Debt Snowball vs Avalanche: Which Payoff Method Is Best?

The Two Most Popular Debt Payoff Methods

When tackling debt, two strategies dominate the conversation: the Debt Snowball and the Debt Avalanche. Both can help you become debt-free, but they work differently.

The Debt Snowball Method

How It Works

1. List all debts from smallest to largest balance (ignore interest rates)
2. Make minimum payments on all debts
3. Put all extra money toward the smallest debt
4. When the smallest is paid off, roll that payment to the next smallest
5. Repeat until debt-free

Example

| Debt | Balance | Minimum | Interest |

|------|---------|---------|----------|

| Credit Card A | $500 | $25 | 18% |

| Credit Card B | $2,500 | $75 | 22% |

| Car Loan | $8,000 | $250 | 6% |

| Student Loan | $15,000 | $200 | 5% |

Order of payoff: Credit Card A → Credit Card B → Car Loan → Student Loan

Pros

• Quick wins: Paying off small debts fast builds momentum
• Psychological boost: Seeing debts disappear keeps you motivated
• Simple: No calculations needed, just order by balance

Cons

• Costs more in interest: You may pay more over time
• Not mathematically optimal: Ignores interest rates

The Debt Avalanche Method

How It Works

1. List all debts from highest to lowest interest rate
2. Make minimum payments on all debts
3. Put all extra money toward the highest-rate debt
4. When paid off, roll that payment to the next highest rate
5. Repeat until debt-free

Example (same debts)

| Debt | Balance | Minimum | Interest |

|------|---------|---------|----------|

| Credit Card B | $2,500 | $75 | 22% |

| Credit Card A | $500 | $25 | 18% |

| Car Loan | $8,000 | $250 | 6% |

| Student Loan | $15,000 | $200 | 5% |

Order of payoff: Credit Card B → Credit Card A → Car Loan → Student Loan

Pros

• Saves money: Pay less total interest
• Mathematically optimal: Fastest way to eliminate debt (by dollars)
• Lower total cost: Best for your wallet

Cons

• Slower initial wins: Might take longer to pay off first debt
• Requires discipline: No quick psychological rewards
• Can feel discouraging: Progress may seem slow at first

Head-to-Head Comparison

| Factor | Snowball | Avalanche |

|--------|----------|-----------|

| Total interest paid | Higher | Lower |

| Time to debt-free | Usually longer | Usually shorter |

| Psychological wins | More frequent | Less frequent |

| Mathematical efficiency | Lower | Higher |

| Best for | Motivation-driven people | Numbers-driven people |

Real-World Example

Scenario: $25,000 total debt, $800/month to pay off

Snowball Result

• Time to debt-free: 38 months
• Total interest paid: $4,200
• Debts eliminated in first year: 2

Avalanche Result

• Time to debt-free: 36 months
• Total interest paid: $3,600
• Debts eliminated in first year: 1

Difference: Avalanche saves $600 and 2 months, but snowball provides quicker motivation.

Which Method Should You Choose?

Choose Debt Snowball If:

• You need motivation and quick wins
• You've struggled to stick with debt payoff before
• Your highest-rate debts have large balances
• Psychological momentum matters more than saving a few hundred dollars

Choose Debt Avalanche If:

• You're motivated by math and optimization
• You can stay disciplined without quick wins
• Your highest-rate debts have smaller balances
• Saving money is your primary motivator

The Honest Truth

The best method is the one you'll actually stick with. A perfect plan you abandon is worse than a less-optimal plan you complete.

Hybrid Approaches

Start with Snowball, Switch to Avalanche

Pay off one or two small debts for quick wins, then switch to avalanche for the remaining debts.

Target High-Rate Small Debts First

If a high-interest debt also has a small balance, prioritize it (wins on both fronts).

Balance Transfer Strategy

Move high-interest debt to 0% promotional cards, then focus on remaining high-rate debts.

Tips for Either Method

1. List All Debts

Know exactly what you owe, to whom, and at what rate.

2. Find Extra Money

Cut expenses or increase income to accelerate payoff.

3. Automate Payments

Never miss a minimum payment. Set up autopay.

4. Don't Add New Debt

Stop using credit cards while paying off debt.

5. Celebrate Milestones

Acknowledge progress to maintain motivation.

Use Our Calculator

Try our Debt Payoff Calculator to compare snowball and avalanche for your specific situation.

Key Takeaways

1. Snowball: Pay smallest balance first (motivation-focused)
2. Avalanche: Pay highest interest first (math-focused)
3. Avalanche typically saves money; snowball provides quicker wins
4. The best method is one you'll complete
5. Consider hybrid approaches for your situation