Debt Payoff Calculator
Comparison utility for Debt Snowball vs. Debt Avalanche repayment strategies
The Debt Payoff Calculator is a financial simulation tool designed to determine the optimal strategy for eliminating multiple unsecured liabilities. It compares two primary algorithms: the Debt Snowball (lowest balance first) and the Debt Avalanche (highest interest rate first). By inputting loan details and an additional monthly budget, users can visualize the impact of "rollover" payments on their debt-free timeline.
Calculator Tool
Liability Inputs
Payoff Projection
Strategy Analysis
Debt Snowball
The Debt Snowball method prioritizes debts based on their principal balance, from smallest to largest. Mathematical efficiency is disregarded in favor of behavioral psychology. By eliminating small debts quickly, the debtor gains "momentum" (psychological reinforcement), which increases the likelihood of adhering to the repayment plan over the long term. Research in consumer behavior suggests that for many individuals, this tangible progress is more valuable than interest savings.
Debt Avalanche
The Debt Avalanche method is mathematically optimal. It prioritizes debts based on interest rates (APR), from highest to lowest. By attacking the most expensive debt first, the total interest accrual is minimized. This method is recommended for disciplined borrowers who are motivated by financial efficiency rather than the number of closed accounts.
Calculation Methodology
This utility uses a discrete-time simulation (monthly iteration) rather than a simple amortization formula. This is necessary because the payment amount for specific debts changes dynamically as other debts are paid off and their minimum payments are "rolled over" into the active debt.
The logic follows the principle of Cash Flow constancy:
In every iteration (month), interest is calculated as I = P × (r / 12). The total budget is then applied. Minimums are satisfied first, and the remaining budget is allocated entirely to the priority debt determined by the chosen strategy.
For analyzing specific credit card scenarios, refer to the Credit Card Payoff Calculator or evaluate the long-term cost of minimums with the Minimum Payment Calculator. Alternatively, if you are considering combining liabilities into a single loan, use the Debt Consolidation Savings Estimator.