Avalanche vs Snowball Debt Method

How avalanche works

1. List all debts by interest rate, highest to lowest.
2. Pay the minimum on every debt.
3. Throw every extra dollar at the highest-rate debt.
4. When it's gone, roll that payment into the next-highest-rate debt.
5. Repeat until debt-free.

Mathematically optimal — you pay the least total interest and finish fastest in dollar terms.

How snowball works

1. List all debts by balance, smallest to largest (rate doesn't matter).
2. Pay the minimum on every debt.
3. Throw every extra dollar at the smallest balance.
4. When it's gone, roll the payment into the next-smallest debt.
5. Repeat until debt-free.

Psychologically motivating — quick wins keep you going. Studies show people stick with snowball longer.

Real example

Three debts:

• $2,000 personal loan at 8%
• $8,000 student loan at 5%
• $5,000 credit card at 22%

Avalanche order: credit card → personal loan → student loan. Snowball order: personal loan → credit card → student loan.

With $400/month extra above minimums, both methods clear all debt in roughly 3 years. Avalanche saves about $400–$600 in interest. Snowball gives you a debt-free win 4 months sooner on the first debt — often worth the small extra cost in motivation.

Hybrid approaches

• Pay off any debt under $1,000 first for a quick win, then switch to avalanche.
• Use avalanche but bundle similar-rate debts and treat them by balance order.
• Use snowball if you've failed avalanche before; stick with what works.

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Frequently Asked Questions