Snowball and Avalanche Payoff Orders: How the Calculations Work
What the snowball and avalanche orderings calculate, how monthly interest is estimated, and how to read the schedule in the spreadsheet. Information only, not financial advice.
This page explains what the spreadsheet calculates. It does not say which method is better or what you should do with your money.
What the calculation has in common
For every debt, the spreadsheet applies at least the minimum payment each month. If you enter an extra monthly amount, it is applied to one debt at a time, in an order determined by the method you select. When a balance reaches zero, the amount that was going to that debt (its minimum plus any extra) is applied to the next debt in the order, so the total monthly payment in the calculation stays the same.
Avalanche order: highest interest rate first
The debt with the highest APR is first in line for the extra amount, whatever its size. The next-highest APR is second, and so on.
Snowball order: smallest balance first
The debt with the smallest balance is first in line for the extra amount, whatever its rate. The next-smallest balance is second, and so on.
Custom order
Choose Custom and number the Priority column yourself (1 is applied first). Any reason can determine your order; the spreadsheet simply calculates the result for it.
Comparing orders
Each order produces its own schedule, estimated final payment month and total interest, and they can differ for the same debts. You can switch the order on the first sheet and compare the figures side by side. The numbers show what each order calculates, not which one suits your situation.
How interest is estimated
Each month, the balance is multiplied by the APR divided by 12 and rounded to the cent. The payment is then applied. Lenders may calculate interest daily, use different due dates or add fees, so the results are estimates and can differ from your statements. The spreadsheet assumes no new charges and that rates stay the same.
Reading the sheets
- Debts: your inputs (balance, APR, minimum payment) plus the calculated payoff order, month and interest for each debt.
- Order: the debts in the order the extra amount is applied.
- Plan: every month's payment, interest, principal and remaining balance, next to the balance if only minimum payments were made.
- Dashboard: the totals, with the difference from minimum-payments-only shown as calculated figures.
A "Check" column flags a debt whose minimum payment is below its estimated monthly interest or is missing, because the calculation then shows a balance that does not fall.
About the example numbers
The Example workbook uses fictional debts, balances and rates, made up to show how the sheets work. They are not typical, average or expected figures, and the results shown there say nothing about any real situation.
Or try the free sample first.
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