Debt Payoff Calculator

The short answer

• Pay the minimum on every debt, and put every extra dollar on one target debt.
• The avalanche targets the highest APR first and always costs the least interest.
• The snowball targets the smallest balance first, so whole debts disappear sooner.
• In our example, four debts of $20,200 with $200 extra a month are cleared in 29 months either way; the avalanche saves $346.

How a debt payoff plan works

Every payoff plan uses the same three rules:

1. Set a fixed monthly budget: all your minimum payments plus whatever extra you can afford.
2. Pay the minimum on every debt each month, so nothing goes late.
3. Put everything left on one target debt. When it is paid off, its minimum joins the extra and goes to the next target.

The amount you put toward debt grows each time a debt is cleared, like a snowball rolling downhill. The only difference between the methods is which debt you target first.

The avalanche method

The avalanche lists debts from the highest interest rate to the lowest. Because each extra dollar goes where it stops the most interest, it is mathematically the cheapest way to pay off debt, and it is never slower than the snowball in total. Its drawback is that the first target may be a large balance, so it can take a while before any debt disappears.

The snowball method

The snowball lists debts from the smallest balance to the largest, whatever the rate. Clearing small debts early cuts the number of bills you juggle and gives quick wins, which many people find keeps them going. It usually costs somewhat more interest than the avalanche, and the gap grows when a large debt also has a high rate.

A worked example

Both methods start with the store card, which is both the smallest and the most expensive. After that the avalanche attacks the 24% Visa card while the snowball clears the smaller 12% personal loan first. The avalanche saves $346.

When each debt is cleared

The snowball clears a second debt nine months earlier (month 16 against 25), which is the psychological win it is known for. The avalanche pays off the expensive Visa card four months sooner, which is where its interest saving comes from.

Why rolling over minimums matters

Simply paying each minimum until each debt is gone takes 56 months and costs $6,832. Keeping the same $630 budget and rolling each cleared minimum on to the next debt cuts that to 43 months and $6,323, before you add a single extra dollar.

How much extra to pay

The extra amount matters far more than the method. Going from $0 to $200 extra saves about $2,900 of interest; choosing the avalanche over the snowball saves a few hundred more.

Which method should you choose?

• Choose the avalanche if you are motivated by numbers and your highest-rate debt is not huge.
• Choose the snowball if you have many small debts, have tried and stopped before, or need early wins to stay on track.
• If your smallest debt also has the highest rate, the two methods start the same way.

The best plan is the one you will stick with: a snowball you finish beats an avalanche you abandon.

Mixing the two

Many people clear one or two tiny balances first for momentum, then switch to the highest rate. Run both methods in the calculator and look at the difference: if it is small, choose whichever order feels better.

Listing your debts

Gather your latest statements and write down each balance, APR and minimum payment. Include credit cards, store cards, personal loans, car loans, medical bills on payment plans and private student loans. Pull your free credit reports at AnnualCreditReport.com to check you have not missed any accounts. Leave out your mortgage: it usually has a low rate and is best paid on schedule.

Typical interest rates

The Federal Reserve’s G.19 survey shows why cards are usually first in line: in August 2026 banks charged about 22% on cards that paid interest, about 11.9% on 24-month personal loans and about 7.2% on 72-month new car loans. The credit card payoff calculator looks at a single card in more detail.

Consolidation and balance transfers

A debt consolidation loan or a 0% balance transfer card can lower the rate on your most expensive debts. That helps only if the new rate, after fees, is lower and you stop adding new debt. Compare the total cost with the loan calculator, then enter the new loan here as one debt in place of the ones it replaces.

Debts to treat differently

• Federal student loans have income-driven plans and forgiveness options; see the student loan calculator before paying them early.
• Low-rate car loans and mortgages usually come last.
• Tax debts to the IRS carry penalties and interest; set up a payment plan with the IRS.
• Debts in collection: check the debt is yours and within the statute of limitations before paying.

Emergency savings first

Without some cash set aside, the next car repair goes back on a card. Many advisers suggest a starter emergency fund of about $1,000 or one month of expenses before attacking debt hard, and capturing any 401(k) employer match, which is an instant return.

