Calculation Principles
All DebtCalculatorLab calculators use CPA-reviewed mathematical models based on industry-standard amortization formulas. Our calculations account for monthly compounding interest, payment application order, minimum payment requirements, and strategy-specific prioritization rules.
Payoff Strategy Methodologies
Debt Snowball Method
Logic: Debts sorted by balance (smallest to largest). All extra payment directed to smallest debt while maintaining minimums on others.
Best for: Borrowers needing visible progress and psychological wins.
Debt Avalanche Method
Logic: Debts sorted by APR (highest to lowest). Targets highest-interest debt first to minimize total interest paid.
Best for: Mathematically optimal approach for maximum interest savings.
Debt Readiness Checker (Decision Engine)
Logic: Non-numerical assessment using debt-to-income ratios, hardship indicators, and goal classification to route users to appropriate solutions.
Output States:
- Self-managed payoff ready (good DTI, no hardship)
- Strategy optimization recommended (manageable debt, benefit from comparison)
- Consolidation-ready (multiple high-APR debts)
- Debt relief-ready (high DTI, hardship present)
What it does NOT do: Collect PII, perform credit checks, guarantee outcomes.
Data Sources & Industry Benchmarks
Our calculators incorporate data from authoritative financial sources to ensure realistic modeling:
Federal Trade Commission (FTC)
Consumer protection guidance on debt settlement practices and typical settlement ranges
Consumer Financial Protection Bureau (CFPB)
Credit card minimum payment regulations and debt collection standards
Industry Averages
Credit card APR ranges (14-25%), typical minimum payment percentages (2-3%), debt settlement success rates (40-60% of original balance)
Academic Financial Models
Standard amortization formulas and compound interest calculations reviewed for mathematical accuracy
Note: All data is used for educational modeling only. Actual results depend on individual circumstances and creditor-specific policies.
Key Assumptions
- Interest rates remain constant throughout payoff period
- No new debt added during payoff
- Payments made on time every month
- No payment holidays or forbearance periods
- Minimum payments calculated as 2-3% of balance with $25 floor
- Settlement percentages (debt relief) are industry averages (40-60%)
Limitations & Disclaimers
Educational Purpose Only: All calculators provide estimates for educational purposes and do not constitute financial advice.
What Can Change Results: Payment consistency, interest rate changes, fees, penalties, creditor policies, credit score impacts, and individual circumstances.
Professional Advice Recommended: For personalized guidance, consult qualified financial advisors, credit counselors, or attorneys.