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Debt Snowball vs. Avalanche: Which Is Right for You?

In this article

  1. Debt Snowball Method
  2. Debt Avalanche Method
  3. Debt Snowball vs. Debt Avalanche: How Do They Differ?
  4. Tips on Getting Started
  5. FAQs
  6. Final Thoughts

There are two popular methods people use to pay off their debt: debt snowball and debt avalanche. Both can be a strategic way to accelerate payments on money you owe and help you become debt-free faster.

Jackie Lam • October 20, 2021

If you have debt, you know that the balance in your savings account can be more of an illusion. It often seems like there’s an underwater glacier that’s pulling any net balance in your account to a negative.

But no need to despair. There are some tactics to help you methodically pay off money owed.

For instance, you may have heard the terms “avalanche” and “snowball” debt repayment methods tossed about. No, it doesn’t involve hiding out in a snowy mountain range until your debt load magically disappears, although that would be pretty awesome. Instead, these are two common tactics to pay off your debt, whether you have student loans, credit card debt, personal loans, car loans, and so forth.

Let’s take a deeper look at these two popular debt repayment methods, so that you can decide which method is right for you.

Debt Snowball Method

Imagine a snowball rolling down a mountain, starting small and then getting larger as it collects more snow — that’s how the debt snowball method works. This method involves paying off your debts from smallest to largest. 

To do this, first make a list of all the debts you owe, in ascending order of amount, and then start by paying off the smallest amount. You still make the minimum payment on each outstanding balance, but you put any additional money you have toward the one with the smallest balance. Once that debt is paid, you can work your way up to the next smallest amount owed — regardless of the internet rate. Ideally, this process would continue until all accounts are paid off.

This method is a good way to start clearing those little debts quickly. For some, seeing those smaller debts fall away could be a great confidence booster. So, if you are someone who is motivated by instant gratification, the snowball method might be the best way for you to tackle outstanding debt.


Debt Snowball Example

To keep things simple, let’s just focus on credit card debt. Let’s say you have 3 credit cards, each with varying balances and interest rates:

Card A – Balance: $800; Minimum Payment: $50; Interest Rate: 25%

Card B – Balance: $2,000; Minimum Payment: $45; Interest Rate: 22%

Card C – Balance: $500; Minimum Payment: $40; Interest Rate: 20%

With the debt snowball method, you’d start with making extra payments on Card C (with a balance of $500) until it’s completely paid off. Next, you’d take the extra monthly payments you were making on Card C and put them toward Card A, which is the card with the next-lowest balance ($800). Once Card A is paid off, you then put all your efforts into Card B (with a balance of $2,000).


Debt Snowball Pros and Cons 

Seeing small wins fast can be very motivating.Because you are prioritizing balances over annual percentage rate (APRs), it will cost you more interest — meaning you will lose more money in the long run.
Because you’re focusing on the debt with the smallest balance, you can make faster strides while spending less money in the short term.Clearing all your debts could take more time, depending on the nature of the debts and how frequently their interest compounds.

Debt Avalanche Method

Unlike the snowball method which focuses on tackling the lowest debt and working your way up to the highest one, the avalanche method focuses on paying the loan with the highest interest rate first. 

To do this, first make the minimum payments on all your debts. You will then focus on tackling the debt with the highest interest rate, paying the minimum payment plus extra payments each month. After you’ve crushed the first one, you then take the money you would use to pay off that debt and move onto the debt with the next-highest interest rate. 

This method won’t bring instant gratification, as it will take longer to see a significant dent in your debts, but if you have the discipline, the debt avalanche method will save you the most in interest payments — meaning you would pay less over time.


Debt Avalanche Example

So, to illustrate this, let’s use the same 3 cards as we did with our Snowball Debt Repayment example:

Card A – Balance: $800; Minimum Payment: $50; Interest Rate: 25%

Card B – Balance: $2,000; Minimum Payment: $45; Interest Rate: 22%

Card C – Balance: $500; Minimum Payment: $40; Interest Rate: 20%

Because you’re doing the avalanche debt method, you’ll first make minimum payments on all 3 cards. In this scenario, you’d then also throw down extra each month toward the credit card with the highest interest rate (in this case, Card A with an interest rate of 25%).

