Debt Elimination Calculator - Avalanche or Snowball Method

Use this calculator to compare the benefit of using avalanche and snowball debt payoff method.

Index

This tool helps answer :

If I am disciplined to repay my debt in fixed amount, should I use avalanche (pay highest interest rate first) or snowball method (pay smallest balance first)?
If I accumulate significant savings from a bonus or lump-sum benefit recently, should I use avalanche or snowball method to repay the debt?
Should I still prepay my laon (such as mortgage) to be debt-free early, even if the loan interest rate is lower than investment yield?

Outstanding debts
	Loan #1	Loan #2
Is credit card debt
Current balance
APR (interest rate)
Remaining term	months	months
Scheduled monthly payment If this is credit card debt, this amount will be the minimum payment required, usually 1% of balance or $25 (whichever is more), plus the accrued interest.
Select to prepay

Prepayment settings

1. Input your monthly saving after all living expenses, before paying back any debts : .

Based on debt inputs above, the total scheduled minimum monthly debt payment is .
So, given your monthly saving, you may have left for extra debt elimination.

2. Next, input the monthly extra debt repayment you want to make : . This is in addition to the scheduled minimum payment.

3. Besides, input an one-time prepayment, if any, you want to make : . This will only be done once and within this month. For example, this can be out of your current savings or a salary bonus to be received soon.

4. Assume an investment yield on savings : . This is the expected annual investment yield you assume to generate if you don't make extra debt payment, and instead use the money for investment.
Depending on your investment preference, 3% ~ 10% is reasonable. For example, certificate of deposit is around 3 to 5%, bond investment is around 4 to 6%, and stock investment is around 6 to 10%.

Debt payoff strategies
	Avalanche	Snowball	No Prepayment
Priority to pay first	Highest-interest debt	Lowest-balance debt	No extra payment
Months to pay off
Years to pay off
Total amount paid
Total interest saved
Total investment contributed (1)
Total investment income earned (2)
Wealth accumulated at the end = (1) + (2)

Wealth Accumulated in Each Strategy

Accumulated Wealth Higher / Lower than No Prepayment

How to use this tool to choose the debt elimination method

The tool features a debt payoff calculator that compares the two most popular debt repayment strategies:

Avalanche - pay off high-interest debt first
Snowball - pay off the smallest balance first

It also shows you the financial impact side-by-side in a chart. To use the tool, follow these steps:

Enter the Information of Your Debts
Select two debts (either credit cards or loans) you want to eliminate, input the current balance, interest rate (APR), remaining term in months, and scheduled monthly payment will be calculated automatically.
Prepayment Settings
Enter your monthly savings in cash after deducting all living expenses before considering any debt payment. Next, the scheduled debt payment is automatically summed up from those two loans. If the scheduled debt payment is greater than your monthly savings, you are unlikely to have more cash to make a prepayment. If you have extra savings left, enter the monthly amount you plan to allocate toward the extra debt payoff and input any one-time prepayment (e.g., from the bonus received).
Investment Yield Settings
Choose an investment yield if you alternatively save the cash for investment rather than make more debt repayment. In some circumstances, when your expected investment yield is higher than any interest rate of your debts, it makes more financial sense not to pay off any debts earlier. For example, when your credit card APR is zero in the promotional period or your mortgage rate is very low, saving your cash in higher yield CD or Treasury Bills can earn more interest than the interest charged on your debts.
View Results of Calculation
The calculator will display how long it will take to pay off the debt, total payments, and interest savings for each strategy.
Check the Accumulated Wealth
In the chart of "Accumulated Wealth Higher / Lower than No Prepayment", the blue line is the savings of using the Avalanche method minus the savings of no prepayment, and the red line is the savings of using the Snowball method minus the savings of no prepayment. The blue line is always better than the red line because you can always save more interest in the Avalanche method than in the Snowball method. However, there is another catch in this chart. When you see the ultimate savings in the Avalanche method are negative (less than 0) in the long term, in this case, the prepayment doesn't create more savings than no prepayment. This is because your investment yield is higher than the interest rates of your debts. You may need to reconsider if it's worth it to repay the loan more than the scheduled amount.
Choose a Payoff Strategy
Whether you want to go with "Avalanche" (pay off high-interest debt first) or "Snowball" (pay off the smallest balance first), or not even prepay any debts at this moment. You should determine which strategy is best based on your situation, preference, and persistence.

However, We recommend prioritizing the repayment of credit card debt, especially if the promotional 0% APR period has ended. These balances often carry interest rates of 25% or more, which are typically higher than the returns you can expect from most investments. Once your credit card balances are fully paid and your remaining debts carry lower interest rates, such as a mortgage at 4%, you may want to consider whether it's more beneficial to allocate extra cash toward investing for potentially higher returns rather than to continue to pay off all the debts.