Compare the avalanche method (highest interest rate first) against the snowball method (smallest balance first), see your real debt free date, and find out how much interest an extra monthly payment actually saves you.
How the avalanche and snowball methods actually differ
Both methods pay the minimum on every debt, then throw every spare dollar at one target debt until it hits zero, then roll that entire payment into the next one. The only difference is which debt you target first. Avalanche targets the highest interest rate, which mathematically saves you the most money. Snowball targets the smallest balance, which gets you a "debt free" win faster and tends to keep people motivated longer. Neither is wrong. If you have stuck with a payoff plan before and quit, snowball's quick wins are worth more than the extra interest. If you are disciplined and want the cheapest path out, avalanche wins every time.
A concrete example
Say you have a $4,500 credit card at 22.9% APR with a $120 minimum, and a $9,000 car loan at 6.5% APR with a $220 minimum, and you can add $150 extra a month. Avalanche tells you to hit the credit card first since 22.9% is bleeding you the most, even though the car loan balance is bigger. That single choice, on these numbers, saves roughly $300 to $500 in interest over the payoff period compared to attacking the car loan first, because every month the card balance is high, it is accruing interest almost four times faster than the loan.
Why the "extra payment" number matters more than people think
Minimum payments are calculated to stretch a balance out for years, sometimes decades, because most of each payment goes to interest, not principal. Adding even $50 to $100 a month on top of minimums shrinks that timeline dramatically, because that extra amount goes almost entirely to principal. Run the calculator above with $0 extra first, then with $150 extra, and compare the months to debt free. The gap is usually much bigger than people expect before they see the real numbers.
This calculator gives estimates based on the numbers you enter and assumes payments are made on time every month. This article is for general informational purposes and isn't financial advice.