How the debt payoff plan works
The plan assumes you pay the same total every month — all your minimum payments plus any extra — until every debt is gone. Each month, every debt gets its minimum, and the extra goes to one target debt. When a debt is paid off, its minimum payment isn’t spent elsewhere: it joins the extra and goes to the next debt. This rollover is what makes the plan speed up over time.
The two methods differ only in which debt they target first:
- Avalanche — highest interest rate first. It keeps the most expensive balances shortest, so it costs the least in interest.
- Snowball — smallest balance first. Small debts disappear quickly, which some people find keeps them motivated, but it usually costs more interest.
The Consumer Financial Protection Bureau describes both approaches and suggests weighing the pros and cons to find the one that works for you. The calculator shows both side by side, plus what happens if you only ever pay the minimums.
The monthly calculation
For each debt that still has a balance, every month:
Interest = balance × APR ÷ 12
Budget = sum of all minimum payments + extra payment
- APR
- annual percentage rate as a decimal (23.9% → 0.239)
- Budget
- the fixed amount you pay across all debts each month
- Add the month’s interest to each balance, rounded to the cent.
- Pay each debt its minimum, or its whole balance if that is smaller.
- Send what is left of the budget to the target debt — highest APR (avalanche) or smallest balance (snowball). If that clears it, the remainder goes straight to the next debt in line.
- Repeat until every balance is zero.
The order is set from the balances and rates you enter. Ties are broken by the other rule (a lower balance wins an APR tie, a higher APR wins a balance tie).
Worked example
Four debts totalling $22,400, with $665 in minimums and $200 extra, so $865 a month:
- Credit card: $6,000 at 23.9%, minimum $180
- Personal loan: $3,500 at 11%, minimum $115
- Car loan: $12,000 at 6.9%, minimum $320
- Medical bill: $900 at 0%, minimum $50
- First month’s interest on the credit card: $6,000 × 23.9% ÷ 12 = $119.50
- Avalanche (card → personal loan → car → medical bill): debt-free in 30 months, total interest $3,110.14. The medical bill is cleared by its own minimums in month 18, the card in month 20, the personal loan in month 23 and the car in month 30.
- Snowball (medical bill → personal loan → card → car): debt-free in 31 months, total interest $3,646.69. The first debt is gone in month 4.
- Avalanche saves $536.55 in interest and one month.
- Paying only the minimums would take 56 months and cost $6,129.62 in interest.
Choosing a method
- The gap is often small. When rates are similar or the extra payment is large, both methods finish close together. When one debt has a much higher rate, avalanche pulls ahead.
- Sticking with the plan matters most. Either method with rollover beats paying minimums. If quick wins help you keep going, the extra interest of snowball can be a price worth paying.
- Stop adding new debt. The plan assumes no new charges. New spending on a card you are paying down pushes the debt-free date back.
- Look at the rates, too. A lower rate from a balance transfer or consolidation loan can help, but check the fees and the rate after any promotional period.
Other tools
For one card and a target date, try the credit card payoff calculator. For an installment loan’s schedule, use the loan calculator. Once the debts are gone, the savings calculator shows what the same monthly amount could build.
Limitations
- Credit cards usually charge a daily rate on the average daily balance and recalculate the minimum payment as the balance falls. The calculator keeps each minimum fixed, which is the usual way to follow a payoff plan, so real interest will differ slightly.
- Rates are assumed fixed. Promotional 0% rates that end, or variable rates, change the result.
- Late fees, annual fees and penalty rates are not included.
Frequently asked questions
Is the debt avalanche or debt snowball better?
Avalanche, which targets the highest interest rate first, costs less interest in nearly every case. Snowball, which targets the smallest balance first, gives earlier wins that can help people stay motivated. The best choice is the plan you will actually follow; the calculator shows how much the difference is for your debts.
What does rolling over a payment mean?
When one debt is paid off, you keep paying the same total each month and send that debt’s former minimum payment to the next debt. The amount going to each new target grows as debts disappear, which speeds up the whole plan.
Why does the calculator say my minimum payment is too low?
If the minimum payment is not more than the first month’s interest, the balance never falls and the debt can never be paid off by minimums alone. Check the minimum and the APR on your statement.
Should I include my mortgage?
Most people leave the mortgage out and focus on consumer debts such as cards, personal loans and car loans, because mortgage rates are usually lower and the term much longer. You can include it, but it will almost always come last in both methods.
How much does paying extra each month help?
In the worked example, $200 a month on top of $665 in minimums, with rollover, clears $22,400 of debt in 30 months instead of 56 and saves about $3,000 in interest compared with paying only the minimums.
Sources
Last reviewed September 19, 2026