Two Strategies, One Basic Idea
If you have several debts, both methods use the same basic approach: keep making at least the required minimum payment on your other debts while directing your extra debt-payment money toward one target.
When that target is paid off, move the money you were paying on it to the next debt. Your total debt-payment budget does not have to increase for the amount attacking the target debt to grow.
Start With the Smallest Balance
List your debts from smallest balance to largest. Make the minimum payments on everything, then put your available extra payment toward the smallest debt.
Once that debt reaches zero, take the entire amount you were paying on it and add it to the payment on the next-smallest debt.
The advantage is visible progress. Eliminating a smaller account can give you an early win. The tradeoff is that a larger debt with a high interest rate may continue accumulating interest while you work through smaller balances.
Start With the Highest Interest Rate
List your debts by interest rate, from highest to lowest. Continue making the minimum payments on everything, but direct your extra payment toward the debt charging the highest rate.
When it is paid off, roll that entire payment into the debt with the next-highest interest rate.
Because you attack the most expensive debt first, the avalanche generally reduces the amount of interest you pay. The tradeoff is that your first target might have a large balance, so it can take longer before you completely eliminate an account.
Snowball vs. Avalanche at a Glance
| Snowball | Avalanche | |
|---|---|---|
| First target | Smallest balance | Highest interest rate |
| Main advantage | Quicker visible wins | Generally saves more interest |
| Main challenge | May cost more interest | First payoff may take longer |
| May fit you if | Progress keeps you motivated | Reducing interest cost motivates you |
A Simple Example
Suppose you have three debts:
- $800 balance at 10% interest
- $3,000 balance at 24% interest
- $7,000 balance at 8% interest
The snowball attacks the $800 balance first because it is the smallest. The avalanche attacks the $3,000 balance first because 24% is the highest interest rate.
Neither method changes the requirement to keep making the minimum payments on the other debts. What changes is where your extra payment goes.
Which One Should You Choose?
If your main priority is reducing interest expense, the avalanche has the mathematical advantage. If paying off an account quickly will make you more likely to stay committed, the snowball may be more useful in practice.
I have personally used the debt avalanche method because I prefer directing extra money toward the debt costing me the most. But that does not make it the right choice for everyone.
Whichever method you choose, consistency matters. Keep your minimum payments current, avoid adding unnecessary new debt, and keep rolling each eliminated payment into the next target.
Before You Start
You need enough income to cover necessary living expenses and required minimum payments before either strategy can work as intended. If you cannot cover your minimums, choosing between snowball and avalanche is not the immediate problem.
You may need to review expenses, contact creditors about available options, or consider speaking with a reputable nonprofit credit counselor.
If you are still organizing your debts and monthly expenses, start with How to Start Paying Off Debt When You Don’t Have Extra Income.
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Debt Reduction: How to Get Out of Debt Without Increasing Your Income — Second Edition goes deeper into assessing your debt, snowball and avalanche strategies, budgeting, spending habits, credit counseling, and worksheets for building your own plan.
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