Getting out of debt requires a solid strategy and commitment. This calculator helps you compare two popular debt repayment methods and create a realistic plan for becoming debt-free.
Debt Avalanche Method
The Debt Avalanche method prioritizes paying off debts with the highest interest rates first. This approach minimizes the total amount of interest you'll pay and typically results in becoming debt-free faster. Here's how it works:
- Make minimum payments on all debts
- Put extra money toward the debt with the highest interest rate
- Once a debt is paid off, roll its payment into the next highest-interest debt
- Continue until all debts are paid
Debt Snowball Method
The Debt Snowball method focuses on paying off your smallest debts first, regardless of interest rates. While this may result in paying more interest overall, it provides psychological wins that can help maintain motivation. Here's the process:
- List debts from smallest to largest balance
- Make minimum payments on all debts
- Put extra money toward the smallest debt
- After paying off a debt, add its payment to the next smallest debt
- Repeat until debt-free
Tips for Successful Debt Payoff
- Stop taking on new debt while paying off existing debt
- Create and stick to a budget
- Look for ways to increase income or reduce expenses
- Consider debt consolidation if you qualify for lower interest rates
- Build an emergency fund to avoid new debt
- Track your progress and celebrate milestones
Understanding the Results
The calculator provides several key pieces of information to help you plan your debt payoff journey:
- Total Debt: The sum of all your current debt balances
- Time to Debt Free: How long it will take to pay off all debts with your chosen strategy
- Total Interest Paid: The total amount you'll pay in interest over the payoff period
- Debt Free Date: The estimated date when you'll be completely debt-free
- Payment Breakdown: How to allocate your monthly payment across your debts