DueTrack Studio

Free tool · Personal Finance

Debt payoff calculator: snowball vs avalanche

Compares the two most popular ways to pay off several debts, snowball (smallest balance first) and avalanche (highest interest rate first), using your real balances, rates and payments.

General education, not financial advice. Your situation may differ. Disclaimer.

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How it works

Each month, interest is added to every balance and every minimum payment is made. The extra amount goes to one target debt: the smallest balance (snowball) or the highest rate (avalanche).

When a debt is paid off, its minimum payment rolls into the extra amount for the next target, so the payments snowball.

Monthly simulation: balance × (rate ÷ 12) interest added, minimums paid, then (extra + freed-up minimums) to the target debt

Worked example

Three debts (store card 900 at 19.9%, credit card 4,500 at 24.9%, car loan 8,200 at 6.9%) with 200 extra a month are cleared in 27 months either way. Avalanche costs 1,937.22 in interest, 62.64 less than snowball (1,999.86), but snowball clears the first debt in month 5 instead of month 18.

Limits

  • Rates are treated as fixed and interest as monthly. Cards that charge daily interest, promotional rates and fees will differ a little.
  • Minimum payments on cards usually fall as the balance falls; here they stay fixed, which is what most payoff plans assume.

Questions

Which method should I choose?

Avalanche always costs the same or less in interest. Snowball gives quicker wins, which helps many people keep going. If the difference in interest is small, pick the one you will stick with.

Why does the calculator say a balance never goes down?

The monthly interest on that debt is larger than what you pay towards it. Increase the payment, or talk to the lender or a non-profit debt adviser.

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