Finance
Debt Payoff Calculator
Plans a debt payoff, where two orderings trade interest against momentum.
Result
Treats all debt as one balance at an average rate. With several debts at different rates, paying the highest-rate one first (avalanche) always costs less in total than paying the smallest first.
Get a Free Business AuditHow the calculation works
Total debts with their balances and rates, against a monthly amount available, ordered either by highest rate first or by smallest balance first. Highest rate first minimises total interest; smallest balance first clears individual debts sooner, which some people find easier to sustain.
What moves the number
- Total amount available each month.
- Rates across the debts.
- Balances and how quickly each could clear.
- Whether the plan will actually be followed.
Where this one goes wrong
Highest rate first is arithmetically better and smallest balance first is behaviourally better for some people, and the plan that gets followed beats the plan that is optimal, so the difference in total interest is worth calculating before deciding on principle. Calculate both. Any plan also depends on not adding new debt while clearing the old, which is the condition that fails most often and which the arithmetic cannot address.
Before you quote
- Calculate the interest difference between the two orderings.
- Choose the plan you will actually follow.
- Avoid adding new debt while clearing existing balances.
Questions
About this calculator
Should I pay the highest rate or the smallest balance first?
Highest rate first minimises total interest; smallest balance first clears debts sooner and some people sustain it better. Calculate the interest difference before deciding, because the plan that gets followed beats the one that is optimal.
How much difference does the ordering make?
It depends on the spread between the rates and the balances. Where rates are similar the difference is small and the behavioural argument wins; where one debt is at a much higher rate the arithmetic argument is strong.
What makes a payoff plan fail?
Adding new debt while clearing the old. That is the condition that fails most often, and no arithmetic addresses it. A plan that assumes no new borrowing is only as good as that assumption holds.
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How to use this calculator
- Total balance ($). Enter your own figure; the page starts at $24,000.
- Average interest rate (%). Enter your own figure; the page starts at 12.5%.
- Current monthly payment ($). Enter your own figure; the page starts at $600.
- Extra you could add ($). Enter your own figure; the page starts at $150.
The result updates as you type, so you can try a figure, see what it does to time to clear at current payment, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Total balance | $24,000 |
| Average interest rate | 12.5% |
| Current monthly payment | $600 |
| Extra you could add | $150 |
What comes out
| Result | Value |
|---|---|
| Time to clear at current payment main result | 4 yrs 5 mo |
| With the extra payment | 3 yrs 4 mo |
| Interest saved | $1,924 |
| Interest at current payment | $6,615 |
Clear in 4 yrs 5 mo as things stand. Adding 150 a month cuts that to 3 yrs 4 mo and saves $1,924 in interest.
How sensitive the answer is
Holding everything else steady and changing only total balance, this is what happens to time to clear at current payment. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Total balance ($) | Time to clear at current payment |
|---|---|
| $12,000 | 1 yr 11 mo |
| $18,000 | 3 yrs 1 mo |
| $24,000 example above | 4 yrs 5 mo |
| $36,000 | 7 yrs 11 mo |
| $48,000 | 14 yrs 5 mo |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Total balance ($)
- A money amount, starting at $24,000.
- Average interest rate (%)
- A percentage, between 0 and 100, starting at 12.5%.
- Current monthly payment ($)
- A money amount, starting at $600.
- Extra you could add ($)
- A money amount, starting at $150.
What the results tell you
| Result | What it is |
|---|---|
| Time to clear at current payment | The headline result. A number. |
| With the extra payment | A number. |
| Interest saved | A money figure. |
| Interest at current payment | A money figure. |
Rates and terms move
Loan and interest figures assume the rate and term you enter hold for the whole period. Variable rates, fees rolled into the balance and early-repayment terms all change the real cost.
Keep going
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