About the debt snowball vs avalanche calculator
Both methods pay every minimum each month and put the rest of the budget, including the minimums freed as debts are cleared, on one target debt. The snowball targets the smallest balance first; the avalanche targets the highest interest rate first. Both run month by month on the same budget, and the result compares months to debt-free, total interest and the order in which the debts disappear.
With the four default debts and 200 extra, a budget of 910 a month, the avalanche finishes in 31 months with 4,342.45 of interest and the snowball in 32 months with 4,824.18, so the avalanche saves 481.73. The snowball clears its first debt, the store card, in month 6; the avalanche clears its first, the credit card, in month 23.
Interest is added monthly at rate ÷ 12 and each minimum stays fixed. Minimums that fall with the balance, fees and new borrowing are not modeled.
Questions
Which is better, the debt snowball or the debt avalanche?
The avalanche usually costs less interest, because every extra payment goes to the most expensive debt. The snowball clears individual debts sooner, which some people find easier to keep up. With the default debts the avalanche saves 481.73 and one month, while the snowball's first payoff comes in month 6 instead of month 23. If the smallest balance also has the highest rate, the two orders are the same.
How does the debt snowball method work?
List your debts from smallest to largest balance, pay the minimum on all of them, and put every extra amount on the smallest. When it is paid off, add its payment to the next one. With 200 extra a month, the defaults clear the 1,200 store card in month 6, the 4,000 personal loan in month 16, the 7,500 credit card in month 28 and the 11,000 car loan in month 32.
How does the debt avalanche method work?
Order your debts by interest rate, highest first, pay every minimum, and send the extra to the top of the list; when a debt is cleared, its payment moves to the next highest rate. In the default example the 24.9% credit card is cleared in month 23, the 19.99% store card in month 24, the 13.5% personal loan in month 27 and the 6.9% car loan in month 31.
How much does an extra payment speed up debt payoff?
A lot, because the extra goes straight to principal and compounds as payments roll over. The default minimums total 710 a month and clear all four debts in 45 months with 7,576.90 of interest using the avalanche. Adding 200 a month cuts that to 31 months and 4,342.45; adding 400 cuts it to 25 months and 3,164.64.
Why roll a paid-off debt's payment into the next one?
Keeping the total payment constant is what makes both methods work. If each default debt were paid only by its own minimum, the last one, the credit card, would take 58 months and the interest would total 8,098.73. Rolling freed minimums forward with no extra money clears everything in 45 months with 7,576.90 of interest.
How accurate is the debt snowball vs avalanche calculator?
Accuracy depends on your inputs and the method's assumptions. Decimal arithmetic uses 50 significant digits, but estimates, numerical methods and source data can be less precise; the displayed rounding does not remove those limits. It is checked against 4 worked examples whose answers come from independent sources; for example, “Four debts with 200 extra” is checked against Python decimal (prec 50) month-by-month simulation of both strategies with a constant budget.
Where does the method come from?
Consumer Financial Protection Bureau — How to reduce your debt (snowball and highest-interest-rate methods); FDIC — How to dig out of debt? Grab more than one shovel.