Loan Guide

Every loan and every debt balance is repaid through the same underlying mechanic: a series of payments that each split between interest, the cost of borrowing, and principal, the part that actually reduces what you owe. A $10,000 loan at 5% over 36 months costs $789.56 in interest. Stretch the same loan to 60 months and the interest rises to $1,322.60, an extra $533, even though nothing about the loan amount or rate changed.

When you owe several debts at once instead of one loan, a second variable enters: which debt gets your spare cash first. On three example debts totaling $25,000 with an extra $200 per month available, targeting the highest-interest debt first (Avalanche) finishes in 36 months for about $4,312 in interest, while targeting the smallest balance first (Snowball) finishes in 37 months for about $4,973, a $661 difference for the same total debt and the same extra payment.

This guide separates the Loan Calculator, for a single fixed-rate loan, from the Debt Payoff Calculator, for multiple balances competing for the same budget, and shows the concrete numbers behind term length, fees, and payoff strategy so you can see exactly where your money goes.

A fixed-rate loan is repaid with amortization: a constant scheduled payment where the interest and principal split shifts every month. Interest is charged only on the remaining balance, so early payments are interest-heavy and later payments are principal-heavy. On the $10,000 loan at 5% over 36 months, month one carries about $41.67 of interest and $258.04 of principal out of the $299.71 payment; by month 36 nearly the entire payment reduces principal.

The formula behind this is Payment = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the financed amount, r is the monthly rate (annual rate divided by 12), and n is the number of months. At a 0% rate the formula collapses to simply P divided by n, since there is no interest to schedule.

Debt payoff plans use the same interest-then-principal logic on each individual debt, but add one more rule: any payment above the required minimums, plus the minimums freed up by debts that have already reached zero, gets redirected to one focus debt at a time. This redirection, not the interest formula itself, is what separates a payoff plan from a single loan.

The Loan Calculator estimates the scheduled monthly payment, total interest, and total cost of a single fixed-rate loan, and lets you add financed fees as one-time, yearly or monthly charges. Using its own default numbers, a $10,000 loan at 5% annual interest over 36 months gives a monthly payment of $299.71, a total interest cost of $789.56, and a total paid of $10,789.56.

Term length is the biggest lever on monthly affordability. Stretching the same loan from 36 to 60 months lowers the payment to $188.71, a saving of $111 per month, but raises total interest to $1,322.60, an extra $533 over the life of the loan. Neither term is universally correct: it is a trade-off between what fits your monthly cash flow and what the loan costs overall.

A financed origination fee is added to the starting balance and repaid with interest like the rest of the loan. A 2% fee on the $10,000 loan adds $200 to the financed amount, raising the monthly payment to about $305.70 and the total cost to about $11,005.20, which includes roughly $16 of extra interest generated by financing the fee itself rather than paying it upfront.

The Debt Payoff Calculator compares Avalanche, which targets the highest APR first, against Snowball, which targets the smallest balance first, across multiple debts sharing one monthly budget. Using its own default three-debt scenario, a Credit Card ($8,000, 22% APR, $200 minimum), an Auto Loan ($12,000, 6% APR, $280 minimum) and a Personal Loan ($5,000, 11% APR, $150 minimum), with $200 extra available on top of $630 in combined minimums, Avalanche finishes in 36 months for about $4,312 in total interest.

Snowball, on the same three debts and the same $830 total monthly budget, targets the $5,000 Personal Loan first since it is the smallest balance, clearing it in about 16 months for an early motivational win, then finishes the full plan in 37 months for about $4,973 in total interest, roughly $661 more than Avalanche.

Both strategies rely on cascading minimums: once a debt is cleared, its minimum payment does not disappear from the budget, it rolls onto the next focus debt on top of the existing extra payment. This is why either strategy clears all debts far faster than paying only the required minimums on each one.

Comparing loans by monthly payment alone. The 60-month term on the $10,000 example pays $111 less per month than the 36-month term, but costs $533 more in total interest, a trade-off the monthly figure alone never reveals.

Financing a fee without noticing it also earns interest. A 2% origination fee ($200) on the $10,000 loan raises the total cost to about $11,005.20, roughly $16 more than the fee amount itself because the financed fee accrues interest for the full 36-month term.

Choosing Snowball for motivation without knowing the price. Snowball costs about $661 more in total interest than Avalanche on the three-debt example, a specific, knowable cost for the early win of clearing the smallest debt first, not a free choice.

Underrating the extra payment compared to strategy choice. Avalanche and Snowball differ by only 1 month and about $661 on the example debts, while doubling the extra payment from $200 to $400 typically cuts both payoff time and total interest by more than half.

Forgetting that freed-up minimums must cascade. Once the credit card clears under Avalanche, its $200 minimum plus the existing $200 extra creates a $400 combined attack on the next debt; without this cascade, the plan reverts to the much slower minimum-only pace.

Treating a minimum payment as always enough to make progress. If a debt's minimum payment is smaller than the interest accruing on it, the balance grows every month regardless of payments, and the calculator flags the plan as not payable until the extra payment or minimum is raised.

Term length is the strongest lever on a single loan: it moves the monthly payment and the total interest in opposite directions, as shown by the $111 monthly saving costing $533 in extra interest between 36 and 60 months on the same $10,000 loan.

For multiple debts, the extra payment amount matters more than the strategy label. Doubling the extra payment from $200 to $400 in the three-debt example typically cuts both payoff time and interest by more than half, a far bigger swing than the 1-month, $661 gap between Avalanche and Snowball.

Financed fees behave like extra principal: a 2% origination fee does not just cost 2%, it generates its own interest for the entire term, adding roughly $16 beyond the $200 fee itself on the 36-month example loan.

Avalanche and Snowball converge to the same result when the highest-APR debt is also the smallest balance, since both strategies then pick the identical debt to attack first. The two plans only diverge, and only then does the trade-off between cost and motivation actually matter, when interest rate and balance size point at different debts.

When comparing loan offers, total cost of the loan, principal plus interest plus financed fees, is the only number that accounts for every difference between offers. A lower headline rate can still lose to a competing offer once a larger origination fee is financed in, which is why the $200 fee in the worked example changes the total cost by about $216, not just $200.

When comparing payoff plans, run both Avalanche and Snowball on your actual debts before picking one. If the gap is small, as in the $661 example, choose the plan you are more likely to complete; if the gap is large because your highest-rate debt is also your largest balance, the interest savings from Avalanche compound further with every month you stay on plan.

For a debt consolidation decision, treat the new consolidation loan like any other loan offer: put its rate, term and fees through the Loan Calculator, and compare its total cost against the total interest your current Avalanche or Snowball plan would otherwise produce on the same balances.