Snowball vs. Avalanche: The Details Behind the Debt Payoff Strategies

Snowball vs. avalanche may not sound related to paying off debt, but it’s a perfect visual to illustrate how you can attack your debt. If you’ve decided this is your year to banish the credit card, student loan, or personal debt, then knowing the details and differences of these two debt payoff strategies could save you months of frustration.
Like anything else with our finances or heck, even our lives, if we want something then we have to formulate a plan. If you have a goal in front of you, you have to put a plan into action and attack it from all sides.
The snowball method and avalanche method are designed to do just that. To give you a strategy for payoff so your efforts are rewarded. And all indications are these strategies are much-needed in today’s economy. With 42 million Americans now carrying federal student loan debt, averaging $37,584 and carrying a total debt of $90,460, you need a plan to destroy this debt once and for all.
But each method has its pros and cons. One strategy may be better suited to your financial situation or personality than the other. This is why you’ve come to the right place as we explore each of these popular debt payoff strategies.

The debt snowball method

Imagine a ball of snow sitting at the top of a mountain. Something pushes this snowball and it starts to roll downhill. As it’s rolling, it’s getting bigger and bigger and gaining more momentum the further it goes. Eventually, the snowball is so large it crashes into a tree and that’s it. The snowball is no more.
This visual is the essence of the snowball method.
The snowball method focuses on paying off your smallest step debt first. Once the smallest balance is paid off, you apply the payments that you were previously using toward it to pay the next smallest debt.
To get started you:
  • Make a list of your debts, and put them in order of your smallest debt to highest debt. Don’t worry about the interest rate.
  • Start with the smallest balance and make this your focus. Put all extra money towards it each month.
  • Meanwhile, pay the minimum monthly payments only on the other debts.
  • Once you’ve paid off the smallest debt, move on to the second smallest debt. Pay what you were paying towards the previous one PLUS the minimum payment amount. Your second smallest debt now becomes your focus.
  • Repeat until all debts are paid.

A snowball example

Here’s what a snowball payoff plan might look like for someone who has five debts they are trying to pay off:
  • $3,000 student loan at 4.25% APR
  • $1,500 credit card at 15% APR
  • $900 store credit card at 23% APR
  • $800 store credit card at 22% APR
  • $500 store credit card at 24% APR
With this example, you would pool all your resources to pay off the $500 balance first, while paying minimum payments on the other four. And the idea is to be aggressive with the $500, meaning, any extra money goes towards this $500. This means selling excess items, taking on a side gig, skip eating out for a month — whatever you need to do to quickly pay off the $500. This gives you the momentum to keep working.
Once you pay off the $500, you continue the same level of urgency and work on the $800 debt, and so on.

Pros and cons of snowball

There are several positives to the snowball approach. This is a widely respected concept for debt payoff. It’s also the same method championed by personal finance expert Dave Ramsey. And it’s easy to see why.
The snowball method provides momentum because you see results quickly, perhaps even within a month, you are encouraged by your results. The quick wins are the motivation you need to tackle the next one on your list.
The downside to it is you potentially pay more in interest payments because you’re not tackling your highest interest rates first.

The debt avalanche method

Imagine you’re skiing in the beautiful Swiss Alps and you look over to see a large mass of snow break off and drop down from the top. It starts to slowly fall, but as it continues sliding the avalanche moves faster and faster. The mass isn’t getting bigger along the way, but rather it’s moving faster and faster. Pretty soon the avalanche is faster than any skier on the mountain.
And so it is with the avalanche method.
The avalanche method makes you focus on the highest interest rate first, instead of the amount of your loan or credit card balance. Once the highest interest rate debt is paid off, you apply the payments that you were previously using toward it to pay the next highest.
To get started you:
  • Make a list of your debts, and put them in order of your highest interest rate debt to the lowest. Don’t worry about the balance on each of them.
  • Start with this highest interest rate and make this your focus. Put all extra money towards it each month.
  • Continue to pay the minimum monthly payments only on the other debts.
  • Once you’ve paid off your first balance, move on to the second-highest rate. Pay what you were paying towards the previous one PLUS the minimum payment amount. Your second highest interest rate now becomes your focus.
  • Repeat until all debts are paid.

