Debt Payoff Calculator
The debt payoff calculator helps you plan how to pay off multiple debts using two popular strategies: Avalanche (prioritize the highest interest rate) and Snowball (prioritize the smallest balance). You enter each debt — balance, interest rate, and minimum payment — and the calculator simulates month by month to show when you will be debt-free and the total interest paid under each strategy.
Illustrative scenario: Three debts (credit card 50.000.000, car loan 200.000.000, personal loan 100.000.000) — totaling 350.000.000. Extra payment of 3.000.000/month beyond minimums.
How the calculation works
Month-by-month simulation:
- Calculate monthly interest = balance × annual rate / 12.
- Pay minimums on each active debt.
- Allocate extra payment to the priority debt:
- Avalanche: Debt with the highest interest rate (saves the most interest).
- Snowball: Debt with the smallest balance (builds psychological momentum).
- When a debt is paid off, its minimum payment rolls into the next priority debt.
Monthly interest formula:
$$i_{\text{monthly}} = \frac{r_{\text{annual}}}{12}$$
Total interest = Σ (monthly interest throughout the payoff period).
When does Avalanche beat Snowball?
When the smallest balance is not the highest-rate debt. In that case, Avalanche targets the most expensive debt first, reducing total interest faster. Snowball targets the smallest debt first, creating early wins but paying more interest overall.
The snowball effect
When a debt is fully paid off, its minimum payment is freed up and added to the payment for the next priority debt — so your payoff speed accelerates over time.
Worked example: Pay off 3 debts totaling 350.000.000
| Debt | Balance | Annual Rate | Min Payment |
|---|---|---|---|
| Credit Card | 50.000.000 | 20% | 2.000.000 |
| Car Loan | 200.000.000 | 10% | 5.000.000 |
| Personal Loan | 100.000.000 | 15% | 4.000.000 |
Extra payment: 3.000.000/month
Avalanche (prioritizes credit card at 20% — highest rate):
- Credit card paid off first → extra + freed minimum rolls to personal loan (15%) → finally car loan (10%).
- Lower total interest because the most expensive debt is eliminated first.
Snowball (prioritizes credit card at 50.000.000 — smallest balance):
- Same order in this example because smallest balance also has highest rate.
- When smallest balance and highest rate differ, Snowball pays more interest but creates early wins.
Key takeaways
- Always pay more than the minimum when possible.
- Avalanche is mathematically optimal; Snowball is psychologically optimal.
- The most important thing: have a plan and stick to it.
Frequently asked questions
What is the difference between Avalanche and Snowball?
Avalanche targets the highest interest rate debt first, saving the most money mathematically. Snowball targets the smallest balance first, providing quick wins for motivation. When the smallest balance is also the highest-rate debt (as in the example above), both methods produce identical results.
Which strategy should I use?
If you want to minimize total interest, choose Avalanche. If you need psychological wins to stay motivated, choose Snowball. Both are far better than paying only minimums. Research shows Snowball helps people stay committed in the first 6 months.
How much extra should I pay each month?
Any extra payment reduces total interest and shortens the payoff timeline. Even an extra 500.000 VND/month makes a significant difference over time. Try increasing the extra payment whenever your income grows.
Should I consolidate my debts?
Consolidation can lower your interest rate if you qualify for a lower-rate loan. But avoid running up new charges on the credit cards you just paid off. When consolidating, make sure the total cost (including processing fees) is genuinely lower than paying debts individually.
Is paying only the minimum OK?
Paying only the minimum dramatically extends the payoff period and increases total interest manyfold. Example: a 50.000.000 credit card at 20% with only 2.000.000 minimum could take decades and total interest far exceeding the original balance. Always try to pay extra, even a small amount.
Does this calculator include prepayment penalties?
Currently the calculator does not include prepayment penalties. Check your loan contracts for early repayment fees before making accelerated payments. Some lenders charge 1-3% of the prepaid amount during the first year.