Strategically pay down your debts by focusing on the highest interest rates first.
Your Avalanche Debt Payoff Plan:
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Total Interest Paid: Loading…
Debt Payoff Order:
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Understanding the Avalanche Debt Payoff Method
The Avalanche method is a popular and highly effective debt reduction strategy. It prioritizes paying off debts with the highest interest rates first, while making minimum payments on all other debts. This approach can save you a significant amount of money on interest over time and is often considered the mathematically optimal way to become debt-free.
How the Avalanche Method Works:
List Your Debts: Gather all your debts (credit cards, loans, etc.) and note down their current balance, interest rate, and minimum monthly payment.
Order by Interest Rate: Arrange your debts in descending order based on their annual interest rate (APR). The debt with the highest APR goes to the top.
Pay Minimums on All But One: Make only the minimum required payment on all your debts, except for the one with the highest interest rate.
Attack the Highest Interest Debt: Allocate any extra money you have available for debt repayment (your 'Total Monthly Payment' in the calculator) towards the debt with the highest interest rate.
Snowball Effect: Once the highest-interest debt is paid off, take all the money you were paying towards it (minimum payment + extra) and add it to the minimum payment of the *next* highest-interest debt. This accelerates the payoff process.
Repeat: Continue this process, moving from the highest interest rate debt to the next, until all your debts are eliminated.
Why Choose the Avalanche Method?
Saves Money: By tackling high-interest debt first, you minimize the total amount of interest paid over the life of your debts. This is the primary financial advantage.
Mathematically Optimal: From a purely financial perspective, this method guarantees the lowest total interest cost and often the fastest payoff time.
Requires Discipline: It can be less psychologically motivating than the "snowball" method (paying off smallest balances first) because you might not see debts disappear as quickly, especially if your smallest debts have low interest rates. However, the long-term financial gains are substantial.
Calculator Logic Explained
This calculator simulates the Avalanche payoff strategy. Here's a simplified breakdown of how it works:
Input: You provide your total available monthly payment and details for each debt (name, balance, interest rate).
Sorting: The calculator internally sorts your debts from highest to lowest interest rate.
Simulation: It then simulates month by month:
For the highest-interest debt (the "target debt"), it applies the entire available monthly payment.
For all other debts, it applies only their minimum monthly payment (which is assumed to be covered by the total monthly payment budget, but is tracked for interest calculation). If the total monthly payment is insufficient to cover all minimums plus the target debt, the simulation assumes the minimums are paid first and the remainder goes to the target debt.
Interest accrues on the remaining balance of each debt.
Balances are updated.
Tracking: The simulation continues until all debts are paid off. It tracks the total number of months and the total interest accumulated.
Note: This calculator assumes interest is compounded monthly. For simplicity, it doesn't account for potential changes in minimum payments or extra payments you might make outside of the set total monthly payment. It also assumes the input interest rates are Annual Percentage Rates (APRs).
function calculateAvalanchePayoff() {
var totalMonthlyPayment = parseFloat(document.getElementById("totalMonthlyPayment").value);
var debts = [];
for (var i = 1; i 0) {
debts.push({
id: i,
name: name,
balance: balance,
interestRate: interestRate,
originalBalance: balance, // To display total paid later
interestPaid: 0
});
}
}
// Sort debts by interest rate in descending order
debts.sort(function(a, b) {
return b.interestRate – a.interestRate;
});
var months = 0;
var totalInterestPaid = 0;
var remainingPaymentBudget = totalMonthlyPayment;
var payoffOrder = [];
// Check if total monthly payment is sufficient for minimums (simplified check)
var totalMinimums = debts.reduce(function(sum, debt) { return sum + (debt.balance * 0.01); }, 0); // Assuming 1% minimum for example
if (totalMonthlyPayment 0) {
alert("Warning: Your total monthly payment may not be enough to cover minimum payments on all debts. This calculation might be inaccurate.");
}
var simulationActive = true;
while (simulationActive && debts.length > 0) {
var currentDebt = debts[0]; // Highest interest rate debt
var monthlyInterestRate = currentDebt.interestRate / 100 / 12;
var paymentForCurrentDebt = remainingPaymentBudget;
// Ensure we don't overpay the current debt
if (paymentForCurrentDebt > currentDebt.balance) {
paymentForCurrentDebt = currentDebt.balance;
}
var interestThisMonth = currentDebt.balance * monthlyInterestRate;
var principalThisMonth = paymentForCurrentDebt – interestThisMonth;
// Handle cases where payment is less than interest
if (principalThisMonth < 0) {
principalThisMonth = 0; // No principal paid this month, only interest accrues
interestThisMonth = paymentForCurrentDebt; // All payment goes to interest
}
currentDebt.balance -= principalThisMonth;
totalInterestPaid += interestThisMonth;
currentDebt.interestPaid += interestThisMonth;
// Update remaining payment budget for next iteration
remainingPaymentBudget -= paymentForCurrentDebt;
if (currentDebt.balance 0) {
remainingPaymentBudget = totalMonthlyPayment;
} else {
simulationActive = false; // All debts paid
}
}
// If no debts are left or if simulation runs too long (safeguard)
if (debts.length === 0) {
simulationActive = false;
} else if (months > 10000) { // Safeguard against infinite loops
alert("Calculation exceeded maximum months. Please check your inputs.");
simulationActive = false;
break;
}
months++;
// Re-apply the full monthly payment if not all debts are paid off
if (simulationActive && debts.length > 0) {
remainingPaymentBudget = totalMonthlyPayment;
}
}
// Display results
document.getElementById("totalTime").innerHTML = "Total Payoff Time: " + months + " months";
document.getElementById("totalInterestPaid").innerHTML = "Total Interest Paid: $" + totalInterestPaid.toFixed(2);
var listHtml = "";
payoffOrder.forEach(function(debt, index) {
listHtml += "