Snowball vs. Avalanche Method for Paying Down Debt

It can be easy to fall into debt, but getting out can be tough. Whether you’re dealing with student loans or credit card balances, the best course of action is to create a repayment strategy.

Of all these strategies, many financial experts find two to be the most effective: the snowball method and the avalanche method.

What is the Debt Snowball Method?

The debt snowball method is a popular way to pay off multiple debts. It’s called the “snowball” method because it starts small and builds momentum, just like a snowball rolling down a hill.

Here’s how the strategy works:

1. Create a list of your debts from smallest to largest without including interest rates.
2. Make minimum payments on all debts except the smallest one.
3. Put any extra money you have toward the smallest debt.
4. Once you pay off the smallest debt, move to the next smallest.
5. Repeat this process until all debts are paid off.

What is the Debt Avalanche Method?

The debt avalanche method is different from the snowball method in that it focuses on the largest payments first. Think of it like an avalanche that starts at the top of a mountain and gains power as it moves down. You start with your highest-interest debts and work your way down.

Here’s how to use this method:

1.  List all your debts, ordering them from highest interest rate to lowest.
2. Make minimum monthly payments on all debts.
3. Put any extra money toward the debt with the highest interest rate.
4. Once you pay off the highest-interest debt, move to the next highest.
5. Continue this process until all debts are paid off.

The point is to focus on one debt at a time, starting with the smallest. This approach gives you quick wins, which can boost your motivation. Each time you pay off a debt it’ll feel like a small victory, which can help you stay committed to your debt payoff plan.

The snowball method is especially good for people who need to see progress to stay motivated. It doesn’t save the most money on interest, but it can be very effective psychologically. Many people find it easier to stick with this method because of the regular wins it provides.

Comparing the Snowball and Avalanche Methods

Both the debt snowball and avalanche methods are effective strategies for paying down debt. The snowball method can provide quick wins and a psychological boost, which can be incredibly motivating for many people. Alternatively, the avalanche method can save you more money in interest over time, which appeals to those who prioritize long-term financial optimization.

Here are some key differences between the debt snowball method and the debt avalanche method.

Which Strategy Will Help You Pay Down Debt?

Are you someone who wants to see your debt disappear quickly? Or are you focused on paying as little interest as possible on your journey to being debt-free? Choosing between the snowball and avalanche methods depends on your personal financial circumstance, mindset and goals.

Here are some considerations to help you determine which strategy might be most effective for you.

Reasons to Consider the Debt Snowball Method

• You're feeling overwhelmed by multiple debts and need a clear starting point.
• You're motivated by quick wins and visible progress.
• You have several small debts that you could pay off relatively quickly.
• You've struggled to stick with debt repayment plans in the past.

The snowball method prioritizes psychological wins over mathematical optimization. It can be especially powerful for those who need to build momentum and confidence in their debt repayment journey.

Reasons to Consider the Debt Avalanche Method

• You're committed to saving the most money possible on interest.
• You have high-interest debts that are significantly impacting your finances.
• You're comfortable with a long-term approach and can stay consistently motivated.
• You have the discipline to stick with a plan even if you don’t see immediate results.

The avalanche method is mathematically optimal, potentially saving you more money overall. It can be a great choice for those who are motivated by efficiency and long-term financial gains.

Here are some important steps to take after considering the differences between these repayment methods:

• Look at the number of debts you have, their sizes and their interest rates.
• Ask yourself if you’re focused on becoming debt-free quickly or minimizing interest.
• Be honest about what motivates you and what approach you're most likely to stick with.
• Consider how much extra money you can put toward debt repayment each month.

Whenever you can, try to put extra money toward your debts. The right debt repayment strategy isn't just about math—it's about what works for you. It's OK to start with one method and switch to another if you find it's not working. Some people even combine elements of both methods.

Consider Debt Consolidation as an Alternative

While the snowball and avalanche methods are effective strategies for paying down multiple debts, debt consolidation is another approach worth considering. Debt consolidation involves combining multiple debts into a single loan, often with a lower interest rate. A debt consolidation loan can be an effective option for managing higher-interest debt, giving you both the mental and financial benefits.

Here’s how debt consolidation could benefit you.

1. Simplify payments: Instead of managing multiple due dates and creditors, you'll have just one monthly payment.
2. Potentially lower interest rate: If you qualify for a lower rate, you could save money on interest over time.
3. Fixed repayment term: Most loans come with fixed interest rates. This means that repayments are the same, which can make it easier to budget. Many consolidation loans have a set payoff date, giving you a clear timeline for paying down debt.

Debt consolidation isn't right for everyone. Before deciding, compare the total cost of debt consolidation (including any fees) with your current debts. Also, check if you'll save money in the long run, especially if the consolidation loan has a longer term than your current debts. Our debt consolidation calculator can help you navigate this process.

Snowball or Avalanche Your Way to a Debt-Free Future

Consistency and commitment are the most important things when paying down debt. With dedication, discipline, a clear plan in hand and advice from the team at Navy Federal Credit Union, you’ll be well on your way to achieving your goal of becoming debt-free.