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Debt Snowball Formula:
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The Debt Snowball Method is a debt reduction strategy where you pay off debts from smallest to largest, gaining momentum as each balance is paid off. This calculator incorporates interest calculations to provide a more accurate timeline for becoming debt-free.
The calculator uses the formula:
Where:
Explanation: The calculator sorts debts from smallest to largest, applies your monthly payment plus any rolled-over payments from previous debts, and calculates the time to pay off each debt including interest charges.
Details: Calculating your debt-free date with interest provides motivation and helps you create a realistic plan for financial freedom. It shows the true cost of debt and the power of consistent payments.
Tips: Enter all debt amounts separated by commas, corresponding interest rates separated by commas, and your total monthly debt payment. The calculator will automatically sort debts from smallest to largest and calculate your payoff timeline.
Q1: Why use the snowball method instead of avalanche?
A: The snowball method provides psychological wins by paying off smaller debts first, which can help maintain motivation throughout the debt repayment journey.
Q2: What if my monthly payment doesn't cover the interest?
A: The calculator will show "Infinite" time for debts where the payment doesn't cover the interest, indicating you need to increase your payments or negotiate lower rates.
Q3: Should I include minimum payments?
A: Enter the total amount you can afford to pay toward debt each month, not just minimum payments. Paying more than minimum accelerates debt freedom.
Q4: How accurate is the interest calculation?
A: The calculator uses monthly compounding interest, which provides a realistic estimate for most consumer debts like credit cards and loans.
Q5: Can I use this for mortgage or car loans?
A: Yes, but these typically have fixed payment schedules. The snowball method works best for revolving debt like credit cards.