Debt Payoff Calculator
Create a debt-free plan using the Avalanche or Snowball method. See exactly when you'll be debt-free.
Pay highest interest rate first. Saves the most money mathematically, but requires patience.
Add your first debt above to see your payoff plan
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What is Debt Payoff Planning?
Debt payoff planning is like creating a roadmap to financial freedom. Instead of randomly throwing money at bills, you strategically attack your debts in an order that either saves you the most money (Avalanche) or keeps you motivated with quick wins (Snowball).
The average American has $90,000+ in debt. Without a plan, you might pay tens of thousands in extra interest over your lifetime.
Avalanche vs Snowball Method
๐๏ธ Avalanche Method (Mathematically Optimal)
- Pay minimums on all debts
- Put all extra money toward the highest interest rate debt
- Once paid off, roll that payment to the next highest rate
โ๏ธ Snowball Method (Psychologically Optimal)
- Pay minimums on all debts
- Put all extra money toward the smallest balance debt
- Once paid off, roll that payment to the next smallest
Studies show that people using the Snowball method are more likely to actually become debt-free because the quick wins keep them motivated. The "best" method is the one you'll stick with!
Real Example: $20,000 in Debt
Let's say you have:
- Credit Card A: $5,000 @ 22% APR, $150 min
- Credit Card B: $8,000 @ 18% APR, $200 min
- Car Loan: $7,000 @ 6% APR, $250 min
With $200 extra per month:
| Method | Time to Debt-Free | Total Interest |
|---|---|---|
| Avalanche | 36 months | $4,847 |
| Snowball | 37 months | $5,123 |
| Minimum Only | 68 months | $11,240 |
Avalanche saves $276 in this example, but takes the same time. The real win? Both save $6,000+ compared to minimums only!
The Power of Extra Payments
Even small extra payments create a snowball effect:
| Extra Payment | Time Saved | Interest Saved |
|---|---|---|
| $50/month | 8 months | $1,200 |
| $100/month | 14 months | $2,100 |
| $200/month | 22 months | $3,400 |
| $500/month | 32 months | $5,800 |
Before making extra payments, make sure you have a small emergency fund ($1,000). Otherwise, one unexpected expense could put you right back into debt.
Smart Strategies to Pay Off Debt Faster
1. The "Found Money" Rule Tax refund? Work bonus? Gift money? Put at least 50% toward debt. You won't miss money you never had.
2. Bi-Weekly Payments Instead of 12 monthly payments, make 26 half-payments. That's one extra full payment per year!
3. Round Up Payments If your minimum is $147, pay $150 or $200. Small amounts add up.
4. The Debt Audit Call your credit card companies and ask for a lower rate. If you have good payment history, many will reduce your APR by 2-5%.
5. Balance Transfer (Use Carefully) 0% APR balance transfer cards can save thousands โ but only if you pay it off before the promotional period ends. Otherwise, you could end up worse off.
Debt Payoff Mistakes to Avoid
โ Mistake 1: Closing Paid-Off Cards This hurts your credit score. Keep cards open but cut them up if tempted.
โ Mistake 2: Not Having a Budget Without tracking spending, you might accumulate new debt while paying off old debt.
โ Mistake 3: Paying Off Lowest Interest First Unless using Snowball intentionally, this costs you the most money.
โ Mistake 4: Ignoring 401(k) Match If your employer matches 401(k) contributions, that's 50-100% instant return. Don't skip this even while paying off debt (unless it's very high interest).
โ Mistake 5: Going Too Aggressive Putting every penny toward debt with no fun money leads to burnout. Budget a small amount for sanity.
When You're Debt-Free
Once you pay off all debt, redirect those payments to:
- 6-month emergency fund
- Retirement savings (15% of income)
- Other goals (house, travel, etc.)
You'll be amazed how fast wealth builds when you're not paying interest to banks!