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About This Calculator
Create a strategic plan to eliminate multiple debts by comparing the avalanche method, which targets the highest interest rate first, against the snowball method, which tackles the smallest balance first. Both approaches work, but the avalanche saves more on interest while the snowball provides quicker psychological wins. Enter all your debts to see a customized payoff timeline and total interest cost for each strategy.
Quick Tips
- 1 List all debts by interest rate and attack the highest rate first to save the most.
- 2 Use the snowball method if you need quick wins to stay motivated.
- 3 Put every windfall like tax refunds and bonuses toward your highest-rate debt.
Example Calculation
Three debts: $5,000 at 24%, $12,000 at 18%, $8,000 at 9%, paying $900/month using avalanche method.
Debt-free in: 32 months | Total interest paid: $3,847 | Avalanche saves $612 vs snowball
How to Create a Debt Payoff Plan
An effective debt payoff plan starts with listing all debts, including balances, interest rates, and minimum payments. Next, determine how much total money you can allocate toward debt each month. After covering all minimum payments, direct any remaining funds toward one target debt using either the avalanche or snowball method. Tracking progress monthly and celebrating milestones helps maintain motivation throughout what can be a multi-year process.
Avalanche vs Snowball Method
The avalanche method prioritizes paying off the debt with the highest interest rate first, then moving to the next highest, which minimizes total interest paid over time. The snowball method targets the smallest balance first, regardless of interest rate, providing quick psychological wins as debts are eliminated. Mathematically, the avalanche saves more money, but research shows the snowball method keeps people more motivated because of the satisfaction of crossing debts off the list sooner.
How Extra Payments Reduce Total Interest
Making payments above the minimum has a dramatic impact on both payoff time and total interest. On a $25,000 debt at 15% interest with a $600 monthly payment, increasing to $750 per month saves approximately $3,400 in interest and pays off the debt 16 months sooner. Every extra dollar goes directly toward reducing the principal, which immediately reduces the interest charged in subsequent months, creating a compounding effect in your favor.
Debt Consolidation Options
Debt consolidation combines multiple debts into a single payment, ideally at a lower interest rate. Common options include personal loans (fixed rates typically 6-15%), balance transfer credit cards (0% intro APR for 12-21 months), and home equity loans (lower rates but your home serves as collateral). The best option depends on your credit score, total debt amount, and whether you can qualify for a rate meaningfully lower than your current weighted average.
Frequently Asked Questions
Pay more than the minimum, use the avalanche method (highest interest first), and look for ways to reduce rates via balance transfers or consolidation. Even an extra $100/month can save thousands in interest.
A common guideline is to keep total debt payments (excluding mortgage) below 20% of take-home pay. If you are aggressively paying down debt, allocate as much as possible while keeping an emergency fund.
Build a small emergency fund ($1,000–$2,000) first, then focus on high-interest debt (above 7–8%). Once high-interest debt is gone, split between saving and paying off lower-interest debt.
Debt consolidation combines multiple debts into a single loan, ideally at a lower interest rate. This simplifies payments and can reduce total interest. Options include personal loans, balance transfer cards, and home equity loans.