Debt Payoff Calculator

There are two standard methods for clearing several debts at once, and the argument between them is older than most personal finance advice. The arithmetic settles part of it and not the part people argue about.

The two methods

Both run the same arithmetic and differ only in the order they attack. Each month, for every debt:

interest = balance × annual rate ÷ 1200

balance = balance + interest - payment

where the payment is the minimum on every debt except the target, which also receives the extra plus every minimum freed by a debt that has already cleared. Avalanche sorts the targets by rate, snowball by balance.

Avalanche. Pay minimums on everything and put every spare rupee against the highest interest rate. When it clears, move to the next highest. Mathematically optimal — it always costs the least in total interest.

Snowball. Pay minimums on everything and attack the smallest balance first. Clears individual debts fastest, producing visible progress early.

Both require the same total payment each month. They differ only in where the surplus goes.

What the difference actually is

Take four debts and a ₹29,000 monthly minimum plus ₹5,000 extra:

The avalanche saves ₹6,324 over the snowball. That is real money and it is 2% of the interest bill.

The far larger number is the third row. Finding ₹5,000 a month saves ₹2,84,509 and seventeen months, whichever order you use.

The order is a second-order decision. The extra amount is the first-order one. Most of the energy spent arguing about avalanche against snowball would be better spent on the ₹5,000.

When the gap does widen

The two methods converge here because the highest-rate debt also happens to be one of the smaller balances. That is common and not universal.

The gap grows when a large balance carries a high rate and a small balance carries a low one — say a ₹5 lakh credit card balance alongside a ₹40,000 interest-free instalment plan. Snowball would clear the ₹40,000 first while 42% compounds on ₹5 lakh, and the difference over a couple of years is substantial.

The rule: check whether the ordering actually differs between the two methods before deciding it matters. Frequently it barely does.

Which to choose

Avalanche if you will stick with a plan on arithmetic alone. It always costs less.

Snowball if you have abandoned repayment plans before. Clearing a debt entirely — one fewer account, one fewer payment, one fewer reminder — is a real psychological event, and a study of participants in debt repayment programmes found that closing accounts in order of smallest balance predicted completion better than the interest-optimal order did.

The best method is the one you finish. A snowball completed beats an avalanche abandoned by an enormous margin, and the ₹6,324 the avalanche would have saved is irrelevant if the plan stops in month eight.

A workable hybrid: clear anything above 30% first regardless of size, because at those rates the balance grows faster than most people can pay it down, then switch to smallest balance for the rest.

Credit card debt is the emergency

Indian credit cards charge 3% to 3.75% a month, which is 42% to 55% a year once monthly compounding is included. Nothing else on an ordinary balance sheet approaches it.

A ₹1,00,000 balance at 3.5% a month, paying only the 5% minimum, takes well over a decade to clear, and passes the original balance in interest paid before it is half repaid. The minimum payment is designed to service the interest and barely touch the principal — it is a product feature, not a repayment plan.

Two facts make it worse. The interest-free period disappears the moment you carry a balance, so new purchases start accruing from the transaction date rather than the statement date. And cash withdrawals never have an interest-free period and usually add a 2.5% fee on top.

If you are carrying a card balance, clearing it returns 42% guaranteed and tax-free. No investment does that, and no other debt on this page comes close.

Options for restructuring

Balance transfer. Move a card balance to another card at 0% to 12% for three to twelve months. The transfer fee is 1% to 3%, and the promotional rate reverts afterwards — usually to a rate as high as the one you left. Useful only with a plan to clear it inside the window.

Convert to EMI. Most Indian issuers convert a balance to an instalment plan at 13% to 18%, which is a third of the revolving rate. It is worth doing almost immediately if the balance will not clear within a month or two.

Personal loan consolidation. A single loan at 11% to 16% replacing several higher-rate debts simplifies the payments and lowers the rate. The trap is well documented: the cards, now empty, get used again, and the borrower ends up with the loan and new card debt.

Loan against property or gold, at 9% to 12%. Cheaper still, and secured — which converts an unsecured problem into one that can cost you the asset.

Settlement. Negotiating a reduced payoff is a last resort. It is recorded as "settled" rather than "closed" on your credit report and damages the score for years, which affects every future loan.

The order that comes before all of this

Before optimising the payoff sequence:

Stop adding to it. A repayment plan running alongside continued card spending does not work.

Keep a small emergency buffer, ₹25,000 to ₹50,000. Without it the next unexpected expense goes on the card and undoes months of progress.

Never miss a minimum. A missed payment triggers a late fee, penal interest, and a credit report entry that costs far more than the amount missed.

Then apply the surplus, in whichever order you will actually sustain.

Reading a credit card statement

Three lines on the statement decide how much a balance costs, and two of them are easy to misread.

Total amount due is the full balance. Paying it in full by the due date means no interest at all on purchases.

Minimum amount due, usually 5% of the balance. Paying it keeps the account in good standing, avoids the late fee and protects the credit score — and does almost nothing to the balance.

Statement date and due date. The interest-free period runs from a purchase to the due date of the statement it falls into, which is why a purchase made the day after a statement gets nearly two months of grace and one made the day before gets three weeks.

The critical detail: paying the minimum does not preserve the interest-free period. Once a balance is carried, interest is charged from the transaction date on everything, including new purchases, until the balance reaches zero. A partial payment is far better than a minimum payment, and only a full payment restores the grace period.

When to get help

Some debt situations are not arithmetic problems and no repayment ordering will fix them.

If total unsecured debt exceeds a year of income, if minimum payments alone exceed what you can pay, or if you are borrowing to make repayments, the situation needs restructuring rather than optimising.

Options include approaching lenders directly — most have hardship and restructuring processes that are not advertised — and, for larger amounts, the insolvency and bankruptcy framework for individuals. Speaking to the lender early is consistently better than after a default, because the range of options available narrows sharply once an account is classified as non-performing.

Avoid any service charging a large upfront fee to negotiate on your behalf. The lender's own restructuring desk costs nothing to contact.

What this calculator assumes

• Minimum payments continue on every debt, with the extra amount applied to one debt at a time in the order the method specifies.
• Rates are annual and compounded monthly, which matches how Indian credit cards and loans work.
• Balances do not grow — no new spending on any account during the plan.
• No fees, penalties or promotional rate changes are modelled.
• Once a debt clears, its payment is rolled into the surplus, which is what makes both methods accelerate over time.