Why use this calculator
Throwing extra money at debt without a strategy can cost you thousands in unnecessary interest. The Avalanche method (highest rate first) minimises total interest paid, while the Snowball method (smallest balance first) provides quick psychological wins. This calculator shows both options so you can choose.
How to use it
Enter your extra monthly payment (the amount above your minimums), choose your method, then fill in your debt details — balance, interest rate, and minimum payment. Include only active debts with a balance greater than zero.
The formula
Avalanche: extra payment goes to highest-rate debt first. Snowball: extra payment goes to smallest balance first. Each month: interest accrues, minimums paid on all, extra applied to target debt. Cycle repeats until all balances reach zero.
Worked examples
$8k CC at 20%, $4k personal at 12%, $2.5k car at 6%, $200 extra — Avalanche
Debt-free in ~34 months, ~$3,200 total interest
Same debts, Snowball method
Debt-free in ~36 months, ~$3,600 total interest — 2 extra months but early wins
When people use it
- Getting out of credit card debt
- Paying off multiple personal loans
- Comparing payoff strategies
- Motivating yourself with a debt-free date
Tips
- The Avalanche method saves the most money mathematically — use it if you're disciplined
- The Snowball method works better if you need motivation from quick wins
- Even $50 extra per month dramatically reduces payoff time and interest
- Once a debt is paid off, roll the full payment into the next debt
- Consider a balance transfer to a 0% card to reduce interest while paying off debt
Questions people ask
- Which method is better — Avalanche or Snowball?
- Mathematically, the Avalanche method (highest interest first) saves more money. Behaviourally, the Snowball method (smallest balance first) works better for many people because early wins build momentum. Choose based on your personality.
- What counts as a 'minimum payment'?
- The minimum payment is the smallest amount you can pay each month without penalty. For credit cards, it's typically 2-3% of the outstanding balance or $25, whichever is greater. Check your statement.
- Should I pay off debt or invest?
- If your debt interest rate is higher than your expected investment return (roughly 7% for shares), pay off debt first. Credit card debt at 20% is a guaranteed 20% return when eliminated. HECS debt at 0% real return should be lowest priority.