Common questions about the debt payoff calculator, answered directly.
If your debt interest rate is above 7-8% (roughly market return expectations), paying off debt gives a guaranteed "return" that's hard to beat. Below that rate, investing often wins mathematically. Credit card debt at 20%+ should almost always be paid before investing beyond a 401k match.
Paying only the minimum on a credit card keeps you in debt for decades. On a $5,000 balance at 22% APR with the common "interest plus 1% of balance" minimum, you'll pay for about 19 years and spend roughly $8,100 in interest — more than the original balance.
Yes — the avalanche method (highest rate first) minimizes total interest paid. But the order only matters for extra payments above the minimum; minimums should always be paid on all debts simultaneously to avoid late fees and credit score damage.
In both avalanche and snowball methods, when a debt is fully paid, you roll its minimum payment (plus any extra) to the next priority debt. This "snowball effect" accelerates payoff significantly as debts are eliminated.
Federal student loans typically carry lower rates (3-7%) — investing in a 401k with employer match almost always beats paying extra toward these. Private student loans at higher rates are a different calculation. Use the rate as the primary guide.
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