Debt Payoff Avalanche vs Snowball Calculator

Purpose and model boundary

Use this to run both debt payoff orders against the same money: highest rate first, and smallest balance first. Up to ten debts are followed month by month with their own rates and minimum payments, and the calculator reports what each order costs in interest, how long each takes, and the month each one clears its first debt, so the case for clearing a small debt early is a number rather than a claim.

It compares two orders. It does not tell you which to choose, because the early win one of them buys is worth something this model cannot price.

Inputs and units

Governing relationships

Every debt is followed month by month. Each month a debt is charged one twelfth of its annual rate on the balance standing at the start of that month, and its own minimum payment is applied.

The extra payment is a pool on top of those minimums, and the two orders differ only in where the pool goes. Under the highest rate order it goes to whichever live debt charges the most; under the smallest balance order it goes to whichever live debt owes the least. When a debt clears, its minimum payment joins the pool for the rest of the plan, which is why both orders finish faster than the minimums alone would.

The same money goes in every month under both orders, so both clear exactly the same principal. The whole of the difference between them is interest, and it comes from how long each balance is carried before the pool reaches it.

Calculation sequence

This is the order in which the reported figures depend on one another, each step traceable to what the calculator says a figure is built from. It is not a claim about the order in which the workbook evaluates its own cells.

1. Read the debts and apply the rate movement, if one was entered, to every rate at once.
2. Add the balances together to get what is owed today, which both orders will clear identically.
3. Run the plan month by month with the pool directed at the dearest live debt, recording the month each debt disappears and the interest charged along the way.
4. Run the same plan again with the pool directed at the smallest live balance instead.
5. Read off, for each order, the month everything is gone, the month the first debt is gone, and the interest paid.
6. Subtract one order's interest from the other's to get what paying the dearest first saves, and one set of months from the other to get how much longer the other order takes.
7. Rerun the dearest first plan across a grid of extra payments and rate movements, so the sensitivity of the answer to each is visible rather than asserted.

Outputs and interpretation

Model Status reads OK, or explains why the debts as listed are not a question this model can answer, or why an answer that computed deserves a second look.

The calculator also returns a grid that reruns the plan across a range of extra payments and rate movements at once. Its axes, corner and body arrive as separate values and are the grid's parts rather than results to read on their own; the page assembles them into the table.

Every figure above is returned by the model. The page arranges and formats them; it computes none of them.

Validation and status logic

These are the states the delivery's own recorded runs exercise, so the table records what this calculator has been observed to return rather than every branch it could take. A figure that moves with the inputs is shown as ….

Assumptions and limitations

• Interest on every debt is charged once a month, at its annual rate divided by twelve, on the balance at the start of the month.
• Minimum payments are held fixed at the amounts you enter. A card whose minimum falls as its balance falls will ask for less over time than this assumes, which makes the plan modelled here the faster of the two.
• The extra payment is the same every month for the whole plan.
• A cleared debt's minimum joins the pool, which is what makes either order finish sooner than the minimums alone.
• The name column is yours to read and no calculation looks at it.
• Nothing is charged to any of these accounts after today, and no fee, penalty rate or promotional rate ending is modelled.

Restrictions and non-computing states

This calculator enforces the numeric limits recorded above before either order is run, so a value outside them is refused rather than answered.

At least two debts must carry all three of their figures. With one debt there is no order to choose, and a row carrying only some of its figures is refused by number rather than quietly ignored.

The debts must be listed from the first row down with no gap between them. A filled row below a blank one is refused rather than silently skipped.

The plan is followed for a limited number of months. Where the debts do not clear inside that window the run stops there, and the status line says the months and the interest are floors rather than answers.

Errors and warnings

NOT VALID means the debts as listed are not a question this calculator can answer, and the figures beside it should not be relied on. CHECK is not an error: the arithmetic is sound and the figures stand, but something about the combination is worth knowing first, such as a debt whose minimum cannot cover its own interest. The status is shown with the results rather than in place of them, so a flagged answer is still a readable one.

A value the page itself refuses, because it falls outside the limits above, is rejected before the calculation is requested and no figures are returned at all. That is different again from a transport or service failure, where the page reports that the result could not be fetched rather than showing a stale or partial one.

Both payoff orders are defined, and both are computed from the same debts, by the US Department of Defense Office of Financial Readiness in its Debt Destroyer, which states the two methods in the same terms this calculator uses.

For a published comparison of the two orders across a real set of debts, showing how small the difference in months usually is and how the whole of the difference falls in interest, see the LendingTree debt avalanche against debt snowball study.

These sources provide background; they do not supply the calculator's assumptions or certify its result. This calculator is informational and is not financial, investment, or tax advice. Which order to follow is partly a question about what keeps you paying, and no arithmetic here can answer that half of it.