Debt Payoff Calculator

The order of repayment matters, but only after three earlier decisions are made. Skipping straight to avalanche-versus-snowball is the most common reason plans fail.

1. List every debt with its balance, rate and minimum. A plan built from memory is not a plan. Include store cards, personal loans and any family borrowing you intend to repay.
2. Note which debts are secured. A mortgage or car loan can result in repossession; a credit card cannot. Secured obligations generally come first regardless of rate.
3. Set one total monthly amount you can commit reliably - then keep it constant. The strategy decides how it is split; the discipline decides whether it happens at all.
4. Build a small buffer first. Even $1,000 aside prevents an unexpected bill from becoming new debt and restarting the cycle.

Note. The difference between the two best-known strategies is measured in hundreds of dollars over several years. The difference between a plan you follow and one you abandon is measured in thousands. Choose accordingly.

Consolidation replaces several debts with one. Whether it saves money depends entirely on the new rate, the new term, and what happens to the old accounts.

The saving is real if the cards are actually closed or paid off. The failure mode is well documented: the consolidation loan clears the cards, the cards are then used again, and the borrower ends up servicing both.

• Check the rate is fixed. A variable consolidation loan can end up above the cards it replaced.
• Count the fees. Origination fees of 1-6% reduce the benefit.
• Do not extend the term to lower the payment without noticing the effect on total interest.
• Keep the cards open but unused only if that genuinely suits you - closing them reduces available credit and may affect your profile, but leaving them open and running them up is worse.

The question is not only which debt to clear first, but whether to clear it at all versus investing the same money.

• Guaranteed return. Paying off a 21% card is a guaranteed, tax-free 21% return. No investment offers that reliably.
• Interest is certain; investment returns are not. A 7% expected market return against a guaranteed 7% debt cost is a coin toss on the debt side and a gamble on the investment side - the debt wins on risk-adjusted logic.
• Employer match is different. Contribute enough to capture a full match before accelerating debt - that is an immediate return no repayment can beat.
• Emergency fund precedes both. Without a buffer, either plan is fragile.
• Behaviour counts. A borrower who clears a balance and stops accumulating new debt will win eventually either way. A borrower who keeps revolving will not be saved by an optimised allocation.

There is a practical hybrid: clear any balance under about one month's payment immediately for the psychological win, then switch to avalanche for the remainder. That captures most of the motivational benefit at almost none of the cost.

1. Automate the payment so the commitment happens before the money can be redirected.
2. Re-run the calculator after any change - a cleared debt, a rate change, or a windfall all alter the optimal split.
3. Redirect cleared payments. When one debt is finished, do not absorb its payment into spending; move it to the next target. This is what makes the final stage accelerate.
4. Treat windfalls consistently. Decide in advance what share of bonuses and refunds goes to debt, so the decision is not made under pressure.
5. Do not celebrate with borrowing. The single most reliable way to undo a payoff plan is a new financed purchase on a cleared card.
6. Review the plan quarterly. A plan that has not changed in two years has probably drifted from reality.