Debt Snowball vs Avalanche: Which Payoff Method Wins?

You've decided to get serious about paying off debt. But should you tackle the smallest balance first (snowball) or the highest interest rate (avalanche)?

Both methods work—but one might be better for your situation.

The Debt Snowball Method

How it works: Pay minimums on all debts. Put extra money toward the smallest balance. When it's paid off, roll that payment to the next smallest.

Example

You have:

• Credit Card A: $500 at 22% APR
• Credit Card B: $3,000 at 18% APR
• Personal Loan: $8,000 at 12% APR

With snowball, you attack the $500 card first, regardless of interest rate.

Pros

• Quick wins build momentum and motivation
• Psychological boost from eliminating accounts
• Simpler to track and execute

Cons

• Costs more in total interest paid
• Takes longer mathematically

The Debt Avalanche Method

How it works: Pay minimums on all debts. Put extra money toward the highest interest rate. When it's paid off, move to the next highest rate.

Example

Same debts as above—you'd pay the 22% card first, then 18%, then 12%.

Pros

• Mathematically optimal—saves the most money
• Faster total payoff time
• Less interest paid overall

Cons

• Slower initial progress if highest rate has large balance
• Requires discipline without quick wins

The Numbers: A Real Comparison

Let's say you have $20,000 in debt and can pay $800/month:

Snowball Results

• Payoff order: Store Card → Visa → Personal Loan
• Total time: 29 months
• Total interest paid: $4,847

Avalanche Results

• Payoff order: Store Card → Visa → Personal Loan (same in this case)
• Total time: 28 months
• Total interest paid: $4,512

Savings with Avalanche: $335 and 1 month

In this example, the methods happen to align. But when a large balance has the highest rate, avalanche saves significantly more.

When Each Method Wins

Choose Snowball If:

• You need motivation and quick wins
• Your debts have similar interest rates
• You've tried and failed with other methods
• Emotional momentum matters more than math

Choose Avalanche If:

• You're disciplined and don't need quick wins
• You have a high-interest debt with a large balance
• Saving maximum money is your priority
• You can stay motivated with slower visible progress

The Hybrid Approach

Many financial experts suggest a middle ground:

1. Start with snowball to build momentum (1-2 quick wins)
2. Switch to avalanche once you're in the groove
3. Celebrate milestones to maintain motivation

The Third Option: Consolidation

Neither method addresses interest rates directly. If you're a homeowner, consider:

HELOC Consolidation Convert 20%+ credit card debt to 8% HELOC debt. You'll:

• Pay off faster regardless of method
• Save thousands in interest
• Have one simple payment

Example: $20,000 at 20% costs $4,000/year in interest. At 8% HELOC rate, it costs $1,600/year. That's $2,400 saved annually.

Making Your Choice

Ask yourself:

1. Do I need quick wins to stay motivated? → Snowball
2. Can I stay disciplined without seeing accounts close? → Avalanche
3. Do I have home equity and high-rate debt? → Consider consolidation first

The Most Important Factor

Here's the truth: both methods work if you stick with them. The worst method is the one you quit.

A study from Northwestern University found that people using the snowball method were more likely to eliminate all their debt—not because it's mathematically better, but because early wins kept them engaged.

The best debt payoff method is the one you'll actually follow through on.

Your Action Plan

1. List all debts with balances and interest rates
2. Choose your method based on personality
3. Consider consolidation if you have home equity and high-rate debt
4. Automate payments to stay consistent
5. Track progress monthly

Ready to Accelerate Your Payoff?

If you're a homeowner with equity, consolidating high-interest debt into a HELOC can supercharge either method. Learn more about HELOC debt consolidation or see if you qualify.