Avalanche vs. snowball: Which is the best way to pay off debt?

Both the debt avalanche method and the debt snowball method can help you pay off several debts as quickly and efficiently as possible. Which strategy will work best for you depends on your financial situation and motivational style.

Avalanche method

When paying off debts using the debt avalanche method — also called the debt-stacking method — you pay off your debts with the highest interest rates first.

When you tackle the debt with the highest interest rate, you’ll see savings in the form of unpaid interest. You can put that savings towards the next debt with the highest interest rate, and so on until you’re debt-free.

How the debt avalanche method works

Say you owe:

• $500 on a payday loan with a 300% interest rate
• $200 on a credit card with a 25% interest rate
• $10,000 in student loans at a 7% interest rate

Here, you’d start with your payday loan because you’re paying an extremely high interest rate. Once you’ve cleared that debt, you’d move to your credit card debt and then finally your student debts.

With the payday loan as your focus debt, you’d pay as much as you can on that debt each month and only make the minimum payments on your other debts. By focusing on the payday loan, you’re minimizing the amount you’d be paying towards interest, which leads to savings.

When the payday loan is paid off, you’d move on to your credit card debt. Because this is now your focus debt and you’ve paid off your payday loan, you could redirect your payday loan repayment amount, and anything extra you can, towards this debt until it’s satisfied.

On the other end of the spectrum, your student loan has the lowest interest rate and will take a long time to pay off, making it ideal to save for last.

Pros and cons of the avalanche method

Dive deeper into the debt avalanche method

Snowball method

With the snowball method, you pay off your smallest debts first. Once you pay the littlest debt, you use the money that you would have been paying on that debt and apply it to the next in line. This way each time you pay off a debt — moving up your list from smallest to largest — you’ll have a larger payment amount to go towards the next debt in line.

The key to this method is that once you get the ball rolling and start seeing your minimal debts disappear, you’ll be able to move on and tackle the larger ones easier.

How the debt snowball method works

Let’s say we have the same situation from before:

• $500 on a payday loan with a 300% interest rate
• $200 on a credit card with a 25% interest rate
• $10,000 in student loans at a 7% interest rate

You’d pay off your credit card first, then your payday loan and then your student loan debt.

So you’d continue to make the minimal payments on your other debts, but if you can scrap together an extra $50 or $100 a month to pay towards the balance of your credit card, plus the minimum payment, that debt would be eliminated in anywhere from two to four months.

Next, you’d focus on your payday loan debt. So if you were originally making minimum payments of $125, you’d add on the money you were paying towards your credit card and use it to settle your payday loan debt quicker.

After that, you’d take all of the money that you we’re paying towards previous debts and hurl them in the direction of your student loans.

Pros and cons of the snowball method

Dive deeper into the debt snowball method

Which should I choose?

That depends on your financial situation and motivational style. If you have a number of smaller debts that are overwhelming to keep track of, the snowball method can help you clear those out and regain control of your finances.

If you have a lot of debt or are paying high interest rates on one or more debts, you might find it more motivating to save money in the long run by using the debt avalanche method.

And if neither one of those scenarios describes you perfectly, you can combine the two options — pay off your small debts first using the snowball method and then switch over to the avalanche method to pay your larger debts off in order of interest rates.

Compare debt relief options

If you have too much debt to pay off using the avalanche or snowball method, consider using a debt relief service. These companies can help negotiate with creditors to lower the amount you need to pay — but it will negatively impact your credit score.

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CuraDebt Debt Relief		20% of enrolled debt or less, no upfront fees.	Must have verifiable income and more than $10,000 in unsecured debt or tax debt — excluding payday loans.	This company claims to significantly reduce your consumer and tax debt.	Check my rate View details		loading Fetching your data...

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Bottom line

There’s no “best” — especially when it comes to climbing out from under debt. If paying off your smallest debts first keeps you motivated, use our debt snowball calculator to get started. If saving on interest keeps you motivated, use our debt avalanche calculator instead.

And if trying to pay off multiple debts at once isn’t working no matter which method you try, consider a debt consolidation loan so you only have to make one monthly payment, or even a debt relief service to keep yourself out of bankruptcy.

Frequently asked questions

• How can I get out of debt if I live paycheck to paycheck?

  If you’re in a small amount of debt, you can make small sacrifices in your budget to save up an extra $50 or $100 a month to get started — this is especially helpful with the debt snowball method. If you’re in a lot of debt, you may need to consider more drastic lifestyle changes to avoid bankruptcy, such as getting a second job or downsizing your home.

  Read our guide to debt-free sacrifices to learn tangible ways you can save money to repay debts.

• Which method will help my credit score more?

  It depends. If you’re looking to raise your current score, the fastest way to do that is to pay off your revolving credit, like credit cards, before your installment credit, like loans. This will reduce your credit utilization ration, or how much of your credit limit you’re using, which will raise your credit score.

• When is the debt snowball a bad idea?

  If you have a large debt with a high interest rate, you might be better off using the debt avalanche method or getting a debt consolidation loan. This is because you’re likely to pay a lot of money in interest on that debt while you pay off the smaller ones.

  See what you could save with a debt consolidation loan

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