An example of avalanche

Let’s use the same numbers as our snowball example, but this time the debts are listed from highest to lowest interest rate.
  • $500 store credit card at 24% APR
  • $900 store credit card at 23% APR
  • $800 store credit card at 22% APR
  • $1,500 credit card at 15% APR
  • $3,000 student loan at 4.25% APR
With this method, you would concentrate on the $500 store credit card because it’s the highest interest rate while paying minimums on the others. Once it’s paid off, you move on to the $900, and so on. And again, you should use the same intensity of applying any extra money towards the payoff.

Pros and cons of avalanche

The avalanche method also has its advantages and disadvantages.
With this method, you “save” the most money on interest because you’re paying the highest amount of interest off first. At the end of the debt payoff process, you can rest assured you did not pay any more interest on a card than you had to.
On the flip side, focusing on higher interest rates is not as motivating. If you have a $10,000, $20,000, or higher loan balance or credit card debt, this may take a while to see both progress and experience the satisfaction of knocking out debt.

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Snowball vs avalanche

Choosing a strategy is a personal choice. No one understands your financial situation better than you do.
But you should look beyond your finances since as you can see from our example, the numbers behind each strategy may be extremely close for you. Think about your personality. If you thrive on the small victories along the way or if you like the immediate satisfaction of paying off a small amount, then snowball is a better fit.
But if the thought of spending one extra dollar on interest keeps you up at night, then the avalanche method would better suit your personality.
Another factor to consider is which method gets you to your next financial goal faster? Let’s say your dream is to save for a down payment but to do that you need 50% of your high-interest debt paid off. Then the avalanche would get you closer to this goal.
There is no right or wrong answer here. The benefits are equal: your debt is paid down and your credit score is improved. But before you begin, you do need an honest conversation with yourself. This means writing down your goals, understanding the debt you carry, and knowing what works best for you. Plus this helps you think about other options, such as refinancing or debt consolidation, and if it’s worth the effort to go through that process with lenders.
One more thing, if you need to see the numbers in black and white before you make your decision, then a snowball vs. avalanche calculator is a helpful tool. There you can see the difference in timeline and interest paid by choosing one method over the other.

How long does it take to pay off debt?

So how much in interest debt do you end up paying with these two strategies? How long does it take you to pay it off?
Here’s the beauty of it: the two methods are extremely similar in timeframe and not much difference in interest debt paid.
Using these same numbers and a debt calculator, you can easily calculate the numbers for each scenario.
With the snowball method, the total debt repayment and interest paid back is $7,429 and it will take 26 months to complete.
With the avalanche method, the total debt repayment and interest paid back is $7,425 and would also take 26 months to complete. That’s only a $4 savings by concentrating on the highest interest rate first (in our scenario).

Before you choose a strategy

Before you decide which path allows you to get debt-free as soon as possible, the number one step you need to take is to list out all of your debts. It sounds simple, but if you’re someone who has thousands of dollars in credit card debt, multiple student loans, or a personal loan, then this can be a scary prospect.
But to run the right scenarios and understand how each method might work for you, you have to deal with facts. List out your debts one by one, and confirm the interest rate you pay for each of them.
That’s it. Don’t beat yourself up about it. Put the facts on paper and you’re ready to face your debt head-on with one of these tactics.

The bottom line

Getting to the point where you know you need to tackle debt and you need a strategy is a good thing. This means you’re putting serious thought into reaching your debt payoff goal. Now it’s time to take action!
The snowball method and avalanche method are popular strategies for a reason — because they work by requiring you to focus on one debt at a time. So if you are looking for a focused, tactile approach to debt payoff, then the snowball or avalanche approach can get you there.

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