Why use this calculator
Most people with several debts pay a little extra towards whichever one feels worst, which is usually the biggest balance or the one with the most aggressive collections letters. That is rarely the cheapest choice, and without a simulation there is no way to see the difference.
Two strategies dominate the research. The avalanche directs every spare dollar at the highest interest rate, which mathematically minimises total interest. The snowball clears the smallest balance first, which costs a little more but produces a visible win early, and studies of real repayment behaviour consistently find that people who see an account close are more likely to keep going.
This calculator runs both properly, including the part almost every spreadsheet gets wrong: when a debt clears, its minimum payment must roll into the next target rather than quietly returning to your spending.
How to use it
- Start with the extra payment, which is the amount above your combined minimums that your budget can genuinely sustain every month, not your best month.
- Choose a method, then run it again with the other one to see the difference for your own numbers.
- For each debt, take the balance from your latest statement rather than the credit limit, and take the interest rate from the same statement, using the purchase rate rather than the cash advance rate. Enter the minimum monthly payment your statement requires.
- Leave the balance at zero for any row you do not need, and the calculator will ignore that debt entirely.
- Enter a zero rate for a genuinely interest-free plan such as a buy now pay later instalment.
What each result means
- Total debt
- The combined starting balances of every debt you entered, which is the principal the plan has to clear.
- Time to debt free
- How long the whole plan takes if you hold the same total monthly payment and roll each cleared minimum forward.
- Interest charged in the first month
- The interest added across all your debts in the first month at today's balances and rates. Only the part of your payment above this figure actually reduces what you owe.
- Switching method would
- What changing from your chosen method to the other one, avalanche or snowball, would do to the total interest at the same monthly payment. Avalanche never costs more interest; snowball can still suit you if quick early wins keep you going.
- Total interest paid
- Everything the lenders charge you across the plan. This is the number the choice of method actually changes.
- Payoff method
- Which debt your spare money attacks first. Avalanche targets the highest rate, snowball targets the smallest balance.
- Payoff order
- The sequence in which the debts close. Under the snowball the first name usually arrives months earlier, which is the point of it.
- Total paid, principal and interest
- The full amount leaving your account before the last debt closes, principal and interest combined.
- Monthly payment including the extra
- The constant figure to set up. Holding it steady after a debt closes is what makes either method work.
- Interest saved by the extra payment
- What your extra payment is worth in avoided interest, compared with the same method paying only minimums.
- Time saved by the extra payment
- How much earlier you finish because of the extra payment, compared with paying only the minimums.
The formula
Each month, for every debt: interest = balance multiplied by the annual rate divided by 100 divided by 12, all in dollars
That interest is added to the balance, then the minimum payment is deducted. The total monthly budget equals the sum of all minimum payments in dollars plus your extra payment in dollars, and it is held constant for the entire simulation. Whatever is left after the minimums is applied to the first unpaid debt in priority order: the highest annual rate for the avalanche, or the smallest starting balance for the snowball. The loop repeats until every balance reaches zero or 600 months elapse, whichever comes first.
How this number is used in practice
The rollover is where almost all of the power sits, and it is the part people abandon. When the first debt closes, its minimum payment is free cash, and the natural response is to enjoy it. Doing that turns a two year plan into a four year plan, because the total monthly payment falls every time an account clears.
The discipline that makes either method work is simply refusing to let the total drop: when Debt 1 closes, its entire payment goes onto Debt 2 the following month. Setting the payments up as automatic transfers on pay day, and increasing the next one manually the day an account closes, removes the decision from the moment when it is hardest to make.
The choice between methods is smaller than the internet suggests. On a typical mix of three consumer debts the avalanche saves a few hundred dollars over a couple of years. That is real money and worth having if you will stick to the plan either way, but it is dwarfed by the effect of the extra payment itself, and completely dwarfed by the effect of giving up.
If seeing an account close is what keeps you going, the snowball is the correct choice and the extra few hundred dollars is the price of finishing. Run both in this calculator and look at the actual gap for your own numbers before deciding.
Two things sit outside this simulation and both matter. A balance transfer to a genuinely interest-free period can beat either method outright, but only if you clear the balance before the promotional rate reverts and only if you stop using the old card. And any debt that is already in hardship, in arrears, or attracting default fees needs a call to the lender before it needs a spreadsheet, because a hardship arrangement can freeze interest in a way no repayment strategy can match. In Australia, every credit licensee is required to consider a hardship notice, and free financial counselling is available nationally.