After you’ve finished paying off Card A, you would pay the minimum payment on Card B ($45) and Card C ($40), plus an extra payment toward Card B (the one with the second-highest interest rate of 22%.) Once you’ve paid off Card B, you’re left with Card C to pay off.


Debt Avalanche Pros and Cons

Minimizes the amount of interest you pay, which will save you more money in the long run.Requires a constant amount of discretionary income. Depending on your situation, you may not be able to afford to make the minimum payments, plus extra, every month. 
Lessens the amount of time it takes to get out of debt.  Because you’re throwing down larger chunks of cash toward your debt, you’ll make faster headway.It could take a while to pay off your loans, especially if the balance with the highest interest rate happens to have the largest amount of debt.


Pro Tip

Setting up an automatic savings account helps you budget for paying off your debts. It will keep you from spending the extra money you’ll need to pay down either the loan balance or interest.

Debt Snowball vs. Debt Avalanche: How Do They Differ?

With both the debt snowball and avalanche repayment methods, you are making the minimum payments on all your debts, plus extra payments. But there are a couple of major differences between the snowball and avalanche repayment methods.

  1. The snowball method focuses on making extra payments based on your balances.
  2. The avalanche method focuses on making extra payments based on your interest rates. 
  3. The snowball method goes from lowest to highest amounts.
  4. The avalanche method goes from highest to lowest amounts.

Keep in mind that if your higher balance card also happens to be the one with the lower interest rate, then for you, there might not be that much of a difference between the avalanche and snowball method. 

Tips on Getting Started

Ready to nip your debt in the bud? Here are some pointers on kick-starting the process: 

  • Add up all your debts. Once you’ve decided which repayment debt plan you’d like to go with, tally up all your debts so you can see your balances, interest rates, terms, and fees. Pro tip: there are lots of money management and money-saving apps that allow you to view your debts at-a-glance. The key here is to figure out which debt to tackle first. If it’s been a while since you’ve paid close attention to a particular account, reach out to a representative and get the deets. This will help you make an informed decision.
  • Track your progress. There are a ton of creative ways to track your progress, including a debt payoff thermometer, a Pac-Man style board game where each square or circle represents a certain amount of cash, and you color in each square as it gets paid off.
  • Open a savings account once your debt is paid off. Once your debt is paid off, you can take your money and throw it toward whatever you like — vacation, splurge fund, a car, and what have you. Just make sure you open a savings account for your new goal. This way you can ensure you’re making steady headway.


How does the debt snowball work?

The debt snowball is a type of accelerated debt repayment plan. You list all of your debts from the smallest to largest balance. You then devote extra money each month to paying off the smallest debt first, while making only minimum monthly payments on the others. When the first balance is settled, you move on to the next smallest balance. 

How does the debt avalanche work?

The debt avalanche is a type of accelerated debt repayment plan. You list all of your debts from the highest to lowest interest rate. You then devote extra money each month to paying off the balance with the highest interest first; while making only minimum monthly payments on the others. When the first debt is settled, you move on to the next highest interest rate. 

Which debt should I pay off first?

If you are struggling to figure out whether you should tackle big debt or small debt first, remember that it really comes down to your personality and motivations. If you are motivated by small wins, studies have shown that paying off small debts often leaves people feeling more accomplished — and more likely to keep up with a repayment program that eventually clears all their outstanding balances. 

On the other hand, paying off big debt is more cost-efficient in the long run. The larger your outstanding balance, the more interest it’s generating; so, by paying off the bigger debt, you will save on interest, and you will free up funds for other expenses.

Final Thoughts

So which method is best? Ultimately it’s up to you to decide. Like all things in personal finance, there’s no one-size-fits-all solution. It really depends on what motivates you the most. Would you rather save more in interest, or knock out the smaller debts first?

No matter which debt repayment method you choose, here’s the thing: the fact that you’re making it a priority is king. And by keeping debt payoff top of mind, you’ll be on your merry way to crushing it.

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