Debt Avalanche Calculator

How the debt avalanche works

The avalanche method pays the minimum on every debt and sends every spare dollar at the debt with the highest interest rate. When it’s paid off, its minimum rolls onto the next-highest APR. Because your extra dollars always attack the most expensive debt, the avalanche is the cheapest possible order: among plans that keep every minimum paid and spend the same total each month, no other sequence pays less interest.

Note what the definition does not say. The avalanche does not change how much you pay each month, and it does not change which debts you owe. It changes exactly one thing — the address your spare dollars go to — so everything it can possibly save has to come out of interest.

Where the interest comes from

Each balance grows by its own monthly rate before your payment lands:

This is the whole reason rate beats balance. The car loan is more than three times the size of the card, yet carrying it costs only $3.15 more per month. A dollar moved from the car loan to the card stops 3.3× as much interest, every month, for as long as the plan runs. That ratio — not the size of the debts — is what the avalanche exploits.

What each extra dollar buys

The demo debts total $12,100 with $380 of combined minimums. Adding a fixed extra payment on top, every row computed by the engine above:

The first dollars are worth the most. The initial $25 a month buys 3 months and $455.90 of interest. Doubling $150 to $300 buys only 6 further months and $367.96 more. Note too that the avalanche does something with no extra money at all: freed-up minimums alone clear everything in 3 years 3 mo instead of letting each debt crawl to its own finish line.

What the avalanche actually saves

The honest question is not whether the avalanche is cheaper — it always is, or ties — but by how much on debts like yours:

Two things in that table surprise most people.

First, the saving is not a straight line. Across the rows above it peaks at $75 extra a month ($143.94) and falls away on both sides. With nothing extra there is barely anything to allocate, so the two methods do almost the same thing; with a very large extra payment everything clears so fast that the order has little time to matter. The avalanche earns its keep in the middle — which is where most real budgets sit.

Second, on these debts it saves no time at all. Both methods finish in 2 years 2 mo. That is not a quirk: your monthly outlay is identical under both plans, so the finish line only moves when the interest saved is large enough to cover a whole final payment. Here $120.68 spread over 26 months never gets there. Pages that sell the avalanche as “faster” are describing some other set of debts — run yours above and read the months column rather than assuming.

What does change is which debt dies first. Under the avalanche the 24.99% card clears in month 13 instead of month 16 — 3 months sooner — because it is attacked from the start rather than waiting behind the smaller loan.

Your savings depend on the rate spread, not on the method

Swap only the card’s APR and hold everything else fixed — same balances, same minimums, same $150 extra:

In the top rows the avalanche and the snowball are the same plan and the saving is exactly zero. That is not rounding. Once the card’s rate drops to the personal loan’s 12% or below, the loan becomes the highest-rate debt as well as the smallest one, both rules point at it, and no ordering strategy has anything left to add. The avalanche’s advantage appears only when a real rate gap opens up, and grows with it.

The practical reading: check your spread before agonising over the order. If your rates sit within a few points of each other, pick whichever method you will actually stick with, because the arithmetic difference is pocket change. If a 29.99% card sits next to a 7.5% car loan, the order is worth real money. And in either case, changing the rate itself — a lower-rate consolidation loan, or a balance transfer whose 3–5% fee is smaller than the interest it avoids — beats every possible reordering, because it shrinks the gap instead of merely exploiting it.

Inside one credit card, the avalanche is already the law

A single card can carry several balances at different rates at once — purchases at one APR, a cash advance at a higher one, a transferred balance at a promotional one. You do not have to allocate between them, because Regulation Z does it for you. Under 12 CFR § 1026.53(a):

That is the avalanche, written into federal regulation and applied automatically inside each card account. Two limits are worth knowing:

• It governs only the excess. The official commentary is explicit that § 1026.53 “does not limit or otherwise address the card issuer’s ability to determine… the amount of the required minimum periodic payment or how that payment is allocated.” The minimum itself can still be spread across your cheapest balances. Only what you pay above the minimum is protected.
• It stops at the edge of the account. Nothing requires anyone to allocate across your different cards and loans, and nobody does. Between accounts the avalanche is entirely manual — which is the gap this calculator fills.

Deferred interest is not a 0% promo — and it breaks the ranking

These two offers look alike on the marketing page and behave completely differently when the clock runs out. The distinction is legal, not stylistic:

Regulation Z defines deferred interest as finance charges “that a consumer is not obligated to pay or that will be waived or refunded… if those balances or transactions are paid in full by a specified date” (§ 1026.16(h)(2)), and the official commentary states that a plain 0% offer — one where no interest can be charged for that period under any circumstances — is not deferred interest. The regulator’s own worked example of the difference is blunt: a $2,000 purchase under a “no interest if paid in full within the year” program, left unpaid at the deadline, lets the issuer charge a whole year of accrued interest at 20% in one go.

So a deferred-interest balance is a high-APR debt wearing a 0% costume, and a naive ranking parks it dead last right up until the month it becomes your most expensive debt. Enter the rate that applies if you miss the deadline, not the promotional 0%, and check the payoff month this calculator gives that debt against the expiry date.

One piece of help is built into the rules. Inside a card account a deferred-interest balance is treated as a 0% balance for allocation purposes — except during the last two billing cycles before the program expires, when § 1026.53(b)(1)(i) requires your excess payments to go to that balance first. The regulation is trying to get it cleared in time. Two cycles is not much of a runway, and it reaches only within that one account, so the deadline is still yours to manage.

Avalanche vs. snowball at a glance

The trade-off is real and it is small. Our debt snowball calculator runs the same engine from the other side and cites the peer-reviewed evidence behind the motivational claim; a plan you finish beats a plan you abandon. But a plan you would have finished anyway should just take the cheaper order.

Worked example

Getting the inputs right

• Rank by APR, not by perks or balance. A store card at 29.99% outranks everything regardless of how small it is.
• Balance: today’s payoff balance from each account portal, not last month’s statement balance.
• A cash advance is a separate debt. It almost always sits several points above the purchase APR on the same card and usually has no grace period. Enter it as its own line at its own rate rather than averaging the two.
• Minimum payment: the current dollar amount from your statement. Card minimums shrink as balances fall; holding your payment level instead — what this calculator assumes — is half of why payoff accelerates.
• Re-rank when rates change. Variable card APRs move with the prime rate, and an expiring promotional rate can send a debt from the bottom of your list to the top in a single statement cycle.
• If your minimums do not cover the monthly interest, the calculator says the balance never clears rather than inventing a payoff date. That is a real answer: the budget is the problem, not the ordering.

Your card statement answers a different question and will quote a far longer payoff. Regulation Z (§ 1026.7(b)(12)) requires it to print a Minimum Payment Warning estimating how long the balance would take to clear if you paid only the minimum — a scenario in which the payment shrinks along with the balance. Every plan on this page holds the payment level instead.