Debt Avalanche Calculator

How The Debt Avalanche Method Works

The Debt Avalanche Calculator is designed to show what happens when you attack your most expensive debts first. Instead of spreading extra money evenly or focusing on the smallest balances, the avalanche method orders your debts by interest rate and uses your extra monthly payment where it has the biggest impact on finance charges.

The calculator simulates two scenarios: paying only the minimum required on each debt, and using the avalanche strategy with a fixed extra monthly payment. It then compares payoff times and total interest across both approaches so you can see how much faster and cheaper the avalanche method can be.

Step 1: Convert APR To Monthly Interest Rate

Each debt has an annual percentage rate (APR). To model monthly compounding, the calculator converts this APR to a monthly rate. If r_annual is the APR expressed as a decimal, the monthly rate r_m is:

Since APR is normally entered as a percentage, the calculator first divides by 100 to convert to a decimal, then divides by 12. For example, 18% APR corresponds to a monthly rate of:

Step 2: Monthly Interest And Balance Update

For each month and each active debt with balance B, the monthly interest added is:

The calculator adds this interest to the balance before applying that month’s payments:

This process is repeated month after month until all balances reach zero in both the minimum-payment and avalanche scenarios.

Step 3: Minimum Payment Scenario (Baseline)

In the baseline scenario, you pay only the minimum on each debt every month. If M_i is the minimum payment for debt i, then the principal reduction for that debt in a given month is:

The calculator caps the payment at the remaining balance when you near payoff, so you never pay more than what you owe. Over time it tracks:

• The number of months until every balance reaches zero
• The total amount paid across all debts
• The total interest paid, calculated as total paid minus initial total balances

Step 4: Extra Payment And The Avalanche Order

For the avalanche scenario, you choose a fixed extra monthly payment E on top of your total minimums. The calculator uses the following logic for each month:

• Compute monthly interest and update balances for all active debts.
• Apply each debt’s minimum payment M_i to its updated balance.
• Order remaining debts by interest rate from highest to lowest.
• Apply the extra amount E to the highest rate debt until it is paid off or the extra is used up.
• If extra remains and the highest rate debt is gone, move on to the next highest APR debt in the list.

This behaviour can be summarized as: minimums everywhere, then extra to the highest rate debt. Mathematically, if D is the set of debts sorted by APR in descending order, the extra payment is allocated in that order while balances are positive.

Step 5: Total Interest And Interest Saved

Let I_min be the total interest paid when you make minimum payments only, and I_ava be the total interest paid using the avalanche method. The calculator defines interest saved as:

These quantities are computed by accumulating the interest charges each month in both simulations and comparing their totals when all debts are paid off.

Step 6: Payoff Time And Time Saved

If N_min is the number of months it takes to pay off all debts with minimums only and N_ava is the number of months with the avalanche strategy, then the time saved is:

The calculator converts these month counts into whole years and remaining months so you can see, for example, that the avalanche method might turn a 12-year payoff into a 7-year and 8-month payoff.

How To Use The Debt Avalanche Calculator

• List each debt with its current balance, APR and minimum payment.
• Set any row you do not use to a balance of zero so it is ignored.
• Enter the extra monthly amount you can put toward your debts in addition to required minimums.
• Click calculate to simulate both the minimum-only and avalanche payoff paths.
• Review the total payoff time, total interest and savings from using the avalanche method.

Why The Avalanche Method Can Save More Interest

High-interest debts charge more for every dollar of balance. By focusing extra payments on the highest APR first, you reduce the balance that generates the most interest. This shrinks future interest charges, frees up more money to attack the next debt and can create a strong compounding effect in your favor.

Although the avalanche method may not always deliver the psychological win of quick small-balance payoffs, it is mathematically efficient at minimizing total interest cost across your entire debt stack.

Tips For Making The Most Of Your Avalanche Plan

• Verify lender minimum payment rules so you always stay current while using the avalanche strategy.
• Consider directing windfalls, bonuses or tax refunds to your current highest-interest debt to accelerate the process even further.
• Revisit your debts periodically to adjust for balance changes or rate changes, especially with variable APR credit cards.
• Keep your extra monthly payment consistent whenever possible, since the avalanche method gains power through steady pressure on your highest-cost debt.