💳Debt Payoff Calculator

Step-by-Step Guide:

1. Add your debts: Enter the balance, interest rate, and minimum payment for each debt.
2. Set your budget: How much can you put toward debt each month?
3. Choose your strategy: Avalanche (highest rate first) or Snowball (smallest balance first).
4. Review your results: See how long it will take and how much interest you'll pay.

Debt Avalanche Method (Highest Rate First)

With the avalanche method, you pay the minimum on all debts and put any extra money toward the debt with the highest interest rate. Once that's paid off, you move to the next highest rate.

• Pros: Saves the most in interest, mathematically optimal
• Cons: May take longer to get first "win" of paying off a debt

Debt Snowball Method (Smallest Balance First)

With the snowball method, you pay the minimum on all debts and put any extra money toward the debt with the smallest balance. This creates quick "wins" that build momentum.

• Pros: Quick psychological wins, builds momentum and motivation
• Cons: Pays more in total interest than avalanche method

Compound vs Simple Interest

Most credit card debt uses daily compound interest, which means you pay interest on interest. If you have a $5,000 balance at 18% APR, you don't just pay $900 per year - you pay more because interest is added to your balance daily.

The Minimum Payment Trap

Paying only the minimum can make a $5,000 debt take over 20 years to pay off and cost more than $10,000 in interest. Minimum payments are designed to maximize creditor profits, not to help you become debt-free.

1. Automate Your Payments

Set up automatic transfers on payday to ensure you never miss a payment or get tempted to spend the money elsewhere.

2. Use Windfalls for Debt

Tax refunds, bonuses, gifts - put unexpected income directly toward debt. A $2,000 bonus can eliminate a small debt entirely.

3. Stop Creating New Debt

Put credit cards away or literally freeze them in a block of ice. You can't get out of a hole while you keep digging.

4. Consider Consolidation or Balance Transfer

If you have good credit, a 0% balance transfer card or lower-rate consolidation loan can accelerate your payoff. But watch out for transfer fees.

Should I pay off debt or invest?

Generally, pay off debt with interest rates above 7-8% first. Investments historically return about 7-10%, so credit card debt (15-25%) should always be paid first. Keep only a small emergency fund while attacking high-interest debt.

How much of my income should I use for debt payoff?

The 50/30/20 rule suggests 20% for savings/debt, but if you have high-interest debt, consider temporarily using 30-40% until you're debt-free. The more aggressive you are, the faster you'll be free.

What if I can't afford the minimum payments?

Contact your creditors immediately. Many offer hardship programs that temporarily reduce rates or payments. Also consider nonprofit credit counseling - they can negotiate on your behalf.