Debt Payoff Calculator

What Is a Debt Payoff Calculator?

A debt payoff calculator shows you exactly how long it will take to pay off multiple debts and how much interest you'll pay under different strategies. By entering each debt's balance, rate, and minimum payment, you can compare the mathematically optimal Avalanche method against the motivationally powerful Snowball method — and see precisely how much extra payments save.

How the Avalanche and Snowball Methods Work

Both methods start with paying minimums on all debts. The difference is where you direct any extra money:

• Avalanche: Target the debt with the highest interest rate. Once it's paid off, roll its freed-up payment toward the next highest-rate debt. This method minimizes total interest paid.
• Snowball: Target the debt with the smallest balance. Clearing it quickly creates momentum and motivation. Research shows Snowball users complete their payoff plans more often.

The Math Behind Debt Payoff

The Minimum Payment Trap

Credit card minimums are typically 1–2% of the balance. On a $5,000 balance at 20% APR, paying only the minimum would take over 20 years and cost more than $6,000 in interest. Paying just $50 extra per month cuts that to under 5 years and saves thousands. This calculator uses decreasing minimums (a percentage of remaining balance with a floor) to model real credit card behavior accurately.

Frequently Asked Questions

What is the Debt Avalanche method?

The Avalanche method directs extra payments to the debt with the highest interest rate first, while paying minimums on all others. Once paid off, you roll that payment toward the next highest-rate debt. This approach minimizes total interest paid and gets you debt-free fastest mathematically.

What is the Debt Snowball method?

The Snowball method focuses extra payments on your smallest balance first, regardless of interest rate. Quick payoffs create psychological momentum. Harvard Business Review research shows Snowball users are more likely to stick to their payoff plans — the best strategy is the one you'll actually complete.

Which is better: Avalanche or Snowball?

Avalanche saves more money mathematically — sometimes hundreds or thousands of dollars. Snowball is psychologically easier and shows higher completion rates. If your debts have similar interest rates, Snowball's motivation boost may outweigh the small interest cost. If rates vary widely (e.g., 8% car loan vs 24% credit card), Avalanche wins clearly.

What is debt-to-income ratio (DTI)?

DTI = monthly debt payments ÷ gross monthly income × 100. Lenders want DTI below 36%; above 43% makes mortgage approval difficult. Add up all monthly payments (mortgage/rent, car, student loans, credit cards), divide by gross monthly income, multiply by 100. Paying off debts directly improves your DTI.

Should I build an emergency fund before paying off debt?

Most experts recommend a small emergency fund ($1,000–$2,000) before aggressive debt payoff. Without one, any unexpected expense forces you back to credit cards, undoing progress. Build the starter fund first, then redirect everything to high-interest debt, then grow your full 3–6 month emergency fund.

Does balance transfer or debt consolidation make sense?

A 0% APR balance transfer card can save significant interest if you can pay off the transferred balance before the promotional period ends (typically 12–21 months). Debt consolidation loans work when you can get a lower rate than your current average. Both work best paired with a strict payoff plan — otherwise, running up the original accounts again negates the savings.

How does the minimum payment trap work?

Credit card minimums decrease as the balance drops — on a $5,000 balance at 20% APR, minimums start around $100/month but shrink over time. Total repayment: over 20 years and $6,000+ in interest. Adding just $50/month extra changes everything. This calculator simulates decreasing minimums accurately to show the real cost of minimum-only repayment.