Snowball vs avalanche, in plain terms
Both methods work the same way. You pay the minimum on every debt, then put every spare dollar on one target debt. When that debt is gone, its payment moves to the next one, so the amount you throw at debt grows each time.
The only difference is how you pick the target.
Debt snowball
Target the smallest balance first. You clear debts quickly, which feels good and keeps many people going. It usually costs a bit more interest than the avalanche.
Debt avalanche
Target the highest interest rate first. This costs the least interest and is usually the fastest on paper. The catch is that your first win can take a long time if the high-rate debt is also a big one.
Which one should you use?
If the calculator shows only a small gap between the two, take the one you'll actually stick with. A plan you drop after four months saves nothing. If the gap is large, the avalanche is worth the patience.
A quick example
Say you owe $6,000 on a credit card at 27%, $3,500 on a personal loan at 11% and $900 on a store card at 15%, and you can add $150 a month on top of the minimums. The snowball starts with the $900 store card. The avalanche starts with the 27% credit card. Run both above and compare the interest line, that's the real price of picking the quicker win.
How the numbers are worked out
Each month, interest is added to every balance at its APR divided by 12. Minimums are paid, then your extra amount goes to the target debt. The calculator runs in your browser, so nothing you type is sent anywhere. It assumes fixed rates and no new charges, so treat the dates as a good estimate, not a promise.
Keep the plan on track
A payoff plan only works if you can see your real balances and your spending each month. Kapitech is an iOS app that tracks your expenses and budget and keeps your debts in one place, with your financial data staying on your device.