Debt Payoff Calculator — Methodology

How This Calculator Works

The Debt Payoff Calculator models two repayment strategies — Avalanche (highest interest rate first) and Snowball (lowest balance first) — and compares the total interest paid and payoff timeline for each.

You enter up to 10 debts with balance, APR, and minimum payment. The calculator simulates month-by-month repayment, applying extra payments according to the selected strategy.

Both strategies pay the same total every month, the sum of your minimums plus your extra payment, until every debt is gone. When a debt is paid off, the payment you were making on it moves to the next debt, as the CFPB describes both methods. So the two strategies are always compared at the same monthly payment.

Inputs and Assumptions

• Balance: Current outstanding balance for each debt.
• APR: Annual percentage rate. Interest is compounded monthly (APR / 12).
• Minimum payment: Required monthly payment for each debt.
• Extra payment: Additional monthly amount applied beyond all minimums.

Assumptions: APR remains fixed. Minimum payments are constant. No new charges are added.

Formula

// Fixed monthly budget, the same for both strategies
budget = sum(minimumPayments) + extraPayment

// Each month
for each open debt:  balance += balance × (APR / 12)
for each open debt:  pay min(minimumPayment, balance)
leftover = budget − payments so far
for each open debt in strategy order:  pay min(leftover, balance)

// Avalanche order: highest APR first
// Snowball order: lowest starting balance first
// A paid-off debt's minimum stays in the budget, so it rolls into
// the next debt in order (the "snowball")

When the payments never pay the debt off

Each month every debt gets its minimum, and the debt your strategy targets also gets the rest of your monthly total. A debt whose payment is no more than its monthly interest cannot shrink. If a month comes when that is true of every debt you still owe, no balance can fall again, so no debt is ever cleared and the payments never change: the debt is never paid off. The total can rise for a while and still be paid off, as long as the targeted debt is shrinking.

When that happens the calculator says the debt is never paid off, shows no payoff date, and shows what you would still owe after 10 years. It shows no total interest, because that interest is never paid. A balance that falls, but too slowly to be cleared within the 50 years modelled, is shown as “not within 50 years” in the same way.

Debt or invest: how the comparison works

The comparison asks what to do with your extra payment. Both plans spend the same total every month (your minimums plus the extra) for the same number of months, so like is compared with like:

• Pay extra on debt: the whole amount goes to your debts by the strategy you picked. Once they are paid off, the whole amount is invested each month.
• Invest instead: your debts get their minimums (a paid-off debt's minimum moves to the next debt) and the extra is invested each month.

If either plan still owes debt at the end (the minimums alone never pay it off, or not within 50 years), the two plans do not both end debt-free, so there is no like-for-like comparison: the calculator says so and shows no dollar figures.

Otherwise both plans are measured in the month the slower plan pays off its last debt, so both end debt-free. The figure shown for each plan is what it then holds, its investments: by then both plans have paid off every debt. Investments are added at the end of each month and grow at your assumed annual return divided by 12 each month. The break-even return is the assumed return at which both plans end level. When all your debts carry the same rate, it equals that rate.

Until 14 October 2026 the comparison set the full value of investing the extra (every dollar paid in plus growth) against only the interest saved by paying debt, so investing appeared to win even at a 0% return.

Data Sources

• Federal Reserve — Consumer debt statistics for contextual benchmarking.
• Consumer Financial Protection Bureau (CFPB) — Debt-to-income ratio guidance and consumer debt education.
• CFPB, Your Money, Your Goals, “Debt action plan” tool (2018) — the two strategies: after all minimum payments, pay more on the smallest debt (or the highest-rate debt), and “after it's paid off, add that extra amount to your minimum payment on the next” debt.

Limitations

• Does not account for variable-rate debts (APR changes over time).
• Does not model minimum payment reductions as balance decreases (some cards reduce minimums).
• The debt-or-invest comparison assumes a constant return with no taxes or fees on the investments. Real returns vary from year to year and can be negative; paying debt is a certain saving, while an investment return is not.
• Before choosing either plan, an emergency fund and any employer retirement match may come first; the comparison does not model them.
• Does not model balance transfer offers or refinancing mid-repayment.
• Assumes no new charges are added to any debt.
• Does not model income-driven repayment of federal student loans. Their payments follow your income, and on the Repayment Assistance Plan (RAP) an interest subsidy covers the interest that a full, on-time payment does not, so the balance does not grow the way this calculator shows when the payments fall short of the interest (StudentAid.gov, checked 14 October 2026).

Last Updated

April 2026 — Algorithm unchanged. Interface updated for trust quality bar compliance.

14 October 2026 — A paid-off debt's payment now moves to the next debt, as this page already described. The calculator used to drop it, so the monthly payment fell each time a debt was paid off, payoff took longer than it should, and the two strategies were compared at different monthly payments. The debt-or-invest comparison now compares the two plans at the same monthly total and the same horizon (see above).

14 October 2026 (later) — When the payments never cover the interest, the calculator now says the debt is never paid off, with no payoff date, no interest total and no debt-or-invest figure (see above). It used to show a payoff of “50+ years”, interest that is never paid, and a net-worth lead running to hundreds of millions of dollars after 50 years.