Debt Payoff Planner
Key Takeaway
The debt avalanche method pays off highest-interest debt first (saving the most money), while the debt snowball method pays off smallest balances first (building psychological momentum). Avalanche saves more mathematically.
Your Liabilities
Total monthly amount allocated for debt payments: ₹33,000 (Min payments sum: ₹23,000).
Strategy Comparison Result
The Avalanche method saves you approximately ₹0 in interest compared to the alternative.
The payoff timeline: Avalanche takes 29 months vs Snowball taking 29 months.
Debt Snowball
Debt Avalanche
Debt Balances Decreasing Timeline
What to do next
Based on your Debt Payoff Planner, here are the tools you should try next:
Advertisement
Avalanche vs. Snowball
When you have multiple debts (credit cards, personal loans, car loans), the mathematical way to pay them off is the Avalanche method (targeting the highest interest rate first). But humans aren't calculators. Sometimes, the Snowball method (paying off the smallest loan first just to get a psychological 'win') is what actually keeps you motivated.
The Psychology of Debt: Divya's Escape
1. Credit Card: ₹50,000 at 36% interest.
2. Personal Loan: ₹2 Lakhs at 14% interest.
3. Car Loan: ₹5 Lakhs at 9% interest.
**The Avalanche Method (The Math Winner):** Divya pays minimums on the loans and throws every extra rupee at the 36% credit card. It takes her a few months, but mathematically, she saves the maximum amount of interest possible.
**The Snowball Method (The Motivation Winner):** What if her credit card debt was ₹5 Lakhs and the personal loan was ₹50,000? Mathematically, she should still attack the credit card. But it might take 2 years to clear. Divya might lose hope. Instead, by attacking the ₹50,000 personal loan first, she clears it in 3 months. The psychological high of crossing a debt off her list gives her the momentum to tackle the giant credit card debt next.
Debt Snowball vs Avalanche: Which Method Gets You Debt-Free Fastest?
Being in multiple debts is financially suffocating. Credit card at 36%, personal loan at 14%, home loan at 8.5%, and a friend loan with no interest , which do you attack first? The answer depends on whether you optimise for math or motivation.
The Debt Avalanche method: pay minimums on all debts, throw every extra rupee at the highest interest debt first. Mathematically optimal , minimises total interest paid. A ₹5 lakh credit card at 36% needs to be annihilated before you touch the 8.5% home loan.
The Debt Snowball method: pay minimums on all debts, throw extra money at the smallest balance first. Mathematically inferior but psychologically powerful. Clearing a small debt creates dopamine , the "I'm winning" feeling that keeps people motivated. Dave Ramsey popularised this method because for many people, the motivation effect outweighs the interest cost.
For purely high-interest debt (credit cards, personal loans above 15%), always use Avalanche. The interest rate differential is so dramatic that the mathematical cost of Snowball becomes real money. For a mixed debt portfolio with moderate rates, Snowball's motivation effect may serve you better if you've abandoned debt payoff plans before.
Use this planner to see both strategies side-by-side for your exact debt situation.
Frequently Asked Questions
Which debts should I pay off first?
Two popular strategies: Avalanche Method (pay off highest interest rate first , saves the most money) and Snowball Method (pay off smallest balance first , gives psychological wins). Mathematically, Avalanche is better; emotionally, Snowball keeps you motivated.
Should I pay off debt or invest first?
Pay off high-interest debt first (credit cards at 36-42%, personal loans at 14-18%). For low-interest debt (home loan at 8%), it may be better to invest in equity (expected 12%) and pay minimum EMI.
Top ITR Filing Services
Disclosure:These are unbiased affiliate links. We may earn a commission if you open an account, at no extra cost to you. We recommend comparing platforms and selecting the one that best fits your financial needs.
Get Smarter With Money Every Week
Join 10,000+ readers. One actionable money tip delivered free every Sunday.
Was this calculator helpful?
Grow Your Service Business Online
Spend less time managing appointments and more time growing your business. Accept appointments 24/7, manage walk-ins, schedule staff, and track revenue from one place.
Advertisement