Debt Snowball vs Debt Avalanche: Which One Should You Use?

By Jackie Beck   Updated 06/26/2020 at 2:13 pm

Is it better to use the debt snowball vs debt avalanche to get out of debt?You’re ready to pay off debt, but what’s the best way to go about it? Should you use the debt snowball method or the debt avalanche?

Spoiler alert:

If you’ve been in debt for a long time and want to get out of debt for good, the debt snowball is highly likely to be best debt reduction method for you. (I’ll go into why later.)

But there’s more to it than that, so read on for details, especially if “but won’t I pay more interest if I use a debt snowball instead of a debt avalanche?” just popped into your head.

The debt snowball vs debt avalanche: What do they have in common?

Yeah, I know, they’re supposed to be duking it out, but it’s important to start with what they have in common, because that’s what makes BOTH methods so much better than the alternative.

To use either method, you list out all of your debts and then focus heavily on whichever debt is at the top of your list while you just pay the minimums on all the rest.

Once you pay off a target debt, you take what you’d been paying to that target debt and start piling it on to the next target debt.

In both cases, this means the amount you pay toward your target debt grows larger and larger over time. So by the time you’re on the last debt on your list, your payments are huge.

That’s the power of both the debt snowball plan and the debt avalanche method, and it’s why they’re both so much better than the alternative.

What’s the alternative to both the debt snowball and the debt avalanche, you may ask?

The alternative is that once a debt is paid, you go out and spend that former debt payment money on something else (like a vacation or furniture) instead of using the money to pay down another debt.

Basically it’s paying off one debt at a time according to the creditor’s terms, while not taking on new debt. That’s a super slow way to get out of debt – but it’s better than not getting out at all.

And it’s definitely better than immediately going back into debt again once you pay off a debt. Many people do that with cars. They pay off their car loan, and then immediately start thinking about replacing that car with a new one. That’s the debt treadmill method, where you never get off.

What’s the difference between the debt snowball vs debt avalanche?

So, what’s the difference between the two ways to pay off debts? I’ve got a detailed explanation of both methods in these articles, The Debt Snowball Method Explained and The Debt Avalanche Explained, but here’s a quick overview of the only difference between the two, technically speaking.

  • In the debt snowball, you list all of your debts in order from smallest balance to highest balance, no matter what their interest rates. Then you start attacking the smallest debt with a vengeance.
  • In the debt avalanche, you list all of your debts in order from highest interest rate to lowest interest rate, no matter what their balances. High interest debts are at the top of the list, so you could end up tackling massive credit card debt first, for example.

That’s it. The ORDER you pay off your debts in is the only difference between the two methods, technically speaking. (Smallest to largest debt, or highest interest to lowest.)

Other than that, they both work exactly the same way.

How do you decide whether to use the debt snowball vs the debt avalanche?

First, don’t blindly assume that you’ll pay more interest with the debt snowball vs debt avalanche, because you might or might not. Sometimes you might pay more in interest with the debt avalanche. Sometimes you might pay less. Or it could be about the same either way.

The same thing goes for time. Often I’ve seen it where there’s only a difference of a few months to pay between the two methods.

The only way to find out for sure is to put your exact debts and your exact payment amounts into a debt calculator and see. (I highly recommend my own Pay Off Debt app. It makes it easy to do exactly that.)

Second, know that you absolutely will pay more interest if you give up and stay in debt. So use the one you’ll be most likely to stick with! The one that will keep you fired up so you succeed.

That’s likely to be the debt snowball method, because it gives you a psychological boost from paying off debts quickly. It gives you lots of small wins, and that keeps you motivated.

In fact, a study by Kellogg School researchers David Gal and Blakeley B. McShane “found that consumers who pursued the ‘small victories’ strategy were more likely to eliminate their entire debt balance.”

In other words, people are more likely to SUCCEED at becoming debt free. (Wouldn’t you like to see your student loan, credit card debt, car loan, etc gone for good?)

If you’re still hung up on the math aspect of the debt snowball vs debt avalanche…

If you’re still hung up on the math aspect of the debt snowball vs debt avalanche debate, and are mentally arguing about how it’s not logical to pay more interest, I want to gently point something out here.

You probably didn’t get into debt logically, and you’re probably not going to get out that way either.

For example, which of these makes more sense:

  • Paying $100 for an item…
  • or paying $118 for the exact same thing?

Most people will say $100, of course! But many of those same people will use a credit card for that item and end up paying 18% APR. If you’ve ever done the same, you chose the $118.

That means you did so for reasons that were NOT about math.

Getting out of debt is about changing your habits and your actions for good. (At a minimum, you stop borrowing, continue paying down existing debts, and build emergency savings.)

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What’s going to help you succeed?

Most people have a lot more success with the debt snowball method. They get some early successes, get fired up, and stay that way for the long haul. So my vote is usually for that :) In fact, we inadvertently used the debt snowball method to get completely out of debt, house and everything. (Here’s our story.)

One exception to this is usually if you’ve acquired your debt all at once (such as getting hit with a slew of medical expenses that were way above and beyond what your insurance covered) and are typically used to living without debt. In that case, it can absolutely make sense to use the debt avalanche, assuming you really do pay less interest with that in your situation.

Another exception is if you’ve got extremely high interest debt like payday loans. If that’s the case, do everything you can to get those nasty little things paid off first, starting with whichever one is easiest for you to get paid off. You want those out of your life as fast as possible.

The point is to choose whichever method works best for you. They will both work if you stick with them, but one will be easier than the other for you.

Deciding which method to use is a matter of knowing yourself and your situation.

No matter which method you chose to pay off debts, get started

Take the extra money you can find in your budget (or money you make by selling things you no longer need, doing surveys, babysitting, getting a second job, etc) and send that plus whatever extra you had been paying toward your other debts to debt you’ve chosen to focus on first. (Because remember, you’re only paying minimum payments to the other debts.)

Unless there is a penalty for doing so, make a payment as soon as you get the money. Have an extra $5 today? Go online and make a $5 principal-only payment toward your chosen debt. Get an extra $20 tomorrow? Do the same thing. Don’t wait until the bill is due or until you have a certain amount “saved up”. Just pay every chance you get. (Just remember to make the regular payment before the due date as well.)

Once your chosen debt is wiped out, choose the next debt in line to focus on. Your debt repayment will speed up over time, because as each debt is paid off, you’ll be able to use the money you were paying toward that debt toward the next debt in line.

So get that snowball rolling! (Or kick your debt avalanche off, if that’s what’s best for you.)

While you’re at it, celebrate each step of the way. Paying off debt is a great feeling!

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