The Debt Avalanche vs. The Debt Snowball

15 Comments

When it comes to paying off debt, there are two popular strategies that are typically encouraged:

The Debt Avalanche method or the Debt Snowball method

Both of these winter-themed strategies are effective for getting you to debt-free, but each has pros and cons.

The Debt Avalanche method

The Debt Avalanche method consists of paying off your debt with the highest interest rate first. Once it’s paid off in full, you then focus on the next highest interest rate debt, and so on, until you pay off your lowest interest rate debt last. Because you get rid of your highest interest debts first, the Debt Avalanche method saves you the most money overall. For this reason, it is mathematically the best solution to paying off your debts. Using the Debt Avalanche method, you will likely focus on paying off things like credit cards and lines of credit before you tackle traditional low-interest debts like student loans.

The Debt Snowball method

The Debt Snowball method has you paying off your smallest debt balance first, regardless of the interest rate. Once the smallest debt is paid off, you then roll the payment into the next largest debt and so on, until you pay off your largest debt balance last. By tackling your smallest debts first, you rapidly feel a sense of accomplishment whenever you pay off a balance. This gives you momentum to tackle the rest of your debt. For this reason, it is often psychologically or emotionally the best solution to pay off your debts, even if it does end up costing you more money in the long run.

What about the emotional weight of debt?

What many people tend to neglect about debt is the weight behind the balances and interest rates. Some debt simply feels emotionally or psychologically painful to carry around. This could be money we owe a friend or family member, or debt from silly mistakes like unpaid parking tickets. Whether these are small balances or 0% loans doesn’t make them any easier to ignore. Sometimes it makes sense to get rid of your emotionally heavy debts even if they are not your highest balances or highest interest rate loans.

How to Pay Off Your Debt

When it comes to deciding between the Debt Avalanche and the Debt Snowball (or any other debt repayment strategy) the first thing you have to do is make a list of all your debts, their interest rates, balances, and minimum payments.

Debt avalanche vs debt snowball

From here, you want to look at:

  • Your largest balance
  • Your highest interest rate
  • Your most emotionally or psychologically “painful” debt
  • Which debts you can pay off early (since some loans may not let you pay off the balance ahead of schedule, even if you want to!)

And then you want to prioritize your debts for repayment.

You can take a blended approach!

There’s no rule that you have to pick one strategy and neglect the rest. Feel free to pay off your most emotionally heavy debt first, then your smallest balance, and then devote your efforts to the highest interest rate loan.

There really is no wrong way to pay off debt, all that matters is that it gets paid off.

I personally advocate for the Debt Avalanche method, because it  saves you the most money overall by lowering the carrying costs of your debt. But I also understand the emotional weight of debt, and sometimes the best thing you can do to ensure you stay committed to your debt payoff strategy is to get rid of whatever debt is “bugging” you the most to carry around.

Let’s say you opt for the Debt Avalanche method, but first you want to get rid of the money you owe mom, because you feel guilty every time you go home for Sunday dinner. Your debts listed by priority will look like this:

debt avalanche vs debt snowball 3

You’ll pay off mom first, then tackle your most expensive credit card, then the rest of your credit card debt, and so on until you’re finally debt free after you pay off your smallest student loan. As long as you’re not ringing up any more debt, you might get to debt free even faster than you expect — because you’re making the minimum payments on ALL your balances, they are decreasing even as you’re focusing on one in particular!

Paying off a big debt is a marathon, not a sprint. You’ll likely find that time is a much greater beast than the actual dollars you owe. Be patient with the process, and be patient with yourself. There is a light at the end of the tunnel, and when you see it, everything will be worth it!


15 Comments

  1. Interesting points, Bridget! I’m in favor of the Avalanche method, too. High interest rates drive me crazy, and I want those debts eliminated as quickly as possible.

  2. While I can definitely understand the psychological/emotional benefits of the debt snowball method, I personally favor the debt avalanche method. I can’t stand paying high interest (or any interest, really!)

