Compare smallest-balance and highest-rate debt payoff plans
Compare two ways to allocate a fixed monthly budget across up to three debts. Keep the same balances, rates and minimum payments in both runs. This is a mathematical illustration, not debt counselling or permission to change your agreements.
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Set the total budget before the priority
Enter a balance, nominal annual rate and fixed monthly minimum for each active debt. Add an affordable extra amount. The starting sum of minimums plus extra becomes the same monthly budget in both plans. Ignore an unused row by leaving its balance zero. Do not enter passwords, account numbers or lender login details.
Understand the allocation order
Both runs first add monthly interest and pay the entered minimums. Remaining budget goes either to the smallest current balance or to the highest annual rate. After a debt is paid, its available payment stays in the budget for other debts. Equal priorities use the original row order. Rates stay fixed and fees, new purchases and penalties are excluded.
Use the difference to ask better questions
Compare total interest and months, then check whether your agreements permit the planned allocation. Keep actual required payments and essential expenses protected. If the model does not reduce total debt or exceeds its simulation limit, it gives a warning. It does not determine legal priority, negotiate creditors or predict how missed payments will be treated. FSCA consumer resources are background reading [1].
Keep the budget constant when comparing methods
Before comparing results, write down the sum of the starting minimums and the extra payment. That same budget must be used in both runs; changing it would compare two budgets as well as two allocation orders. Check that every active debt’s entered minimum matches the assumption you want to model. If an actual agreement recalculates a minimum as the balance changes, this fixed-minimum version will not reproduce it. After a debt is paid, the model redirects its available payment rather than reducing total spending on debt. Keep any real extra charge or arrears obligation in a separate review because it is not included in the tool.
A calculation you can check
Fictional first month at zero interest: debts R400 and R1,000 have minimums R100 each plus R200 extra, making R400 budget. Both minimums leave R200 extra. Smallest-balance allocation leaves R100 and R900 respectively. Future months keep the R400 budget.
Questions about this decision
What is the smallest-balance method?
Extra available payment targets the smallest current remaining balance after the minimum-payment stage.
What is the highest-rate method?
Extra available payment targets the debt with the highest entered annual rate, with other minimums maintained in the model.
Does the budget shrink after a debt closes?
No. The initial monthly budget remains fixed, allowing freed payment to reach other debts.
Can I change a contractual payment based on the result?
Check the agreement and speak to the provider. The tool does not authorise reduced minimums or payment-date changes.
Are fees and insurance modelled?
No. Add their effect to a separate actual repayment review; the comparison models balance interest only.
How many debts can I enter?
Up to three. Use zero balance for an unused row and a positive fixed minimum for each active row.
What if the debts do not reduce?
The simulation flags a non-reducing total or the time limit. Recheck inputs and obtain appropriate help for the actual obligations.
Does it include arrears or court orders?
No. These require an individual review; the mathematical ordering does not determine their priority.