Avalanche vs. Snowball: Which debt repayment strategy is best?

Quick insights

• The avalanche and snowball methods provide different strategies for paying down your debt.
• Both methods can be good debt repayment strategies in different financial situations if you want to tackle more than one debt.
• When choosing between the avalanche and snowball methods, you can tailor your approach and adjust it as you go.

Credit can be a useful financial tool, but repayment can become difficult depending on the total debt you have. The avalanche and snowball methods may pay off debt quickly in certain circumstances. How can you decide which frosty financial strategy may help pay off debt quicker? We provide some guidance below.

Understanding different debt payoff methods

Although there are several ways to approach debt repayment, these are two common strategies:

• Debt snowball: Focuses on paying off the smaller debts you have first. When one is paid off, you roll over the amount you were paying to begin paying the next largest debt you have.
• Debt avalanche: Prioritizes paying your debts with the highest interest rates first. You list each outstanding balance from the highest interest rate to the lowest, and pay off each in that order.

In addition to the strategies above, you might consider debt consolidation loans and balance transfers when becoming debt-free is your top priority.

Comparing the avalanche vs. snowball method

As you compare these debt repayment methods, the details of your own various debts will be important. For example, the timeline for paying off all your debt will depend on your budget, the total amount of debt and other factors. Here are a few points of comparison:

Interest savings

If you follow the debt avalanche method, you organize debts from highest rate to lowest. Paying off highinterest debt ahead of schedule can save money on interest and slow debt from growing exponentially. The debt snowball method, however, prioritizes lower loan balances. Early payoffs generally save money on interest, but the snowball method is more about creating momentum for tackling your larger debts.

Psychological benefits

Everyone’s motivations vary—for some, paying off a loan in full can feel very rewarding. For others, saving money on interest creates the discipline needed to continue paying until they’re debt-free. Both the avalanche and snowball methods would have you focus on paying your debts one at a time. Whichever loans you prioritize, you can gradually become debt-free with a strategy that works for you and a degree of discipline.

Timeline

Many factors contribute to the time it takes to pay off all your debts regardless of your strategy. The total amount of debt and your budget are primary factors. It’s important to make minimum monthly payments on all your debts by the due dates. Your expenses and bills usually determine the extra money in your budget that you can allocate to a loan as you start to apply each method.

Some pursue the snowball method because it can deliver quicker wins. In this respect, the avalanche method might be less appealing, but saving interest on your high-interest debt may make the most financial sense. Depending on the size of your debt, these repayment methods can take years to fully eliminate it; however, seeing a strategy through to debt freedom can be personally rewarding.

Which is better for you, debt avalanche or snowball?

When comparing these methods, here are some worthwhile considerations:

• Is it important for you to save money on interest? The debt avalanche method typically saves borrowers more on interest charges than the snowball method. Debt consolidation options and balance transfers might also save interest on one or more credit lines you have.
• What is your total debt amount? High-interest loans can make an already-high total amount of debt worse, so the avalanche method might be a better choice. But if the rates on all your debts are similar, maybe tackling them from smallest balance to largest would be best.
• How do you manage your money? Choosing the right method can impact overall financial health and stress. If you tend to keep a detailed monthly budget, then consistently making an extra payment toward a debt might be straightforward. On the other hand, that consistency might prove to be challenging if you have other financial demands.

Tips for paying off debt quickly

Here are several practices that may shorten your timeline for repaying your total debt:

• Budget consistently: Identifying how much extra you can allocate toward your debt will rely on consistent budgeting. Both debt repayment methods involve making minimum payments on all your debts while you work to pay off one at a time. In addition, factor in the other bills and expenses you have to pay each month.
• Keep your emergency fund: Despite your new focus on debt repayment, life can bring on surprise expenses. Putting a large portion of savings toward your debt can be appealing, but you might want to avoid dipping into emergency funds.
• Automate payments: This can avoid late fees and help ensure your progress repaying debt continues with less manual energy. Many automated budgeting tools and apps available can also help you keep track of your payments and progress.
• Adjust your budget when you can: Cutting non-essential expenses and considering additional income sources can accelerate debt repayment. Making adjustments to your budget and finding new income streams might free up more money for debt repayment.
• Try to lower your interest: You may be able to negotiate lower interest rates with your lender or transfer outstanding balances to credit lines with lower rates.

In conclusion: What is the best debt elimination method?

The best way to eliminate debt is the one that fits your situation. The goal is to become debt-free, but how exactly do you get there? That’s up to you, and the journey will give you opportunities to change your strategy or refine your budget and meet your goals.

The debt avalanche and snowball methods are recognized for offering actionable steps that can help you pay off debt over time. Your priorities are important to consider, whether that’s saving on interest or creating momentum by tackling smaller debts first. There are financial and psychological benefits to both, and the end goal is the same: to become debt free.