Worked examples
An $8,000 card at 20 per cent, a $4,000 personal loan at 12 per cent and a $2,500 car loan at 6 per cent, with $200 extra a month, using the avalanche
Debt free in 2 years 3 months with $3,152.28 of interest, saving $1,391.61 against paying the minimums alone
The identical three debts and the identical $200 extra, switched to the snowball method
Debt free in 2 years 3 months with $3,443.18 of interest, which is $290.90 more than the avalanche costs
A single $12,000 credit card at 21 per cent with a $240 minimum and no extra payment at all
9 years 1 month to clear and $13,912.58 of interest, more than the original balance
When people use it
- Choosing between the snowball and avalanche methods with your own balances
- Working out how much sooner an extra $100 a month gets you to debt free
- Seeing the true cost of paying only the minimum on a credit card
- Deciding which debt to target first after a pay rise or a tax refund
- Setting a realistic debt-free date before starting a repayment plan
- Testing whether consolidating into one lower-rate loan is worth the effort
Tips
- Hold the total monthly payment constant. When one debt closes, move its entire minimum onto the next one the same month.
- Run both methods before choosing. If the avalanche saves you very little, take the snowball and the motivation that comes with it.
- Stop using the cards you are paying down. A repayment plan and continued spending on the same account cancel each other out.
- Direct one-off money such as a tax refund or bonus straight at the target debt. Lump sums shorten the plan disproportionately because they remove compounding balance.
- Ring the lender and ask for a rate reduction before starting. It costs one phone call and a lower rate improves every month of the plan.
- If a card is in arrears or attracting default fees, request hardship assistance first. Frozen interest beats any repayment strategy.
- Recheck the plan every six months. Rates move, minimums change, and a plan you never revisit is one you stop following.
What it assumes, and where it stops being accurate
- Assumes interest is charged monthly on the outstanding balance. Credit cards calculate daily and bill monthly, so the real figure will differ slightly.
- Assumes you make no new purchases on any of the debts. Continuing to spend on a card being paid down invalidates the entire projection.
- Assumes minimum payments stay fixed. Real credit card minimums fall as the balance falls, which makes minimum-only repayment even slower than shown here.
- Excludes annual fees, late fees, insurance add-ons and balance transfer fees, all of which add to the real cost.
- Excludes promotional and introductory rates. Enter the rate you will actually be paying once any honeymoon period ends.
- Stops the simulation at 600 months. If the result says over 50 years, the minimums are barely covering interest and the plan needs more than a strategy change.
Terms used on this page
- Avalanche method
- Directing every spare dollar at the debt with the highest interest rate, which minimises total interest paid.
- Snowball method
- Directing every spare dollar at the smallest balance first, which closes an account sooner and sustains motivation.
- Minimum payment
- The smallest monthly amount a lender requires to keep the account in good standing.
- Rollover
- Moving a cleared debt's payment onto the next target so the total monthly outlay never falls.
- Balance transfer
- Moving a card balance to another card offering a low or nil promotional rate for a fixed period.
Questions people ask
- Which is better, the snowball or the avalanche?
- The avalanche always costs less because it removes the most expensive interest first, but the gap is often only a few hundred dollars across a multi-year plan. The snowball closes an account sooner, which measurably improves the odds of people finishing. Run both here and pick based on the size of the actual gap for your debts.
- What counts as the minimum payment?
- It is the smallest amount your statement requires each month to avoid default fees and a credit file marker. On credit cards it is typically two to three per cent of the balance or a small dollar floor, whichever is larger. On a personal or car loan it is the contracted repayment, which does not change as the balance falls.
- Should I pay off debt or invest the money instead?
- Compare the interest rate against the return you could reasonably expect after tax. Clearing a card at twenty per cent is a guaranteed twenty per cent return with no risk, which no ordinary investment matches. Below roughly six or seven per cent the decision is genuinely arguable and depends on your tax position and your temperament.
- Does paying only the minimum ever clear the debt?
- Eventually, but slowly and expensively. On a card at around twenty per cent, minimum-only repayment typically takes the best part of a decade and the interest can exceed the original balance. Real minimums also shrink as the balance falls, which stretches the timeline further than this calculator's fixed minimums suggest.
- Is a debt consolidation loan a better option?
- It helps when the new rate is genuinely lower, the term is not much longer, and the old accounts are closed. It hurts when a five year loan replaces debts you would have cleared in two, because a lower rate over a longer term can still cost more. Compare total interest, never the monthly repayment.
- What if my minimum payments do not cover the interest?
- Then the balance grows no matter what you do and the calculator will report over 50 years. That is a hardship situation rather than a budgeting one. Contact the lender to request hardship assistance, which can pause interest or fees, and speak to a free financial counsellor before taking on any new credit.
Use this with
Debt Payoff Calculator answers one part of the question. These pick up where it stops: Credit Card Payoff Calculator, Debt Consolidation Calculator, Loan Repayment Calculator and Budget Planner Calculator.
Where these figures come from
This calculation is jurisdiction-neutral arithmetic. No country-specific rules are applied.
- Moneysmart: Managing debt. ASIC guidance on repayment order, consolidation and hardship
- Consumer Financial Protection Bureau. US research and guidance on credit card minimum payments and payoff order
- MoneyHelper. UK government-backed guidance on prioritising and repaying debts
Debt Payoff Calculator produces an estimate for general information. It is not financial, tax, medical, legal or engineering advice. read the full disclaimer. Spotted a wrong number? Report it and it gets fixed. The form picks up this calculator and the inputs you used.