Three hypothetical debts, fixed minimum payments and $300 a month extra. See what happens when you pay minimums only, smallest balance first, or highest rate first.
Scene 1
Three debts
Store card: 15% APRCredit card: 24% APRCar loan: 7% APR
A store card with $1,500 at 15% APR ($50 minimum), a credit card with $8,000 at 24% APR ($200 minimum) and a car loan with $12,000 at 7% APR ($300 minimum). Taller stacks are larger balances; darker colors are higher rates.
Scene 2
Minimums only
Month 0 of 82
Interest paid: $0
Paying only the minimums, the stacks shrink slowly. It takes about 82 months to be debt-free, with about $10,350 in interest along the way.
Scene 3
Snowball: smallest balance first
Month 0 of 30
Interest paid: $0
Quick wins keep you motivated.
The extra $300 goes to the smallest balance, the store card, which is paid off in month 5. Its payment then rolls into the next smallest debt. Debt-free in 30 months, with about $3,600 in interest. Quick wins keep you motivated.
Scene 4
Avalanche: highest rate first
Month 0 of 30
Interest paid: $0
Less interest overall.
The extra $300 goes to the 24% credit card first, then rolls to the next highest rate. Debt-free in 30 months, with about $3,400 in interest, about $195 less than the snowball. Less interest overall.
Scene 5
Side by side
Months to debt-free
Minimums only82 months
Snowball (smallest balance first)30 months
Avalanche (highest rate first)30 months
Total interest
Minimums only$10,352
Snowball (smallest balance first)$3,601
Avalanche (highest rate first)$3,406
Both strategies beat minimums by a wide margin. The better method is the one you'll stick with.
Minimums only: about 82 months and $10,350 in interest. Snowball: 30 months and about $3,600. Avalanche: 30 months and about $3,400. Both strategies beat minimums by a wide margin, and the better method is the one you'll stick with.
Enter up to five debts with their balance, APR and minimum payment, plus an extra monthly amount. The comparison of months to debt-free and total interest updates as you type.
Scene 7
Takeaway
Any plan beats no plan. Pick the one you'll stick with.
Any plan beats no plan. Pick the one you'll stick with.
Simplified example with fixed minimum payments; real minimums and interest calculations vary. IAM doesn't offer loans, debt consolidation or debt settlement.
General education only, not individual insurance, financial, tax or legal advice. Examples are hypothetical and don't represent any specific product.
