Debt Avalanche Calculator

How the debt avalanche works

The avalanche method is a rule for where to send extra money. You keep paying the minimum on every debt, and you send every spare dollar to the single debt with the highest interest rate. When that debt is gone, its old payment joins the extra money and rolls onto the next highest rate. The order never changes, and the most expensive debt always gets hit first.

The reason it works is arithmetic. Interest is charged on the balance at the rate that applies to it, so a dollar sitting on a 22% debt costs more per month than the same dollar on a 15% debt. Moving a dollar from the low rate debt to the high rate debt, without changing the total you pay, lowers the interest charged this month. Lower interest means more of next month's payment goes to principal, which speeds up everything after it.

The calculator above runs the month by month loop for three debts. You enter each balance, its APR and its minimum payment, plus the extra amount you can add each month. The result is the payoff order, the months to debt-free and the total interest, shown next to the same debts run through the snowball method so you can see the difference. For background on how the CFPB suggests approaching problem debt, the CFPB debt tools are a good starting point.

Worked example: three debts and $150 extra

Here is the case the calculator opens with, and the numbers are the same ones you see on the page.

• Debt A: $5,000 at 22% APR, minimum $100
• Debt B: $800 at 15% APR, minimum $25
• Debt C: $2,000 at 19% APR, minimum $45
• Extra payment: $150 a month

The avalanche sorts by interest rate, so the order is Debt A at 22%, then Debt C at 19%, then Debt B at 15%. Run the loop and the plan clears all three in 35 months and costs $2,353.53 in interest, for a total outlay of $10,153.53 on $7,800 of debt.

Now run the same debts through the snowball, which sorts by balance and pays Debt B, then Debt C, then Debt A. The snowball takes 40 months and costs $2,960.67 in interest. The avalanche wins by $607.14 and five months, purely from the order of the payments. Nothing else changed.

The size of the win depends on how far apart the rates are and how the balances line up. When the highest rate debt is also large, the avalanche pulls ahead by more, because the expensive balance shrinks sooner and stops bleeding interest. When the highest rate debt is small, the gap narrows, and the snowball's early win costs only a little more.

Avalanche against snowball on the same debts

The table below runs the same three debts through both methods at several levels of extra payment. The avalanche column is always the lower interest figure.

Two things stand out. First, with no extra payment the two methods are identical, because minimums alone do not give you a choice about where money goes. The methods only matter once there is something extra to direct.

Second, the avalanche's advantage is largest at low extra payments and shrinks as the payment grows. At $50 a month of extra payment it saves $1,646.22, but at $300 it saves $265.96. The reason is that a bigger payment clears everything so fast that the rate differences have less time to compound. The lesson is that the order matters most for people paying slowly, which is exactly when the saving is hardest to give up.

Why the highest rate first wins the interest race

Imagine two debts, one at 22% and one at 15%, and $100 of extra money to place each month. Put it on the 22% debt and you avoid about $1.83 of interest in the first month, because $100 x 22% / 12 is $1.83. Put it on the 15% debt and you avoid $1.25. The difference is $0.58 in the first month, which sounds like nothing.

But that $0.58 stays on the balance and earns its own interest in every later month, and the effect repeats with every extra dollar you send. Over three years the small monthly edge compounds into hundreds of dollars, which is the $607.14 gap in the worked example. Small monthly advantages are the whole mechanism of compounding, working against you when you carry debt and for you when you pay it down.

The avalanche also has a hidden benefit: it targets the debt that is most likely to have the worst terms. High rate debt is often a store card or a cash advance, and clearing it removes the most dangerous balance from your file first. The Federal Reserve's consumer credit data shows how card rates have moved over the years, and the top end of that range is where the avalanche does its best work.

If your debts all carry similar rates, the avalanche and snowball finish within a month or two of each other, and the cheaper method by a few dollars may not be worth the extra discipline. In that case, pick the order that keeps you paying.

Running the avalanche in real life

The math is the easy part. Keeping the plan alive for three years is the hard part, and a few habits carry most of the weight.

• List every debt with its balance, APR and minimum, so the order is decided by numbers and not by which bill feels urgent.
• Set autopay for at least the minimum on every debt, so a missed payment cannot undo the plan or trigger a penalty rate.
• Send the extra payment to the top debt on the same day each month, right after payday.
• When a debt clears, keep the total payment the same and add the freed up minimum to the next debt.
• Build a small emergency fund first, so an unexpected bill does not send you back to the cards.

The emergency fund point is worth pausing on. A $1,000 cushion prevents the most common failure, which is paying a card down for months and then charging a car repair back onto it. A few hundred dollars set aside can protect thousands of dollars of progress.

This is an estimate, not financial, legal or tax advice. It assumes fixed rates, no new charges and the payments you enter. Real statements include fees and variable rates. For advice about your own situation, a nonprofit credit counselor or your lender is the right place to go.