Debt Reduction Calculator
Use this calculator to compare the Debt Snowball and Debt Avalanche strategies for paying off multiple debts. Enter your current debt details and any additional amount you can pay each month to see how quickly you can become debt-free and how much interest you can save.
Debt 1
Debt 2
Debt 3
Debt Snowball Strategy
Total Interest Paid: $0.00
Time to Pay Off: 0 months
Debt Avalanche Strategy
Total Interest Paid: $0.00
Time to Pay Off: 0 months
Debt ${debtCounter}
`; debtInputsDiv.appendChild(newDebtGroup); } function removeDebt(id) { var debtGroup = document.getElementById('debtGroup' + id); if (debtGroup) { debtGroup.parentNode.removeChild(debtGroup); } } function calculateDebtReduction() { var debts = []; var errorMessage = document.getElementById('errorMessage'); errorMessage.textContent = "; for (var i = 1; i <= debtCounter; i++) { var debtGroup = document.getElementById('debtGroup' + i); if (!debtGroup) continue; // Skip if debt group was removed var balanceInput = document.getElementById('debt' + i + 'Balance'); var aprInput = document.getElementById('debt' + i + 'APR'); var minPaymentInput = document.getElementById('debt' + i + 'MinPayment'); var balance = parseFloat(balanceInput.value); var apr = parseFloat(aprInput.value); var minPayment = parseFloat(minPaymentInput.value); if (isNaN(balance) || isNaN(apr) || isNaN(minPayment) || balance < 0 || apr < 0 || minPayment 0 && minPayment 0) { // Only include debts with a positive balance debts.push({ id: i, balance: balance, apr: apr, minPayment: minPayment }); } } if (debts.length === 0) { errorMessage.textContent = 'Please add at least one debt with a positive balance.'; return; } var additionalPaymentInput = document.getElementById('additionalPayment'); var additionalPayment = parseFloat(additionalPaymentInput.value); if (isNaN(additionalPayment) || additionalPayment < 0) { errorMessage.textContent = 'Please enter a valid positive number for Additional Monthly Payment.'; return; } // Calculate total minimum payments var totalMinPayments = debts.reduce(function(sum, debt) { return sum + debt.minPayment; }, 0); if (additionalPayment + totalMinPayments 0) result.push(years + (years === 1 ? ' year' : ' years')); if (months > 0) result.push(months + (months === 1 ? ' month' : ' months')); return result.join(' and '); } function simulateDebtPayments(initialDebts, initialExtraPayment, strategy) { var debts = JSON.parse(JSON.stringify(initialDebts)); // Deep copy to avoid modifying original array var totalInterestPaid = 0; var months = 0; var currentExtraPaymentPool = initialExtraPayment; // This pool grows with freed-up minimums while (true) { months++; var totalBalanceRemaining = 0; var freedUpMinimumsThisMonth = 0; // Minimums freed up *this month* // Step 1: Calculate interest for the month and add to balances for (var i = 0; i 0) { var monthlyInterestRate = debts[i].apr / 12 / 100; var interestOnDebt = debts[i].balance * monthlyInterestRate; debts[i].balance += interestOnDebt; // Add interest to balance totalInterestPaid += interestOnDebt; // Accumulate total interest paid } } // Step 2: Apply minimum payments to all active debts for (var i = 0; i 0) { var paymentToApply = debts[i].minPayment; // Ensure we don't overpay a debt with its minimum payment if balance is less paymentToApply = Math.min(paymentToApply, debts[i].balance); debts[i].balance -= paymentToApply; if (debts[i].balance 0; }); if (strategy === 'snowball') { activeDebts.sort(function(a, b) { return a.balance – b.balance; }); } else if (strategy === 'avalanche') { activeDebts.sort(function(a, b) { return b.apr – a.apr; }); } for (var i = 0; i < activeDebts.length; i++) { if (remainingExtraPayment <= 0) break; // No more extra payment to distribute var debt = activeDebts[i]; var paymentAmount = Math.min(debt.balance, remainingExtraPayment); debt.balance -= paymentAmount; remainingExtraPayment -= paymentAmount; // If a debt is paid off by the extra payment, its minimum payment is freed up *immediately* for the *next* debt in the same month if (debt.balance <= 0) { remainingExtraPayment += debt.minPayment; // Add its minimum payment to the pool for the *current* month's extra payment application debt.balance = 0; } } // Step 5: Check for termination totalBalanceRemaining = 0; for (var i = 0; i < debts.length; i++) { totalBalanceRemaining += debts[i].balance; } if (totalBalanceRemaining 1200) { // Safety break for extremely long payoff periods (100 years) // console.log("Calculation exceeded 100 years. Stopping."); break; } } return { totalInterestPaid: totalInterestPaid, monthsToPayOff: months }; }Understanding Debt Reduction Strategies: Snowball vs. Avalanche
Managing multiple debts can feel overwhelming, but with a clear strategy, you can accelerate your path to financial freedom. The Debt Reduction Calculator above helps you visualize the impact of two popular methods: the Debt Snowball and the Debt Avalanche.
