How this instrument works
The debt avalanche method answers one narrow question: if you have a fixed amount of spare cash each month, which balance should absorb it first? The arithmetic gives the same answer every time — send every extra dollar to whichever debt charges the highest annual percentage rate, and pay only the minimum on everything else. Interest is a percentage of what you still owe, so shrinking the balance with the steepest percentage removes more future interest per dollar redirected than shrinking any other balance would.
This instrument isolates that effect for a single month. It compares two moves using the same extra payment: putting all of it against the higher-rate balance, or splitting it evenly between both balances. The gap between the two resulting interest charges is the avalanche method's edge for that one month — small on its own, but the same edge repeats every month the higher-rate balance survives, and it compounds, because a smaller balance next month means less interest the month after.
The method has a cost the arithmetic will not show you: it asks you to keep making only minimum payments on a balance you are otherwise ignoring, sometimes for a long stretch, before that debt gets any extra attention. That delay is the entire argument for the rival 'snowball' order — smallest balance first, for a faster run of closed accounts. This sheet tells you only which order minimizes interest paid; it does not weigh in on which order you are more likely to actually finish.
- Enter Higher-rate debt balance and Higher-rate debt APR for the costlier of your two balances.
- Enter Lower-rate debt balance and Lower-rate debt APR for the other balance.
- Set Extra payment available to the dollar amount you can put toward debt beyond both minimums this month.
- Compare Next month's interest, avalanche against Next month's interest, extra split evenly to see the two outcomes side by side.
- Read Interest saved that month by using avalanche order for the exact dollar edge on your own numbers.
Worked example — $5,000 at 22% versus $3,000 at 12%
Take a $5,000 balance at 22% APR and a $3,000 balance at 12% APR, with $200 available beyond minimums this month. Sending the full $200 to the 22% balance leaves $4,800 accruing at 22% and the full $3,000 still accruing at 12%: interest for the month works out to (4,800 × 22 ÷ 1200) + (3,000 × 12 ÷ 1200), which is $88.00 plus $30.00, or $118.00 total.
Split that same $200 evenly instead — $100 off each balance — and the amounts accruing interest become $4,900 and $2,900: interest comes to (4,900 × 22 ÷ 1200) + (2,900 × 12 ÷ 1200), which is $89.8333 plus $29.00, or $118.8333 total. The avalanche order saves $0.8333 in this one month alone, and that same gap recurs every month the 22% balance survives, which is why it adds up to real money over a full payoff.
Questions
Why does the avalanche method save the most interest?
Interest each month is a balance multiplied by its periodic rate, so a dollar removed from the balance charging the highest rate erases more future interest than the same dollar removed from a lower-rate balance. Directing every spare dollar at the highest APR first, rather than spreading it around, is the arithmetic path to the lowest total interest across every debt combined.
Isn't the snowball method — smallest balance first — better?
Not on interest cost. The snowball method usually costs more in total interest because it ignores rate entirely and can leave a high-rate balance untouched for months. Its advantage is behavioral: closing a small account quickly produces a visible win that keeps some people paying. This sheet measures interest only; it does not measure which order you are more likely to finish.
What if my higher-rate balance is smaller than my lower-rate balance?
The avalanche order still sends the extra payment to the higher-rate balance regardless of size, because rate — not balance — determines how much interest a dollar of principal removes. A small balance at 22% still costs more per dollar owed than a large balance at 12%, so it is still first in line for the extra payment.
Why is the monthly saving in the example so small?
$0.83 is the saving for one month on two balances, not the lifetime saving. The same rate gap applies every month the 22% balance still exists, and because the avalanche order shrinks that balance faster, the gap compounds — the full-payoff saving across dozens of months typically runs to many multiples of any single month's figure.
Does this calculator handle more than two debts?
No — it compares exactly two balances so the interest-rate effect stays visible and easy to check by hand. With three or more debts the same rule still applies: rank every balance by APR, send extra payments to the highest rate first, then move to the next-highest once that balance reaches zero, and continue down the list.
References
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.