Debt Payoff Strategies: Avalanche vs. Snowball

If you have multiple debts, the question is not whether to pay them off. It is which one to attack first. The two most popular strategies are the avalanche method and the snowball method. Both work. The right choice depends on whether you are optimizing for math or motivation.

The avalanche method

Pay minimum payments on everything, then put all extra money toward the debt with the highest interest rate. Once that debt is gone, move to the next highest rate. This saves the most money in interest over time.

The snowball method

Pay minimum payments on everything, then put all extra money toward the debt with the smallest balance. Once that debt is gone, roll that payment into the next smallest. This creates quick wins that build momentum.

Example with four debts

Let us say you have these four debts and $150/month of extra money to put toward payoff:

• Credit card: $2,800 balance, 19.99% APR, $85 minimum
• Personal loan: $3,200 balance, 8.0% APR, $100 minimum
• Student loan: $8,500 balance, 4.5% APR, $150 minimum
• Car loan: $11,650 balance, 5.5% APR, $350 minimum

Avalanche order (highest interest first)

1. Credit card (19.99%): paid off in about 12 months
2. Personal loan (8.0%): paid off in about 8 more months
3. Car loan (5.5%): paid off in about 18 more months
4. Student loan (4.5%): paid off last

Total interest paid: approximately $3,200

Snowball order (smallest balance first)

1. Credit card ($2,800): paid off in about 12 months
2. Personal loan ($3,200): paid off in about 9 more months
3. Student loan ($8,500): paid off in about 16 more months
4. Car loan ($11,650): paid off last

Total interest paid: approximately $3,800

When to use avalanche

Choose avalanche if you are motivated by numbers, have patience, and your highest-interest debt is not also the largest balance. The avalanche method typically saves $500-$2,000 in interest compared to snowball, depending on your debt mix.

When to use snowball

Choose snowball if you need early wins to stay motivated, have several small debts you can eliminate quickly, or have struggled to stick with debt payoff plans in the past. Research from Harvard Business Review found that people who use the snowball method are more likely to eliminate all their debt because the psychological boost of crossing debts off the list keeps them going.

How to track your debt payoff

Create a tracker with each debt listed alongside its balance, interest rate, minimum payment, and any extra payment. Update the balances monthly and watch them shrink. The visual progress is surprisingly motivating.

Our Finance Dashboard includes a Debt Payoff tab where you can enter all your debts, choose your preferred method, and see the projected payoff timeline update automatically.