Debt Payoff Calculator

The mathematically fastest method is the Avalanche method: make minimum payments on all debts, then apply any extra money to the debt with the highest interest rate. Once that's paid off, roll that payment to the next-highest rate debt. This minimizes total interest paid. The Snowball method (targeting smallest balance first) is slightly slower mathematically but provides faster psychological wins, which improves completion rates. Research by professors at Kellogg and Northwestern found that people who used the Snowball method were more likely to eliminate all their debt.

Credit card interest is calculated daily based on your average daily balance. At 20% APR: monthly rate = 20% / 12 = 1.67%. On a $10,000 balance: $167/month in interest. If you make only $250 minimum payments, only $83 goes to principal. At this pace, you'll pay $10,000+ in interest and take 10+ years to pay off the debt. The solution: pay as much as possible above the minimum each month. Even $100 extra per month can save thousands in interest and years of payments.

Avalanche: List debts by interest rate (highest first). Pay minimums on all, put every extra dollar toward the highest-rate debt. Once paid, roll that payment to the next. Result: minimum total interest paid, fastest financial payoff. Snowball: List debts by balance (smallest first). Pay minimums on all, target smallest balance with extras. Roll payments forward. Result: faster early wins, better motivation for most people. Which to use: if motivation is your challenge, choose Snowball. If math drives you, choose Avalanche. Both work — the best method is the one you'll actually follow through on.

The decision depends on interest rates: If debt rate > 7% (credit cards, personal loans): pay off debt first — guaranteed return equal to the interest rate. If debt rate is 4–7% (some student loans, car loans): do both — split extra money between investing and debt paydown. If debt rate < 4% (some mortgages, subsidized student loans): invest first — long-term stock market returns (historically ~10%) likely exceed these low rates. Always: 1) Make minimum payments on all debts. 2) Contribute enough to 401k to get full employer match (free money). 3) Build 3-month emergency fund. 4) Then choose invest vs. accelerated payoff based on rates.

A realistic plan for $20,000 at 20% APR: Step 1: Stop adding new charges. Step 2: List all income and expenses — find every possible dollar to redirect to debt. Step 3: Apply for a 0% balance transfer card (if credit score allows) — saves hundreds in interest while paying down principal. Step 4: Make every payment on time (protect your credit score for future steps). Step 5: Apply any extra income (overtime, bonuses, side income) directly to balance. At $700/month total payment: paid off in ~39 months, total interest ~$7,000. At $1,000/month: paid off in ~25 months, interest ~$4,500.