Snowball vs. Avalanche Methods: Comparing Two Popular Debt Payoff Strategies

Paying off debt can feel overwhelming, especially when you have balances spread across multiple credit cards or loans. It’s common to throw money at random towards different debts, feeling like it’s better than nothing. Most people are wondering where to start. This blog post goes over two popular debt payoff methods that can help guide your decision: the Snowball Method and the Avalanche Method. Let’s explore how each works, their pros and cons, and how you can find the approach that motivates you most.

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The Snowball Method: Small Wins Build Momentum

The Snowball Method is all about building momentum by paying off debts from smallest to largest based on the overall balance of the loans/cards.

Here’s how it works:

1. List your debts by balance from smallest to largest, regardless of interest rate.
2. Pay the minimum on all debts except the smallest one. Focus any extra money you have available towards paying off that smallest debt.
3. Once the smallest debt is gone, roll that payment into the next smallest debt, and so on.

Why Choose the Snowball Method?

The main advantage of this method is psychological. Paying off a small debt quickly can give you a boost of confidence and motivation to keep going. You see progress faster, which can help you stay committed to the plan. However, one drawback is that you might end up paying more in interest compared to other strategies, particularly if your larger debts carry higher interest rates.

The Avalanche Method: Minimize Interest

If you’re more numbers-driven and want to minimize the total interest paid, the Avalanche Method might be your go-to.

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Here's how it works:

1. List your debts by interest rate, from highest to lowest.
2. Pay the minimum on all debts except the one with the highest interest rate.
3. Focus all extra money on paying off that high-interest debt. Once it’s gone, roll the payment into the next highest interest debt.

Why Choose the Avalanche Method?

This is usually my recommendation, because the biggest benefit here is in money saved—you’ll pay the least amount in interest over time. This method prioritizes paying off the debt that’s costing you the most in interest first. However, depending on the size of that first debt, it may take longer to see the balance go down, which can feel discouraging for some people.

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In the example above, paying the minimums plus $100 extra monthly, using the Avalanche Method took 3 years and four months, and cost $2,584 in interest over that time, which saved $252 in interest compared to the Snowball Method. These savings grow even more significant with higher interest rates and larger debt balances.

So Which Method is Best?

The truth is, both methods work! If the emotional satisfaction of paying off smaller debts motivates you, the Snowball Method can be a great fit. If saving money on interest is your top priority, the Avalanche Method might be better. Ultimately, the best method is the one that keeps you motivated and committed to becoming debt-free.

There’s even flexibility to combine the two methods—pay off a small balance first to build momentum, then switch to the Avalanche Method for the rest of your debts. Sometimes, there’s a high-payment loan that’s causing the most grief - getting rid of that high payment can be really motivating, too. 

A Debt Payoff Challenge

No matter which method you choose, the more you can contribute to your debt each month, the faster you’ll see results. Here’s a challenge for you: For the rest of the year, try putting an extra $50 a month toward one of your outstanding debts. This extra contribution can make a big difference in reducing the time it takes to become debt-free.

Final Thoughts

Paying off debt, particularly high-interest debt, is one of the foundational steps toward achieving long-term financial freedom. Whether you’re drawn to the Snowball Method for its emotional wins or the Avalanche Method for its interest savings, both approaches can lead you to a debt-free future. The key is to stay motivated, consistent, and flexible enough to adapt the method to your needs. Start today, and you’ll be one step closer to your financial goals. 

If you’re feeling overwhelmed by debt, schedule a free consultation to talk through your situation!