Debt Payoff Calculator: Avalanche and Snowball
Compare paying off several debts at once: the minimums only, the avalanche order and the snowball order, with the months to debt-free and the interest saved.
Interest saved
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Avalanche — Interest saved against the minimums
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Avalanche — Months to debt-free
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Avalanche — Total interest
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Snowball — Interest saved against the minimums
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Snowball — Months to debt-free
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Snowball — Total interest
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Minimums only — Months to debt-free
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Minimums only — Total interest
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Avalanche pays the highest rate first and costs the least in interest. Snowball clears the smallest balance first and finishes that debt sooner. The difference between the two is the price of the order.
The chart fills in once there is a figure to draw.
A run that never clears the debts is left out: its balance grows instead of falling, and the shape of that line would describe the end of the simulation rather than a schedule. The line for the extra payment reaches zero.
The three runs use the same debts and the same extra payment. The only thing that changes is the order the extra money goes in.
At least one of these debts is charged more interest in a month than the payments cover, so that balance grows instead of falling. A run that never clears the debts has no finished schedule, so it reports no months and no interest: those figures would describe the end of the simulation rather than the debts.
How this is calculated
The model is a month-by-month simulation: interest accrues on the balance at the start of the month, every debt that is still open takes its own minimum payment, and the rest of the money goes to the debt the reader picked.
The calculation is a month-by-month simulation. At the start of each month the interest is charged on the balance and added to it. The money available that month is the sum of every minimum payment plus the extra payment entered on the left. Every debt that still has a balance takes its own minimum payment, and that payment covers its interest first and its principal second.
A debt that has been cleared stops taking a minimum payment, and that minimum joins the money going to the next debt. That is the mechanism behind the difference between the orders: the same monthly amount, spent on a different debt, stops different balances sooner.
interest for the month = balance at the start of the month × annual rate ÷ 12; every open debt takes its own minimum payment, interest first and principal second; the rest of the money goes to the debt the order points at
The avalanche order sends the extra money to the highest interest rate first. It costs the least in interest, because the interest it stops is the most expensive money the reader is paying.
The snowball order sends the extra money to the smallest balance first. It costs more in interest overall and it clears one account sooner, which is a different kind of result. The calculator shows both, and the interest saved in each case, so the two can be compared on the same numbers.
What this calculator does not do
- It does not model variable rates. A credit card on a variable rate changes the interest as the index moves, and the schedule here assumes the rate stays where it was typed.
- It does not model fees: late fees, balance transfer fees and annual card fees are not in the total.
- It charges interest monthly. A credit card that compounds daily charges a little more over the year, and the real figure on a card balance is usually slightly higher than this one.
- It does not model the tax treatment of the interest, which on some debts can be deducted and on others cannot.
- It does not model a change in the minimum payments, which lenders sometimes lower for hardship and sometimes raise as the balance falls.
Sources
Guides that go deeper
Common questions
What is the difference between the avalanche and the snowball?
Only the order. Avalanche sends the extra money to the highest interest rate first, snowball to the smallest balance first. The debts, the minimums and the extra payment are the same in both runs.
Which one saves more money?
Avalanche, in the interest. The extra money stops the most expensive debt first, so less interest accrues over the life of the debts. The calculator prints the difference in the interest saved for each order.
Why does the snowball exist if it costs more?
It clears the smallest balance first, so a balance goes to zero sooner. That is a different result from the one the interest measures, and the calculator shows both so the two can be compared on the same numbers.
How is the interest calculated?
On the balance at the start of each month, at the annual rate divided by twelve, and it is added to the balance. Payments then go to that interest first and to the principal afterwards.
What happens to the minimum payment of a debt that is cleared?
It is added to the money going to the next debt, so the monthly amount going to the debts never falls. That is what makes the payoff dates shorter than the sum of the separate schedules.
Does this account for a credit card compounding daily?
No. The model charges interest once a month. A card that compounds every day charges a little more over a year, so the real figure on a card balance is usually a little higher than the one here.