Debt Payoff Planner — Avalanche vs Snowball, Personalised

The avalanche method targets the highest-interest debt first — mathematically optimal, saves the most money. The snowball method targets the smallest balance first — psychologically optimal, builds momentum through quick wins. Northwestern University research found snowball users were significantly more likely to stick with the plan and become debt-free, even though they paid slightly more in interest.

The right answer depends on you. If you are highly analytical and money-motivated, avalanche wins. If you have tried and failed before, or you have several small debts that feel overwhelming, snowball's early wins keep you going. The Debt Payoff Planner shows both timelines side by side so you can pick based on your real psychology, not the textbook.

Credit-card interest is calculated daily on the average daily balance, then charged monthly. At 24% APR on a $5,000 balance, that is roughly $100 of pure interest charged every month before you have paid down a single dollar of principal. Making only the minimum payment (typically 2–3% of the balance) means it can take 25+ years to clear the debt and you will pay 2–3× the original balance in interest.

The leverage of even small extra payments is enormous. On a $10,000 card at 22%, paying $250/month clears the debt in 64 months and costs $5,800 in interest. Paying $400/month clears it in 32 months and costs $2,650 — saving over $3,000 by adding $150/month for less than three years. The Planner quantifies this for your specific debts.

A 0% balance-transfer card can be powerful if used as a tool, not as relief. Real plan: transfer high-rate balances, divide the total by the promo period (usually 18 months), and pay that exact amount every month so you finish before the promo ends. Done correctly, this can shave thousands off the cost. Done casually — making minimum payments and forgetting the deadline — it usually backfires when the rate snaps back to 25%+.

A fixed-rate consolidation loan removes that landmine. You replace several variable-rate debts with one fixed monthly payment over 3–5 years. It only saves money if the new rate is meaningfully lower than your weighted average, and only works if you stop using the freed-up credit cards. Both options are tools — the Planner flags whether they would actually help in your specific case.

Three mistakes derail most debt payoff plans. First, no emergency fund. Without even $1,000 set aside, the next car repair or medical bill goes straight onto the cards you are trying to pay down — undoing months of progress. Build a small starter fund before you go aggressive on debt.

Second, closing paid-off cards. Closing a card hurts your credit score in two ways: it reduces your total available credit (raising utilisation) and it can shorten your average account age. Pay it off, cut up the physical card, but leave the account open. Third, focusing only on debt and ignoring retirement entirely. Always capture the full 401(k) match — leaving free employer money on the table to pay off a 5% loan is a losing trade. The Planner suggests the right balance based on your specific rates and employer match.