CalcDomain

Authoritative data source & methodology

Primary guidance: Consumer Financial Protection Bureau (CFPB), “Paying down debt” (accessed 2025). Also see: Federal Trade Commission (FTC), “Getting Out of Debt”.
Tutti i calcoli si basano rigorosamente sulle formule e sui dati forniti da questa fonte.

Our simulator applies each statement cycle as follows: (1) apply minimums to all open accounts; (2) allocate remaining budget to the target account based on the selected strategy (Avalanche = highest APR; Snowball = smallest balance); (3) accrue interest monthly using APR/12 on each remaining balance; (4) repeat until all balances reach zero.

The formula explained

For a given debt \(i\) with monthly rate \(r_i = \frac{\text{APR}_i}{12}\) and balance \(B_{i,t}\):
Monthly interest: \(I_{i,t} = B_{i,t}\, r_i\)
Principal reduction: \(P_{i,t} = \max(0,\ \text{payment}_{i,t} - I_{i,t})\)
Next balance: \(B_{i,t+1} = \max(0,\ B_{i,t} + I_{i,t} - \text{payment}_{i,t})\)
Strategy order each month:
Avalanche: sort debts by \( \text{APR}_i \) descending. Snowball: sort by \( B_{i,t} \) ascending.

Glossary of variables

  • Balance: Current amount owed for each account.
  • APR %: Annual Percentage Rate used to compute monthly interest.
  • Minimum payment: The required per-month payment to keep the account current.
  • Monthly payoff budget: The total you commit each month; any amount above minimums is directed to the target debt.
  • Debt-free date: Estimated calendar month when all balances reach zero.
  • Total interest: Sum of all monthly interest charges paid until payoff.

How it works: a step-by-step example

Example inputs

  • Debt A: $4,000 at 22.99% APR, min $100
  • Debt B: $2,500 at 17.99% APR, min $60
  • Debt C: $1,200 at 9.99% APR, min $35
  • Monthly payoff budget: $800, Strategy: Avalanche

Process

  1. Pay minimums to A, B, C ($195 total). Remaining $605 goes to the highest APR (A).
  2. Accrue monthly interest APR/12 on each debt after payments.
  3. Repeat monthly; once A hits zero, roll its entire prior payment into B, then C.

The calculator outputs months to payoff, debt-free date, total interest, and a month-by-month schedule to verify the math.

Frequently Asked Questions

Should I choose Avalanche or Snowball?

Pick Avalanche if minimizing interest is your priority. Choose Snowball if quick psychological wins help you stay consistent—then switch to Avalanche later.

What if my budget is less than the sum of minimums?

The model flags an error because accounts would fall behind. Increase your budget, reduce expenses, or consider speaking with your lender or a nonprofit credit counselor.

How accurate is APR/12 monthly modeling?

Most credit cards and loans accrue interest daily, but statements summarize monthly. APR/12 closely approximates outcomes and is standard for planning tools.

Can I reorder debts manually?

Yes—change strategy to Snowball for smallest-balance prioritization, or edit APRs to reflect teaser rates and see the effect.

Will closing a paid account hurt my credit score?

It can affect utilization and age of credit. Consider leaving $0 accounts open unless fees apply; check guidance from your issuer or credit bureau resources.

Tool developed by Ugo Candido. Content reviewed by the CalcDomain Editorial Board.
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