Debt Snowball vs. Debt Avalanche: Which Method Is Right for You?
When you’re facing multiple debts, figuring out where to start can be overwhelming. Should you tackle the smallest one first for a quick win, or the one with the highest interest rate to save money? This is the core of the debate between two popular debt payoff strategies: the Debt Snowball and the Debt Avalanche.
Both methods work, but they are designed for different psychological and financial goals. Let's break them down.
What is the Debt Snowball Method? ❄️
The Debt Snowball method focuses on building momentum. It’s like rolling a small snowball down a hill—it starts small but gets bigger and faster as it goes.
How it works:
- List Your Debts: Order your debts from the smallest balance to the largest, regardless of the interest rate.
- Pay Minimums: Make the minimum payment on all of your debts except for the one with the smallest balance.
- Attack the Smallest Debt: Throw every extra dollar you have at that smallest debt until it's completely paid off.
- Roll It Over: Once the smallest debt is gone, take the money you were paying on it (the minimum payment plus all the extra cash) and "roll it" onto the next-smallest debt.
- Repeat: Continue this process, rolling your payment "snowball" over from one debt to the next. You'll be amazed at how quickly your payment amount grows, knocking out bigger and bigger debts along the way.
Who it's for: This method is perfect for people who need to see progress quickly to stay motivated. That first victory of paying off a debt, even a small one, provides a powerful psychological boost that can keep you going for the long haul.
What is the Debt Avalanche Method? 🏔️
The Debt Avalanche method is the most efficient strategy from a purely mathematical perspective. It focuses on eliminating the most expensive debt first.
How it works:
- List Your Debts: Order your debts from the highest interest rate (APR) to the lowest, regardless of the balance.
- Pay Minimums: Make the minimum payment on all of your debts except for the one with the highest interest rate.
- Attack the Highest-Interest Debt: Throw every extra dollar you have at your highest-APR debt until it's gone.
- Move to the Next: Once that debt is paid off, take the full amount you were paying on it and apply it to the debt with the next-highest interest rate.
- Repeat: Continue this process until you're debt-free.
Who it's for: This method is ideal for people who are disciplined and motivated by saving the most money possible. By tackling high-interest debt first, you minimize the total amount of interest you'll pay over time, which can save you hundreds or even thousands of dollars.
So, Which One Should You Choose?
There's no single right answer—the best method is the one you'll actually stick with.
- If you need quick wins to stay motivated, choose the Debt Snowball.
- If you are driven by numbers and want to save the most money, choose the Debt Avalanche.
The most important thing is to make a plan and take action.
Ready to see how these strategies work with your own numbers? Use our free debt calculator to input your debts and see a personalized action plan in seconds!