Debt Payoff Calculator

The debt snowball method involves paying off your debts from smallest balance to largest, regardless of interest rate. You make minimum payments on all debts and put any extra money toward the smallest debt. When that debt is paid off, you roll that payment into the next smallest. The psychological win of eliminating debts quickly can keep you motivated.

The debt avalanche method involves paying off debts from highest interest rate to lowest. You make minimum payments on all debts and put any extra money toward the highest-rate debt first. This method saves the most money in total interest paid and is mathematically optimal, but can take longer to see individual debts eliminated.

Mathematically, the avalanche method saves more money because you eliminate high-interest debt first. However, the snowball method often works better in practice because the psychological momentum of paying off debts quickly keeps people on track. Research suggests people who use the snowball method are more likely to stick to their repayment plan and become debt-free.

Any amount above your minimum payments accelerates debt payoff significantly. Even an extra £50-£100 per month can save thousands in interest and cut years off your repayment timeline. A common approach is to follow a budget like the 50/30/20 rule, allocating 20% of take-home pay to financial goals including debt repayment.

If your debt interest rate is higher than your expected investment return (typically 7-10% for stock market), pay off the debt first. High-interest debt like credit cards (20%+) should almost always be prioritized over investing. For low-interest debt like mortgages (4-6%), there is a reasonable argument for investing simultaneously, especially if your employer offers pension matching.