Debt Snowball vs. Avalanche: Which Should You Choose?

5 min read
Concerned mother sitting at kitchen table looking at bills while young child sits next to her coloring

When it comes to paying down debt quickly and effectively, you may be weighing the pros and cons of the debt snowball method vs. avalanche to accelerate debt paydown, and wondering which would work best for you. No matter what method you go with, using either the debt snowball or the debt avalanche method is far better than continuing to make only the minimum payments on your loan balances.

For example, let’s say you make minimum payments of $700 a month on a total of three debts.

Account Type

Balance

Annual Percentage Rate (APR)

Minimumm Monthly Payment

Credit card

$5,000

23%

$100

Personal loan

$10,000

9%

$450

Student loan

$2,000

6%

$150

Total

$17,000

$700

If you made only the minimum payments on these balances, it would take about 14 years and $12,795 in interest before they would be paid off in full.

In contrast, using either the debt snowball or avalanche method would help you pay off all these balances more quickly, reducing your total cost of borrowing. However, while both strategies can help you accelerate your repayment progress over time, they do differ in a few important ways. Here’s how to compare debt snowball vs. avalanche and choose the approach that works best for you.

Debt Snowball vs. Avalanche: How Are They Different?

As you compare the debt avalanche and debt snowball repayment methods, these are the major differences to keep in mind:

Debt Avalanche

Debt Snowball

Pays down highest interest rate debts first

Pays down smallest debts first

Continue minimum payments on all balances

Continue minimum payments on all balances

May help pay down debt faster

May take longer to pay down debt (depending on the number and size of balances)

May help maximize interest savings over time

May cost more in interest over time

Requires discipline and self-motivation

Early wins help you remain motivated

What Is the Debt Avalanche Method?

While you continue to make minimum payments on all your loans and credit card accounts, with the debt avalanche method, when you have extra cash to put toward debt, you add it to your monthly payment on the account with the highest interest rate first.

Once you've paid off that first high interest debt balance, you then roll the money you were putting toward it into the monthly payment amount of the account with the next highest interest rate. The idea is to keep repeating this method until all your balances are paid off.

Here’s how a debt avalanche would work using the debts exampled above ($17,000 in debt with minimum monthly payments totaling $700). For example, let’s say you can afford to put an extra $100 each month toward debt paydown.

With debt avalanche, you would add your extra $100 to the $100 minimum monthly payment on the credit card. Once that credit card is paid off, you would then roll that $200 payment into the $450 minimum payment on your personal loan. Once that personal loan is paid off, you would apply the now $800 to your student loan balance until it is also paid in full.

Pros and Cons of the Debt Avalanche Method

The debt avalanche approach to paying off debt can save you hundreds, if not thousands, of dollars on interest over the life of your loans. However, there are some potential downsides to consider, especially if your highest interest rate accounts are also the ones with larger balances. While paying these off first will save you the most in interest over time, they will also take longer to pay off.

Pros

  • May help maximize interest savings.

  • Shortens your debt payoff timeline.

  • Good for those who are self-motivated to pay down debt.

Cons

  • May take longer to pay down your first few accounts.

  • May be difficult to stay motivated.

  • May not make a significant difference on interest savings compared to debt snowball.

What Is the Debt Snowball Method?

Just like the debt avalanche strategy, the debt snowball method involves making the minimum payment on all of your debts, however, you would instead apply any extra cash you have to paying down the account with the lowest balance first.

Once you've paid off your first lowest-balance account, you would roll the amount you were paying on that balance into the payment on the account with the next-lowest balance. Like the debt avalanche, you would continue this process for each account until you had paid off all your debt balances.

Here’s how a debt snowball would work using the same debts exampled at the beginning of this article ($17,000 in debt with minimum monthly payments totaling $700). Let’s again assume you can afford to put an extra $100 each month toward debt paydown.

With debt snowball, you add the extra $100 to the $150 minimum monthly payment you're paying on your student loan—your smallest balance—first. Once that loan is paid off, you then roll that $250 payment on to the $100 minimum payment on your credit card. Once that credit card is paid off, all $800 will go toward paying down your personal loan until it's paid in full.

Pros and Cons of the Debt Snowball Method

Like the debt avalanche method, the debt snowball approach also has its advantages and disadvantages. Generally, the biggest takeaway here is paying down smaller balances first can make you feel like you’re making a lot of progress. However, depending on your debt situation, you may or may not be sacrificing some of the interest savings you could get with debt avalanche.

Pros

  • Allows you to pay down smaller debts quickly.

  • Can help you stay motivated for paying down debt.

  • Could provide similar interest savings compared to debt avalanche.

Cons

  • Can potentially take longer than the debt avalanche method.

  • Could provide lower interest savings compared to debt avalanche.

  • Still requires discipline.

The Bottom Line

As you to start to compare the debt snowball vs. avalanche methods and think about ways to free yourself from credit card and other debt once and for all, it's important to think about your situation, your goals, and your mindset.

The debt avalanche method focuses on interest rates rather than balances. So, if you have accounts with both high interest rates and high balances, it may take a while before you start to feel like you’re making any significant progress. That’s why the debt avalanche approach is best for budget-oriented people who don't need the psychological boost of paying off smaller balances quickly to remain motivated for debt paydown.

In contrast, the debt snowball method is designed to help you stay motivated with early wins by having you focus on paying down your smallest balances first. So, if you've struggled to stick to a debt payoff plan in the past, this option may be a better fit for you. However, depending on your account balances and interest rates, using debt snowball may mean it takes longer to pay down your debt and you could end up pay more in interest than you would if you went with debt avalanche. So, make sure you're satisfied with that trade-off.

In some cases, the difference between the debt avalanche and debt snowball methods in terms of interest savings may be insignificant. Using online debt avalanche and debt snowball calculators, you can get an idea of how each approach helps to accelerate your debt payoff plan and choose the one you believe would help you stick to your goal.

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