Debt Avalanche Calculator

The debt avalanche method involves making minimum payments on all debts and directing all extra money to the debt with the highest interest rate first. Once that debt is eliminated, you roll that payment to the next highest rate, and so on. This approach minimises total interest paid over the life of all debts and is mathematically the most efficient strategy.

The savings depend on your balances and rates, but the avalanche method typically saves hundreds to thousands of dollars compared to paying debts in a random order. The higher the interest rates on your largest balances, the bigger the savings. Use this calculator to see the exact interest saved by targeting your highest-rate debt first.

If two debts share the same interest rate, target the one with the smaller balance first. Eliminating it sooner frees up a payment amount that can then be redirected, effectively combining the avalanche and snowball principles. The interest cost difference is negligible when rates are identical.

In the US, payday loans can carry APRs exceeding 300-400%. Credit cards average 20-24% APR. Personal loans from online lenders for borrowers with poor credit may run 25-35%. Auto loans and student loans are typically lower. The avalanche method is most powerful when you have credit card or payday loan debt alongside lower-rate obligations.

The National Foundation for Credit Counseling (NFCC) has accredited non-profit agencies nationwide. The Consumer Financial Protection Bureau (CFPB) offers free online resources. Non-profit Debt Management Plans through NFCC agencies can negotiate lower interest rates with credit card issuers, reducing the avalanche timeline significantly.

The debt avalanche method directs all extra money (above minimum payments) to the debt with the highest interest rate. Once eliminated, you redirect that combined payment to the next highest-rate debt. This is the mathematically optimal strategy for minimising total interest paid across all debts.

Savings depend on your rates and balances, but the avalanche method consistently beats random or intuitive ordering. The difference is largest when you have high-rate debts alongside low-rate ones. This calculator shows exactly how much interest you save and how many months sooner you become debt-free.

Target the smaller balance first when rates are equal. This removes one debt from your list sooner, simplifying your finances and giving a motivational win, with negligible impact on total interest compared to the alternative.

UK credit cards average 20-30% APR. Overdraft rates can reach 39.9% EAR after FCA reforms in 2020. Buy-Now-Pay-Later products that default to a standard rate can be 29-40% APR. Personal loans from subprime lenders may carry high rates. High-cost short-term credit (formerly payday loans) is capped at 0.8% per day under FCA rules. Target these high-rate debts first with the avalanche.

StepChange Debt Charity (0800 138 1111) is the leading free debt advice charity and can set up a Debt Management Plan. Citizens Advice provides free guidance in person, online, and by phone. MoneyHelper (0800 138 7777) offers free impartial debt advice. If debt is severe, an Individual Voluntary Arrangement (IVA) through an Insolvency Practitioner may be an option.

The debt avalanche targets the debt with the highest interest rate first while making minimum payments on all others. Once that debt is paid off, the payment is redirected to the next highest rate. This maximises interest savings compared to other payoff sequences and is recommended by ASIC Moneysmart for efficient debt elimination.

The savings are specific to your balances and rates. For Australian borrowers with credit card debt at 20%+ alongside a car loan at 8%, the avalanche approach can save thousands of dollars and cut years from the repayment timeline. This calculator quantifies that saving precisely.

Australian credit cards typically charge 15-22% per annum. Personal loans from non-bank lenders can reach 28-48% per annum. Buy-Now-Pay-Later plans that convert to interest-bearing accounts can carry high rates. Payday loans are capped by ASIC at 20% establishment fee plus 4% per month. Target these high-cost debts first with the avalanche strategy.

Yes, if saving maximum money is your priority. The avalanche method always saves more interest than the snowball method. However, motivation matters: if seeing a debt disappear quickly keeps you committed, the snowball method may produce better real-world results even if it costs slightly more. You can also start snowball to build momentum, then switch to avalanche.

The National Debt Helpline (1800 007 007) provides free financial counselling seven days a week. ASIC Moneysmart has free calculators and guides. If debt is unmanageable, a financial counsellor can negotiate a hardship arrangement with your lender. Serious cases may involve a Debt Agreement (Part IX) or personal insolvency through the Australian Financial Security Authority (AFSA).

The debt avalanche directs all extra repayment money to the highest-interest-rate debt first, then cascades to the next highest rate once each debt is eliminated. It is the mathematically optimal strategy for minimising total interest paid. The Financial Consumer Agency of Canada (FCAC) recommends this approach for Canadians with multiple debts.

Savings depend on your specific balances and rates. For a Canadian borrower with a 19.99% credit card, a 14% line of credit, and an 8% car loan, focusing on the credit card first can save hundreds to thousands in interest. This calculator shows your exact savings by optimising the repayment order.

Most Canadian credit cards charge 19.99% on purchases and 22.99% on cash advances. Store credit cards may charge higher rates. Payday loans in Canada are regulated provincially but can equate to APRs of 300-400%. High-cost installment loans can run 29-46.99%. Target these high-rate obligations first using the avalanche strategy.

The avalanche always saves more money mathematically. However, if motivation is a concern, the snowball method provides quicker wins. Many Canadians find that paying off one smaller debt with the snowball method first builds momentum, then switching to avalanche for the remaining debts achieves the best combination of results and motivation.

Credit Counselling Canada member agencies offer free or low-cost counselling and Debt Management Plans. The FCAC website has free debt tools and educational resources. Licensed Insolvency Trustees (LITs) are federally regulated and can explain Consumer Proposals and bankruptcy. Many LITs offer free initial consultations. Find one at the Office of the Superintendent of Bankruptcy Canada website.