently, looks far better on your record than a missed payment on even one account.

What if I cannot cover all the minimum payments?

Call each lender before you miss a payment, not after. Many will reduce a rate or pause interest under a hardship arrangement if you ask early. A nonprofit credit counsellor can also build a debt management plan that rolls everything into one lower payment. Missing payments silently is the costliest option available.