What is the Debt Snowball Strategy?
The Debt Snowball method focuses on psychological wins to keep you motivated. Here's how it works:
- List all your debts from the smallest balance to the largest, regardless of their interest rates.
- Make the minimum payment on all debts except for the one with the smallest balance.
- Throw all your extra money (your "additional monthly payment" from the calculator) at the smallest debt.
- Once the smallest debt is paid off, take the money you were paying on that debt (its minimum payment plus the extra money) and apply it to the next smallest debt.
- Repeat this process, "snowballing" your payments, until all debts are paid off.
Pros: Provides quick wins and boosts motivation as you eliminate debts one by one. This psychological momentum can be very powerful for individuals who struggle with long-term financial discipline.
Cons: You might pay more interest overall compared to the Debt Avalanche, as it doesn't prioritize high-interest debts.
What is the Debt Avalanche Strategy?
The Debt Avalanche method is mathematically the most efficient way to pay off debt. It focuses on minimizing the total interest paid:
- List all your debts from the highest interest rate (APR) to the lowest, regardless of their balance.
- Make the minimum payment on all debts except for the one with the highest interest rate.
- Apply all your extra money (your "additional monthly payment") to the debt with the highest interest rate.
- Once the highest-interest debt is paid off, take the money you were paying on that debt (its minimum payment plus the extra money) and apply it to the next debt with the highest interest rate.
- Continue this process until all debts are eliminated.
Pros: Saves you the most money in interest and helps you become debt-free in the shortest amount of time. This is the financially optimal strategy.
Cons: It can take longer to pay off the first debt, which might be discouraging for some, especially if their highest-interest debt also has a large balance.
How to Use the Debt Reduction Calculator
Our calculator simplifies the comparison:
- Current Balance ($): Enter the outstanding amount for each of your debts (e.g., credit cards, personal loans, student loans).
- Annual Interest Rate (APR %): Input the annual percentage rate for each debt. This is crucial for the Debt Avalanche strategy.
- Minimum Monthly Payment ($): Enter the minimum amount you are required to pay each month for each debt.
- Additional Monthly Payment ($): This is the extra amount you can consistently afford to pay towards your debts each month beyond your minimums. Even a small additional payment can make a significant difference.
After entering your details, click "Calculate Debt Reduction" to see a side-by-side comparison of the total interest paid and the time it takes to become debt-free under both the Debt Snowball and Debt Avalanche strategies.
Which Strategy is Right for You?
The "best" strategy depends on your personal financial psychology:
- If you need quick wins and motivation to stay on track, the Debt Snowball might be more effective, even if it costs a bit more in interest.
- If you are highly disciplined and want to save the maximum amount of money, the Debt Avalanche is the clear financial winner.
Regardless of the strategy you choose, the most important step is to start. Consistent payments and a commitment to your plan will lead you to a debt-free future.