Paying off debt can feel overwhelming, but having the right strategy makes all the difference. Two popular methods for accelerated debt repayment are the Debt Snowball and Debt Avalanche. Let’s break down how each method works, the pros and cons, and which might be the best fit for you.
How Each Strategy Works
Debt Snowball Method
- List Your Debts: Arrange all debts from smallest balance to largest.
- Minimum Payments: Continue making minimum payments on all debts.
- Target the Smallest Debt: Put any extra money toward the smallest debt first.
- Snowball Effect: Once the smallest is paid off, move that payment (plus any extra) to the next smallest debt.
- Repeat: Continue until all debts are paid.
Key Benefit: Quick wins help build momentum and motivation as smaller debts disappear sooner, giving you psychological satisfaction.
Debt Avalanche Method
- List Debts by Interest Rate: Arrange debts from highest to lowest interest rate.
- Minimum Payments: Continue making minimum payments on all debts.
- Target the Highest Interest Debt: Allocate any extra money to the debt with the highest interest rate.
- Move Down the List: As each high-interest debt is paid, apply payments to the next highest interest rate debt.
- Repeat: Continue until debt-free.
Key Benefit: Saves the most money in interest over time, making it a more mathematically efficient approach.
Comparison Table
| Feature | Snowball Method | Avalanche Method |
|---|---|---|
| Priority | Smallest balance first | Highest interest rate first |
| Main Benefit | Quick motivational wins | Saves more on total interest |
| Best For | Those who need visible progress | Those focused on minimizing interest |
| Drawback | May pay more interest over time | Takes more discipline and patience |
| Example Outcome | Debt-free in 35 months, pays more | Debt-free in 34 months, pays less |
Example: For certain debt mixes, avalanche can save over $1,300 more in interest and finish a month sooner compared to snowball.
Which Method Should You Choose?
- Snowball Method: Best if you’re motivated by quick wins, enjoy crossing off accounts, or have struggled with sticking to past repayment plans.
- Avalanche Method: Ideal if your main goal is to pay the least interest, and you’re disciplined enough to press on even if progress isn’t immediately visible.
There’s no one-size-fits-all answer. Both methods work and the best choice depends on your personality, financial goals, and motivation. Some even combine both—starting with snowball for a few small debts before switching to avalanche for higher-cost debts.
Final Thoughts
The best debt repayment method is the one you can stick with. Whether you love the quick payoff of the snowball or the efficiency of the avalanche, the key is picking a strategy and committing to the journey. Watch your debts shrink and celebrate your progress—you’re on the path to financial freedom!