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Debt Snowball Calculator

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Debt Snowball Calculator Consideration of extra principal

Amount borrowed $  
Interest rate %  
Months to pay  
Monthly payment $  
Total interest paid $  
Extra principal $  
Months to pay  
Total interest paid $  

About

The Debt Snowball Calculator computes the size of a monthly payment for a given loan duration and totals interest paid. It also computes the effects of paying extra principal.

To snowball your payments when one debt is paid off, add the extra principal you were paying to that debt plus the required payment (the total of what you were paying) and add that to the payment of the next loan and watch it go down even faster!

It looks like this:

Loan 1 $6,000 7% min payment $118.81, months to pay put 60 (5 years)

Loan 2 $10,000 5% min payment $190, months to pay put 60

Extra to apply $25

Plug in the numbers for loan 1 into the debt snowball calculator.

You'll get 48 months to pay with the extra principal! Shaved 12 months off of that loan.

Now plug in loan #2. But now you'll be paying the 118.81 + 25 into the loan payment of #2, so instead of 25 in extra put in 143.81.

You'll get that loan paid off in only 33 months! That's almost half!

Need a genious idea of how to come up with that extra $25 to get you started? Visit http://www.RushOutOfDebt.com and buy the $19 Ebook. You'll find the secret to getting that $25/mo, maybe more from PayPal! Everything is explained in much more detail there, and there are great ideas and suggestions. You can get that $25/mo without cutting any expenses.

To operate the calculator, first enter the amount borrowed, the annual interest rate, and the duration in months. Press the Compute button to get the principal and interest portions of a mortgage payment as well as a total of the interest to be paid for the duration of the loan. Press the Listing button to generate the principal and interest portions of each monthly payment.

Extra principal payments reduce the duration of the mortgage and the total interest to be paid. Enter the value of extra principal to be paid each month; press Compute to see the effect on duration and total interest. Listing generates a list of the principal and interest portions of each monthly payment with extra principal included.

On invalid entries, the output windows will display:

NaN -- Not a Number

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Discussion

When a loan of principal P is amortized, interest P·i is added to remaining balance and a payment amount M > P·i is subtracted from the remaining balance each period. The required periodic payment to amortize a loan of P at periodic interest rate i in N periods can be calculated from: 

          (1 + i)N
M = P·i·--------------
         (1 + i)N - 1

Since payment M > P·i, each payment reduces the remaining principal. The early payments include a small amount of principal and a large amount of interest. The principal part, pp, and interest part, ip of payment can be calculated from: 

ip = Pk·i
pp = M - ip
The principal is reduced after each payment by: 
Pk+1 = Pk - pp
Adding extra principal to each payment will reduce the duration of a loan and the total amount of interest paid. The largest savings are obtained by including extra principal with the early payments.


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