By MoneyMaths · Calculation methodology
A payment is not the same as a reduction in the amount you owe. Interest may use up part or all of it. Before comparing payoff methods, check that your numbers describe a workable payment plan.
A simple example
Take a $10,000 balance with a 24% nominal annual rate. In a simplified monthly model, first-month interest is $10,000 × 24% ÷ 12 = $200. If you pay only $100 and unpaid interest is added to the balance, you owe $10,100 after that payment. A $200 payment would cover interest but leave the principal unchanged.
Actual cards and loans may use daily interest, changing minimums and different fees. Check your statement. MoneyMaths uses monthly interest and fixed entered minimums, so its result is an estimate rather than a reproduction of every lender’s billing system.
Keep the total payment budget constant
Suppose you have two interest-free debts: $100 with a $100 monthly payment, and $1,000 with a $100 monthly payment. Your total budget is $200 a month. Pay $100 toward each in month one. Once the small debt is gone, direct the full $200 toward the remaining debt. The combined $1,100 is repaid in six months, with a $100 final payment.
If you drop the total payment after clearing the first debt, the second takes longer. Our planner holds the original combined budget constant. It also reuses any unused part of a payment in the same month.
Compare two priorities
- Highest interest first (avalanche): make the entered minimums, then direct the remaining budget toward the debt with the highest rate.
- Smallest balance first (snowball): make the entered minimums, then direct the remaining budget toward the smallest starting balance.
The report shows time and interest side by side. It does not assume that one method is best for every situation. Promotional rates, early-payment fees and debts requiring urgent attention can change the practical decision.
When there is no payoff date
If a plan still has debt after 600 months, MoneyMaths shows the remaining balance and marks the plan unfinished. It never calls that limit a debt-free date. Check the entered balances and minimums, then explore a larger payment. If the required payment is beyond your means, discuss available options with the lender or an appropriate local debt adviser.
Compare your debt repayment plans →
Original worked examples using the MoneyMaths monthly model. See the calculation methodology for allocation and rounding. Updated 21 September 2026.