Debt Snowball vs. Debt Avalanche: Which is Better?

Debt

Two of the most commonly utilized debt repayment strategies are the debt avalanche method and the debt snowball method. Both methods focus on paying off debt, but there are slight variations between the two.

avalanche

So, what is the difference between them, and how do you know which strategy is right for you? Keep reading to find out.

Debt Snowball Method

The debt snowball is a strategy first popularized by financial expert Dave Ramsey. With this method, you’ll list off all your credit card debt from the smallest to the largest.

To get started, you pay off your smallest outstanding debt first, while making the minimum monthly payments on your other outstanding debts. Depending on the size of your credit card debt, you may be able to do this all at once, or it may take you several months.

Once the smallest debt has been paid off, you apply that money to pay off the next highest debt on your list. You continue doing this until you reach your largest outstanding debt.

With the debt snowball method, you don’t worry about how much money you’re paying in interest. This is what differentiates it from the debt avalanche method. Instead, it really focuses on the psychology of paying off debt and capitalizing on small wins to build momentum.

Paying off credit card debt can be a very emotionally draining and difficult process. And with the debt avalanche method, it may not feel like you’re making much progress on your debt for a long time.

This can make it difficult to keep moving forward with your goals. With the debt snowball, you’ll achieve your first “win” pretty quickly, which can help you feel motivated to keep going.

Pros

  • You’ll pay off small balances more quickly
  • Early, quick wins can make it easier to stay motivated
  • Having fewer outstanding balances can reduce stress

Cons

  • You’ll likely end up paying more money in interest
  • If you pay more in interest, it will take you longer to get out of debt

Debt Avalanche Method

With the debt avalanche method, you pay off your debt based on which is charging the highest interest rate. Then you’ll make the minimum payments on everything else.

So if your largest debt is $20,000 in high-interest credit card debt, you’ll pay this off before paying back a $500 medical bill. Many people like the debt avalanche because, mathematically, it makes the most sense.

By tackling your highest interest debts first, you’ll end up paying less money in interest over time. And by paying less interest, you’ll actually end up getting out of debt quicker.

However, if your largest debt is also charging you the most money in interest, it will take a lot longer before you feel like you’re making any progress in paying down your debt.

Pros

  • It makes the most sense financially
  • Paying off the highest interest debt first will save you money over time
  • Getting rid of high-interest debt will help you get out of debt faster

Cons

  • You’ll likely have more outstanding balances, which can cause stress
  • It’s challenging to stay motivated when you don’t see yourself making progress

How to Get Started Repaying Your Debt

So, now that you understand the difference between these two popular methods, how do you decide which is right for you? Many people have strong opinions about which strategy is the right choice, which can make it difficult to choose.

But the truth is, it doesn’t really matter which you choose as long as you have a plan for repaying your debt. So, here are four tips for how you can get started repaying your debt.

1. Do the math

It can be helpful to take a look at the numbers and figure out how much you’ll wind up paying in interest with each plan. If you’re leaning toward the debt snowball and there isn’t a huge difference in how much you’ll end up paying in interest, then stick with that method.

On the other hand, you may find that the debt avalanche would massively cut down on the amount of interest you’ll end up paying over time. In this case, it may be worth the extra mental effort to focus on paying off the highest interest debt first.

2. Know yourself

Any debt repayment plan you choose has to work for you. If you can’t stick with it, then it doesn’t matter what the math says.

So take some time to think about which strategy is going to work best for your personality and goals. Evaluate where your motivational level is at, and consider whether it might be worth it to pay off those small credit card balances first.

3. Focus on one debt at a time

Regardless of which plan you choose, it’s important to just focus primarily on one outstanding debt at a time. Of course, you want to continue making the minimum payment on all your debts, so your accounts remain in good standing and your credit score won’t be affected.

But focusing on paying down one debt at a time will make it easier for you to stay focused and make progress more quickly than by dividing your efforts.

4. Stick with it

And finally, you need to focus on sticking with your debt repayment goals no matter what. Any repayment strategy can work as long as you stick with it and don’t give up. Your financial future is too important not to.

Bottom Line

The debt avalanche focuses on paying off credit card debt with the highest interest rate first. In contrast, the debt snowball focuses on paying off your debt from the smallest to the largest balance.

At the end of the day, it doesn’t matter whether you use the debt snowball or the debt avalanche, as long as you’re committed to getting out of debt.

Keep in mind, you should be working on building better habits along the way so that once you become debt-free, you can stay that way. Building better financial habits involves doing things like creating a budget, improving your credit score, and building an emergency fund.

Frequently Asked Questions

What is the difference between debt snowball and debt avalanche?

Debt snowball involves paying off the smallest debts first, while debt avalanche involves paying off the debts with the highest interest rates first.

Which method is better for eliminating debt?

Both have potential advantages and disadvantages. The debt snowball method can provide motivation and momentum, while the debt avalanche method can save you more money in the long run. It is best to weigh the pros and cons of each and make a decision that is right for you.

How long does it take to pay off debt using either method?

It depends on the amount of debt you have and how much money you can dedicate to paying it off each month. However, both methods can be used to pay off debt in a reasonable amount of time.

How do I know which debt repayment method is right for me?

It depends on your financial situation and what motivates you. If you need motivation to keep up with your payments, the debt snowball may be better for you. If you want to save more money on interest, the debt avalanche method may be better for you.

Can I use both methods at the same time?

Yes, you can use elements of both methods to pay off your debt. For example, you could prioritize paying off the smallest debt with the highest interest rate first.

What other options do I have to pay off debt?

You could look into debt consolidation, credit counseling, or debt management plans. There are also loan programs that can help you pay off your debt.

Can I get help if I’m having trouble paying off my debt?

Yes, there are resources available to help you understand your options and create a plan to pay off your debt. You can reach out to a financial advisor or credit counselor for more information.

Jamie Johnson
Meet the author

Jamie Johnson is a freelance writer who has been featured in publications like InvestorPlace and GOBankingRates. She writes about various personal finance topics including student loans, credit cards, investing, building credit, and more.