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Debt Reduction Calculator
Strategies
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http://www.vertex42.com/Calculators/debt-reduction-calculator.html
© 2007 Vertex42 LLC
Snowball (Lowest Balance First)
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Avalanche (Highest Interest First)
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Balance Date:4/1/2013
Order Entered In Table
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No Snowball
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Creditor Information Table
Custom - Highest First
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RowCreditorBalanceRatePaymentCustomInterest-only
Custom - Lowest First
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1Card #1 4,400.00 13.00% 75.00 247.67
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2Auto Loan #1 22,000.00 5.00% 450.00 191.67
Lowest Balance First: Gives you the benefit of the snowball effect, but you may
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3Auto Loan #2 16,000.00 5.00% 350.00 366.67
pay more interest in the end than Highest Interest First. The main benefit of this
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4Card #2 9,000.00 13.50% 125.00 5101.25
approach is the psychological effect of seeing the number of debts disappear
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5Student Loan #1 25,000.00 4.00% 300.00 483.34
more quickly.
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60.00
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70.00
Highest Interest First: This strategy results in the lowest total interest, but
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80.00
depending on the balance of your higher interest loans, it may take you longer
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90.00
to see your first loan/debt completely paid off. If the difference in the total
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100.00
interest is not significant, than you may get more satisfaction from the Lowest
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110.00
Balance First method.
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120.00
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130.00
Order Entered in the Table: You can use the sort feature (Data>Sort) to
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140.00
choose how you want the snowball effect to work. For example, if you want
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150.00
to use a combination of Lowest Balance First AND Highest Interest First, then
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160.00
first select the creditor information table (B7:F27), then go to Data>Sort, and
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170.00
sort by Balance:Ascending and Rate:Descending (or vice versa).
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180.00
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190.00
Warning: If you are careful, you can rearrange the order of the entries in the
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200.00
creditor table by copying or cutting and pasting, but if you insert a row above
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Total: 76,400.00 Total: 1,300.00
row 1 or after row 20, the formulas will be messed up. You can cut row 1 (B8:E8)
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and paste it above row 3, or cut row 20 (B27:E27) and paste it above row 9.
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Monthly Payment
1,800.00 .
The calculator can handle up to 20 creditors.
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Initial Snowball
 $ 500.00
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No Snowball: Select this option if you want to see how long it will take to pay
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Strategy:1
off the debts without maintaining a constant monthly payment. In some cases,
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you may find it will take more than 30 years (resulting in errors in the spreadsheet).
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Creditors inOriginalTotal InterestMonths toMonth Paid
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Chosen OrderBalancePaidPay OffOff
Custom-Highest or Custom-Lowest: You can manually control the order the
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Card #1 4,400.00 218.05 #N/A#N/A .
debts are paid by entering numbers or formulas in the Custom column. For example,
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Card #2 9,000.00 1,547.72 #N/A#N/A .
if you enter the values 1,2,3,5,4 then rows 4 and 5 will be swapped. You can enter
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Auto Loan #2 16,000.00 1,379.97 #N/A#N/A .
your own formulas as well, whatever they might be.
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Auto Loan #1 22,000.00 2,286.60 #N/A#N/A .
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Student Loan #1 25,000.00 2,909.43 #N/A#N/A .
Minimum Payments: This calculator does not provide the option of making only
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 - - - .
the minimum monthly payments on credit cards or lines of credit. You can find
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an online calculator with this feature at PowerPay.org. Also see Tip #3.
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Tip 1: If you want to use the Lowest Balance First method and you have two debts that
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are close to the same balance but have very different interest rates, you may
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see a substantial reduction in the total interest paid if you change the order of
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the two entries so that you pay the higher rate first. In that case, try using the
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Order Entered in the Table strategy.
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Tip 2: Like Tip 1, if you want to use the Highest Interest Rate method, and you
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have two debts with similar rates but very different balances, you may want to
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change the order so that you pay off the lower balance first. This may make very
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little difference in the total interest, but it can make you feel better faster.
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Tip 3: Update the Creditor Information Table every few months. Your minimum
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Total Interest Paid:
8,341.77
(Lower is Better)
payments may change over time as the balance in your accounts change, or if your
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Results are only estimates
interest rate changes. You may be able to further reduce your overall interest and
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reduce the time to pay off your debts, by re-adjusting your minimum payments
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[42]
every few months. This would mean starting over with a fresh template, entering
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the new Balance Date, and updating the Creditor Information Table.
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Tip 4 - Snowflaking: This is a popular new term given to making occasional extra
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payments above the normal monthly payment. You can add debt "snowflakes" in the
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PaymentSchedule worksheet.
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