Debt Snowball vs Avalanche: Which Should You Use?

Both methods follow the same basic rule: pay the minimum on every debt, then put every extra dollar toward one target debt. When that one is gone, roll its payment into the next. The only difference is which debt you target first.

The debt snowball

List your debts from the smallest balance to the largest and attack the smallest first. You clear a whole debt quickly, which feels great and keeps you going. The trade-off is that you may pay a little more interest overall.

The debt avalanche

List your debts from the highest interest rate to the lowest and attack the highest rate first. Mathematically this saves the most interest. The trade-off is that the first win can take longer if that debt is large.

A quick example

Say you have a $500 store card at 15%, a $3,000 credit card at 24% and a $6,000 car loan at 7%. The snowball pays off the store card first, then the credit card, then the car loan. The avalanche starts with the credit card because it has the highest rate, then the store card, then the car loan. Either way, you keep paying the minimum on everything else.

How to choose

• Pick the snowball if motivation is the hard part and you want quick wins.
• Pick the avalanche if you're disciplined and want to pay the least interest.
• Either one beats paying minimums only. The best method is the one you stick with.

Make progress visible

The Debt Payoff and Savings Challenge Pack has a debt overview with both methods side by side, color-in payoff charts and a payment log, so you can watch every balance shrink.

This article is general information, not financial advice. For advice on your situation, talk to a qualified financial professional.

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