Debt payoff planner

How this works

Start with three numbers: what you owe in total, what you pay each month, and roughly what interest rate you are paying. The planner gives you a debt-free date straight away. Then add your debts one by one and the answer gets sharper: which debt to pay first, what the whole plan costs in interest, and the month each one is gone.

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Avalanche or snowball: which clears debt faster?

Once every minimum is paid, any money left over has to go somewhere. There are two well-known ways to choose where.

The avalanche pays the highest interest rate first. The most expensive debt shrinks fastest, so on the same payments it usually costs the least interest and finishes soonest.

The snowball pays the smallest balance first. It often costs more in interest, but your first debt disappears sooner, and watching an account close for good can be what keeps you going.

The planner works out both on your own numbers and sets them side by side: the debt-free date, the total interest, and how much sooner the snowball clears its first debt. The better plan is the one you will keep paying.

Whichever you pick, a debt that is paid off does not take its minimum payment with it. That money rolls onto the next debt in line, so each one clears faster than the last. The planner counts this for you, which is why its dates can come sooner than you expect.

Why paying the minimum keeps you in debt

Interest is added to what you owe every month. The planner works it out the plain way: the yearly rate divided by twelve, charged on the balance at the start of the month.

A minimum payment is the least you can pay to keep an account in good standing. It is not designed to clear the balance quickly, and a large part of it can go to that month’s interest, leaving little to bring down what you actually owe.

Sometimes the minimum does not even cover the interest. Then the balance grows every month, even when you pay on time and in full. If the planner finds a debt like this, it says so at the top of your results. When that warning rests on a rate you estimated, it tells you, so you can check it against a statement.

The planner keeps each minimum at the amount you enter. On many credit cards the required minimum falls as the balance falls; paying what you pay today, rather than the shrinking minimum, is part of what brings your date closer.

And if your payments can never clear what you owe, the planner says so plainly rather than inventing a date. Change one number, a rate, a minimum or a little extra, and watch the answer move.

What a lender sees when you carry a balance

When you apply for a loan, a mortgage or a new card, a lender looks at more than whether you pay on time. They see how much you owe on each account, how close each card is to its limit, and how long you have been managing credit.

Many lenders also compare what you pay toward debts each month with what you earn. The smaller that share, the more room they see for a new payment.

Balances that stay close to their limits month after month tell a lender that credit is carrying part of your everyday life. Paying them down changes that picture, and the change shows as soon as the lower balances are reported.

To go further into how lenders decide, read What lenders see, what borrowing really costs, and how to use credit without it using you.

What a little extra each month changes

Under your results, the planner shows what an extra $50, $100 or $250 a month would do: how many months come off your plan, and how much interest you would never pay. Each one is worked out in full on your own debts, not estimated.

Extra money goes to the debt at the top of your chosen order, after every minimum is paid. When that debt is gone, the extra and the old minimum move on together to the next one.

If you have built a budget in the budget planner and found money left over, it can bring that amount here for you, already filled in.

When it’s time to talk to someone

A plan only works if the numbers can work. If your minimums take more than you can pay, if an account is already behind, or if collectors have started calling, a calculator is not enough on its own.

Talk to your lender early, ideally before you miss a payment. Many lenders have hardship options for customers who ask. A nonprofit credit counselor can look at your whole situation and explain the choices you have, often at little or no cost.

Be wary of anyone who asks for money up front to settle your debts, or who promises to make them disappear.

This planner is for learning. It shows what the arithmetic says about your numbers, and it is not personal financial advice.

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