How it works
Each month every balance accrues interest at APR ÷ 12 and you pay each minimum. Whatever is left — your extra amount plus the minimums of debts already paid off — goes to one target debt. The snowball method targets the smallest balance first; the avalanche method targets the highest interest rate first. When a debt is cleared, its payment rolls into the next one, which is why payoff speeds up over time.
Choosing a method
The avalanche almost always costs less interest, because it removes the most expensive debt first. The snowball clears small debts quickly, and that early win keeps many people motivated. If the interest difference in your results is small, choose the method you will actually stick with; if it is large, the avalanche is usually worth it. High-rate credit card balances and cash advances deserve special attention either way.
Limits of the simulation
Rates and minimum payments are assumed to stay fixed. In reality, credit card minimums fall as the balance falls, promotional rates expire and late fees add up. The plan also assumes no new borrowing. A balance transfer or consolidation loan at a lower rate can beat both strategies — run the numbers including any transfer fee.
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