  3. Nice post, and easy-to-understand! To add – While I know it isn’t smart to pay off debt with debt, back when I was in debt-repayment-mode, I merged whatever debt I could to the lowest interest rate. This meant moving the 19.5% credit card balances onto a 6% Line of Credit, and CANCELLING all but one of the credit cards. (It’s a short term fix to save on interest costs, and is only smart if you stop using or eliminate the card(s) altogether.) This allowed more of my money to go to the principal, and less to debt. Also, I switched my single credit card to a no-cost rewards card at my existing bank (RBC Esso Visa). I know that the benefit of some rewards cards can outweigh the annual fee, but debt-repayment is about keeping it simple, and speaking from my experience, I encourage others to avoid worrying about rewards-to-fees benefit, and instead use a no-cost card, most of which still offer rewards. Bonus – Whenever I would redeem for free gas, I would reroute that money as added debt payments.

    • This is a GREAT point Keith!! If you can consolidate at a lower rate, that’s definitely preferable than simply trying to tackle the high-interest balances as-is.

      And nice job on the rewards to pay down debt, too!

    • Mark

      Just remember, cancelling a revolving line of credit like a credit card can hurt your credit score.

      • Bridget Casey (Author)

        It has a minimal impact and you only have to worry about your credit score if you’re planning to take on more debt. If you’re not applying for any big loans, your credit score is largely irrelevant.

  4. When I was paying off my debt I thought I would strictly go with the debt avalanche method. It turned out that since my private loan was much larger I started to feel burnt out. Like you said, the emotional and psychological factor is also important. I then switched to the snowball method to quickly pay off my government loans. It gave me a much needed boost to see those disappear!

    • Yep! The emotional/psychological pain is such a big factor. Staying motivated to actually pay down the debt is more important than trying to save a few dollars on interest.

      At the end of the day, spending $100 more on interest is better than trying to avoid it and NOT paying off your debt!

  5. Kayla

    I am a fan of the debt snowball method–the anxiety debt creates for me means that paying something off completely gives me the inspiration to keep going! However, I do have a $22,000 car loan and $9000 student loan, and I’m using the debt avalanche method with it–I work for the provincial government, who will forgive 1/3 of my student loan after I’ve worked for 3 years. Alas, I’m paying the minimum there and funneling any extra cash towards the car loan in the meantime! I appreciated this post Bridget for valuing both sides of the spectrum 🙂

  6. This is a great post and video to clarify things for people who might be unclear. If people take only 1 thing away from this it would be to pick whatever works to pay off your debt. Motivation to cross debt off your list, just like a to-do list, is huge and can build momentum as you mention. Thanks for sharing!

  7. Rich E Rich

    It’s a fact that you pay less interest using the avalanche method. When I was getting out of debt, I found a calculator which allowed you to set the order you wanted to pay them off and I found that the difference in interest between the two methods was only a couple hundred dollars – not overly significant. In the grand scheme I would feel more comfortable if I had to pay $300 more over the course of time going the snowball way, knowing that I would still get to the finish line – vs not starting at all because the first or second debt in the avalanche method seemed insurmountable.

    I preferred the snowball method myself. Just getting rid of some of the easier, lower debts meant that there were less bills coming in, less things to keep track of, less payments to make”on time”, LESS CLUTTER.

    Another “trick” I remember going through was finding extra money to throw at the debt. Selling things on craigslist, temporary side hustles, etc can give you an immediate one-time hit to your debt reduction. You can also change things like utilities (think phone, internet, cable) or insurance/rent/cars and save money every month. Just remember to apply those savings immediately to your debt!

  8. I’m a whatever way works to pay it off the sooner the better.
    It seems that most people once they pay off or pay down debt end up right back where they are or worse off.

  9. We had a lot of success with using the Debt Snowball method. Our interest rates were all pretty similar, so choosing the smallest loan amount ended up being the right solution for us. After we paid off the smaller loan, we had more funds to dedicate to larger loans, resulting in them being paid off even faster than before.

    Whichever method works for you, it’s all about focusing on one loan at a time. Otherwise, your efforts are diluted and result in not getting out of debt.