With multiple credit cards or loans, the question is no longer just “How much do I owe?”, but also “In what order should I pay them off?”. This debt payoff calculator gives you the answer. Enter the current balance, interest rate, and minimum monthly payment for each debt to directly compare the “snowball” and “avalanche” repayment methods. You’ll see precisely how many months it will take to become debt-free, the total interest cost for each method, and the order in which your debts will be paid off.
How do the “Snowball” and “Avalanche” Debt Repayment Methods Work?
Both methods are based on the same fundamental principle: you continue making the minimum monthly payment on all your debts and use available funds to fully pay off a specific debt. Once that debt is paid off, the previously allocated minimum payment isn’t eliminated; instead, it’s added to the amount earmarked for the next debt. This is precisely where the “snowball” or “avalanche” effect comes into play: the amount allocated for repayment increases with each debt paid off.
The difference between the two methods lies in the order in which the debts are tackled.
- “Snowball” method: You start with the debt with the lowest balance, regardless of its interest rate. Quick successes generate positive momentum that motivates you to stick to the plan.
- “Avalanche” method: You start with the debt with the highest interest rate, regardless of its balance. This is the mathematically optimal approach, as it minimizes the total interest cost over the life of the payoff plan.
Example Calculation
Say you have three debts: a $4,000 credit card at 24% APR with a minimum payment of $100, a $2,500 credit card at 19% APR with a minimum payment of $75, and a $6,000 personal loan at 12% APR with a minimum payment of $150. You have an extra $200 a month to put toward whichever debt you’re targeting.
Using the “snowball” method, you’d first pay off the $2,500 credit card, since it has the lowest balance, then the $4,000 credit card, and finally the personal loan. With this plan, all three debts are paid off in 2 years and 5 months, with total interest of about $2,719.
With the “avalanche” method, you’d first pay off the $4,000 credit card, since it has the highest interest rate, then the $2,500 balance, and finally the loan. It still takes 2 years and 5 months to become debt-free, but total interest drops to about $2,573, saving you about $146 just by reordering which debt gets the extra payment.
This difference grows considerably with higher debt levels, bigger differences in interest rates, or a longer payoff timeline, which is why it’s worth running your own numbers instead of assuming one method is always the best fit.
“Snowball” or “Avalanche” Method: Which is Right for You?
The “avalanche” method almost always results in greater savings; simply calculate the interest. However, the “snowball” method offers a crucial, though difficult to quantify, advantage: the satisfaction of seeing quick results. If you can pay off even a small debt in just a few months, the plan seems achievable. This motivates you to continue paying more than the minimum required, instead of falling back into your old habits.
The Consumer Financial Protection Bureau (CFPB) offers additional information to help you evaluate and prioritize different types of debt and make this decision. If you make extra payments on a debt, our Loan Prepayment Calculator will tell you exactly how much interest you’ll save.
If you’re unsure which method to choose, enter your information into the calculator above. If the difference in total interest cost is small, choose the method that motivates you most; it’s usually the “snowball” method. However, if the difference is significant, the additional effort and discipline required by the “avalanche” method are worthwhile.
Tips for Paying Off Debt Faster
- Round up your payments. Paying $220 instead of $200 a month has little impact on your budget but significantly affects the total repayment period.
- Put unexpected income toward paying off debt. Tax refunds, bonuses, and other one-off payments are far more effective when used directly to reduce your debt.
- Ask for a lower interest rate. Credit card issuers will sometimes agree to lower your interest rate if you ask, especially if you have a history of paying your bills on time. Even a small reduction can lead to real savings.
- Avoid taking on new debt. Extra payments are only effective if your total debt doesn’t rise again due to new spending.
Frequently Asked Questions
What is the difference between the “snowball” and “avalanche” methods?
With the “snowball” method, you pay off the smallest debt first, regardless of its interest rate, to make rapid progress. With the “avalanche” method, you prioritize paying off the debt with the highest interest rate, regardless of the amount owed, to minimize the total interest cost.
Which method will get you out of debt faster?
The total time needed to pay off debt is usually very similar with both methods, as they both use the same amount of extra payment toward repayment. While the “avalanche” method generally generates greater interest savings, the quick gains of the “snowball” method can help keep you motivated, which is more important than simple calculations when motivation is the main obstacle.
Does the “snowball” method result in higher interest costs?
Generally, yes, but often only to a certain extent. Since interest rates aren’t factored into the repayment order, interest on higher-rate debts can accumulate over a longer period than with the “avalanche” method. Use both methods in the calculator above to determine the exact cost difference for your specific debt.
Should I include my mortgage in a debt payoff calculator?
Most users exclude their mortgage from these tools and focus on higher-interest consumer debt, such as credit cards, personal loans, and car loans. Mortgages have significantly lower interest rates and are taxed differently; therefore, they are usually planned separately.
What if I can’t afford an extra monthly payment?
Enter an extra payment of $0. The calculator will tell you how long it will take to pay off each debt individually, including minimum payments and the total interest cost. This is a good starting point to see how much you could save with just one additional payment, even a small one.