Finding extra money

Look at subscriptions, insurance quotes, phone plans and eating out. Send windfalls such as tax refunds and bonuses straight to the target debt. If you usually get a big refund, adjusting your W-4 puts that money in each paycheck instead; the paycheck calculator shows the effect.

Your credit score along the way

Paying on time is the biggest part of your credit score, so never skip a minimum. As card balances fall, your credit utilization falls and your score usually rises. Avoid closing paid-off cards with no annual fee, which can raise utilization.

If the numbers do not work

If your minimums alone are more than you can pay, talk to your lenders about hardship programs, or to a nonprofit credit counseling agency about a debt management plan. Be careful with debt settlement companies: they can hurt your credit, and the FTC warns against any that charge fees before settling a debt.

When you are debt-free

1. Month 1Keep the budget

   Send the same monthly amount to savings instead.

2. Months 2 to 6Build an emergency fund

   Aim for three to six months of expenses.

3. After thatSave and invest

   Raise retirement savings and plan for big purchases in cash.

Your first month, step by step

In the example, the first month’s interest is $120.00 on the Visa card, $29.00 on the store card, $56.25 on the car loan and $40.00 on the personal loan: $245.25 in all. Your $830 budget pays the $630 of minimums, and the extra $200 goes to the target debt, the store card under both methods. Of the $830, about $585 goes to principal.

Each month the interest falls as the balances fall, so more of the same $830 goes to principal. That is why progress feels slow at first and much faster towards the end.

When the methods differ most

The gap between the two methods grows when your largest debt also has the highest rate. Take three debts: $15,000 on a card at 26% (minimum $450), $800 at 10% (minimum $30) and $2,500 at 14% (minimum $75), with $300 extra a month.

Here the snowball spends months on small, cheap debts while the 26% card keeps charging, and the avalanche saves $697.

What consolidation would do

In the main example, replacing the Visa card and store card ($7,200 in all) with a 12% consolidation loan with a $220minimum, and keeping the same $830 monthly budget, clears everything in 28 months with $2,366 of interest, against $3,422 with the avalanche. That ignores any origination fee, which can be several percent of the loan, so include it before you decide. It also only works if the paid-off cards are not used again.

Staying motivated

• Write down your debt-free date from the calculator and put it where you will see it.
• Track the total balance each month; a falling line is encouraging even when no single debt is gone.
• Celebrate each debt you clear, cheaply.
• Automate the minimums so a busy month never causes a late fee.
• Rerun the plan when something changes, such as a raise, a new rate or an unexpected bill.

Forgiven debt and taxes

If a lender cancels or settles part of a debt for less than you owe, the amount forgiven is generally taxable income, and you may get a Form 1099-C. There are exceptions, for example if you were insolvent (your debts were more than your assets) just before the debt was cancelled. Keep this in mind before agreeing to a settlement.

Bankruptcy as a last resort

If your debts are far more than you can ever repay, bankruptcy may be an option. Chapter 7 can wipe out many unsecured debts but may require selling some assets; Chapter 13 sets up a three- to five-year repayment plan. Both stay on your credit report for years, and most student loans and recent taxes are hard to discharge. Talk to a nonprofit credit counselor or a bankruptcy attorney first; you must take a credit counseling course before filing.

Debt payoff and borrowing later

Lenders look at your debt-to-income ratio, your monthly debt payments as a share of your gross income, when you apply for a mortgage or car loan. Each debt you clear lowers it. The debt-to-income calculator shows where you stand now and after each debt is gone.

Medical bills and debts in collection

Medical bills often carry no interest if you set up a payment plan directly with the hospital or provider, so they can usually sit at the end of your list. Ask about financial assistance too: nonprofit hospitals must have a written policy for patients who cannot pay. For debts in collection, ask the collector to validate the debt in writing, check that it is yours and the amount is right, and get any payment deal in writing before you pay.

Paying off debt as a couple

List both partners’ debts together and agree on one budget and one method. Joint debts are owed in full by each of you, while debts in one name are usually that person’s alone, though they still affect the household budget. Agreeing on the plan, and on how much each of you puts in, avoids arguments later. Running the calculator together with your combined debts gives you a shared debt-free date to aim for.

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