Which loans to pay off first calculator

How to use this debt snowball payoff calculator. Watch your debts dwindle. Sign up for an account to link your cards, loans and accounts to manage them all in one place.

Let's do this. Understanding your results. When the first debt is settled, then you target the next-smallest one for the extra-payment treatment. Let's see how the snowball effect works on our previous debt example.

The snowball method would have you focus on the car loan first because you owe the smallest amount of money on it. You'd settle it in about three months, then tackle the other two. As with the debt avalanche method, you'd become debt-free in about 11 months. Percentage of U. It's our hunger for instant gratification that makes the snowball method so effective, says personal finance author and talk-show host Dave Ramsey , an advocate of the technique. You need some quick wins in order to stay pumped enough to get out of debt completely.

The debt snowball method's big advantage is that it helps build motivation. Because you see fast results—eliminating some outstanding balances completely in only a few months—it encourages you to stick with the plan.

That mountain of debt doesn't seem so unscalable after all. Plus, it's easy to implement—no need to compare interest rates or APRs; just look at each sum you owe. The big drawback of the debt snowball is that it can be more expensive overall. Because you're prioritizing balances over APRs, you could end up paying more money in interest.

Getting completely free and clear could take more time, too, depending on the nature of the debts, and how frequently the interest on them compounds. Both the snowball method and the avalanche method are types of accelerated debt repayment plans —ways of speeding up the retirement of your debts, by paying more than the minimum due on them each month.

Of course, both assume you can afford to commit extra funds to pay down what you owe on a regular basis. If your income is irregular or unstable—or if you think a layoff is imminent—you might want to stick with making minimum payments. If you're applying one of these strategies to credit card balances, they should be credit cards you don't plan to use for new purchases. You can't pay off a balance, obviously, if you're continuously adding to it.

Finally, there may be special circumstances with certain debts that alter your repayment schedule. Whatever debt repayment method you're using, however, you'd definitely want to clear this balance before the special introductory rate period ends—regardless of how it compares to your other bills.

Otherwise, you'll just have added a fresh pile to your interest-rate-bearing obligations. The debt snowball is a type of accelerated debt repayment plan. You list all of your debts from smallest to largest. You then devote extra money each month to paying off the smallest debt first; you make only minimum monthly payments on the others.

When the first balance is settled, you move on to the next smallest. The debt snowball can be an effective method for settling just about any type of debt, with the exception of mortgage loans. A lot of its appeal is psychological. It has the debtor target small balances to pay off first; erasing these "easier" outstanding balances gives a motivational boost, encouraging the debtor to stay disciplined and keep on with their debt repayments—the way the quick loss of a few pounds encourages a dieter to stay with a weight-loss program.

Whether a debt snowball or a debt avalanche is better depends on whether we're speaking in financial or psychological terms. In terms of saving money, a debt avalanche is preferable.

Since it has you pay off debts based on their interest rates—targeting the most expensive ones first—it means you end up paying less in interest. That adds up to paying less money overall—provided you stick with the payment plan. But, as any behavioral finance expert will tell you, human beings are often irrational when it comes to money. They find it much easier to stay motivated when they pay off smaller debts first, regardless of their interest rates.

So, even though it might cost more, the debt snowball is better, psychologically speaking—debtors are more likely to stick with the program because they have a stronger sense of making progress.

Whether you should pay off big debt or small debt first depends on your psychological makeup. Studies have shown that paying off small debts often leaves people feeling more satisfied—small victories, so to speak—and more likely to keep on with a repayment program that eventually clears all their outstanding balances. If you really want to attack the debt, you need to throw as much money as you can towards it each month, especially if your balance is high.

You need to at least be able to pay the minimums on everything else. Paying off your credit card debts according to the interest rate is a smart move, mathematically speaking, but can take longer to reach your first repayment milestone.

If you need to be motivated to stay on the path to debt freedom, paying down the smallest balances may be your best bet. Being able to knock out a few smaller bills right away can build your confidence and give you the push you need to stick with your debt repayment plan.

Once you get all the little debts out of the way, you can decide whether you want to keep paying your debts based on the balance or switch to paying the highest interest one first. The important thing is to get on a debt payoff plan that works for you and that will help you get out of debt fast. Get started today—your first 14 days are on us. The debt snowball is a debt payoff method where you pay your debts from smallest to largest, regardless of interest rate.

Knock out the smallest debt first. Then, take what you were paying on that debt and add it to the payment of your next smallest debt. Why a snowball? Because just like a snowball rolling downhill, paying off debt is all about momentum. Step 1: List your debts from smallest to largest regardless of interest rate.

What happens then? No more payments. No more answering to collectors. No more watching your paychecks disappear. Because when you get hyper-focused and start chucking every dollar you can at your debt, you'll see how much faster you can pay it all off.

Sorry, minimum payments.