Debt Snowball vs Debt Avalanche Method: Which Strategy Works Better?

The debt snowball method pays off your smallest debts first to build motivation, while the debt avalanche method targets highest-interest debts first to save money. Your choice between these two debt repayment strategies affects how quickly you’ll become debt-free and how much interest you’ll pay. Compare how these different debt repayment strategies work to decide which matches both your financial needs and how you prefer to tackle goals.

How Does the Debt Snowball Method Work?

The debt snowball method, popularized by financial author Dave Ramsey, focuses on paying off your smallest debts first, regardless of interest rates. This strategy builds momentum through quick wins, helping you stay motivated throughout your debt repayment journey.

To implement the debt snowball method:

1. List all your debts from smallest to largest balance
2. Make minimum payments on all debts
3. Put any extra money toward your smallest debt
4. Once the smallest debt is paid, add that payment to the next smallest debt

How Does the Debt Avalanche Method Work?

The debt avalanche method takes a mathematical approach by targeting debts with the highest interest rates first. This strategy minimizes the total interest you’ll pay and can help you become debt-free faster.

To implement the debt avalanche method:

1. List all debts from highest to lowest interest rate
2. Make minimum payments on all debts
3. Put extra money toward the highest-interest debt
4. Once that’s paid, move to the next highest-interest debt

Comparing Debt Snowball vs Debt Avalanche: An Example

Let’s look at a practical example to understand how each method works in practice.

Consider this common debt scenario:

Debt Type	Balance	Interest Rate	Minimum Payment
Store Credit	$1,000	29.9%	$30
Line of Credit	$8,000	6.5%	$200
Visa	$12,000	17.9%	$360
Mastercard	$15,000	19.9%	$450

Here’s how you would prioritize these debts under each method:

Priority	Snowball Method (By Balance)	Avalanche Method (By Interest Rate)
1st	Store Credit ($1,000)	Store Credit (29.9%)
2nd	Line of Credit ($8,000)	Mastercard (19.9%)
3rd	Visa ($12,000)	Visa (17.9%)
4th	Mastercard ($15,000)	Line of Credit (6.5%)

With an extra $300 monthly payment on top of minimums:

• Snowball Method: Debt-free in 35 months, paying $9,978 in interest
• Avalanche Method: Debt-free in 34 months, paying $8,637 in interest

The avalanche method saves $1,341 in interest and one month of payments in this scenario.

Both repayment methods work with all types of debt – whether you have credit cards, a car loan, student loan, or personal loan. Your debt payments will remain the same; only the order changes based on which repayment method you choose.

Try our debt payoff calculator to compare how repaying debts on your own will compare with different debt relief alternatives.

Does the Debt Snowball Method Really Work?

The effectiveness of the debt snowball method depends on your personal motivation to get out of debt. Let’s examine what works and what doesn’t.

Advantages of the Snowball Method

The snowball method excels in several key areas. Here is what we like:

• Creates psychological wins through quick debt elimination
• Helps maintain motivation through visible progress
• It simplifies the debt repayment process as it’s easy to know which debts to pay off first
• Works well for people who need early success to stay committed
• Provides clear milestones to celebrate
• It makes it easier to track financial goals as you eliminate smaller debts one by one

Disadvantages of the Snowball Method

However, there are significant drawbacks to the snowball method:

• Ignoring interest rates can cost you thousands in extra interest
• Interest payments continue to accumulate on larger balances while focusing on smaller debts
• It will take longer to become debt-free
• It is not optimal for those with significant high-interest debt

For example, using our previous scenario, paying by interest rate (avalanche) instead of balance size (snowball) could save you over $1,300 in interest charges and help you become debt-free one month sooner.

The key advantage of the debt avalanche vs debt snowball is that you pay your debt off fast.

Which Repayment Strategy is Right For You?

How to pay off debt successfully depends on choosing a strategy that matches your personality and financial situation.

Choose the Snowball Method if:

• You’re motivated by quick wins
• Your debts are relatively small
• Interest rate differences between debts are minimal
• You’ve struggled to stick with debt repayment plans before

Choose the Avalanche Method if:

• You have significant high-interest debt
• You’re motivated by saving money
• You can maintain focus without quick wins
• Your largest debts also have the highest interest rates

Regardless of which method you choose, to be successful, it’s best to create a realistic budget and allocate every dollar you can to debt repayment. Track your progress monthly and celebrate all milestones. Avoid taking on new debt and stop using your credit cards until the balances are paid in full.

Frequently Asked Questions About Debt Repayment

Signs You Need Debt Relief

Neither the snowball nor avalanche method will work if you’re struggling with overwhelming debt. Consider speaking with a Licensed Insolvency Trustee if:

• You can’t make more than minimum payments on your credit cards
• You’re falling behind on monthly bills
• Collection agencies are calling
• It will take more than 5 years to pay off your credit card and other unsecured debt

As debt advisory experts, a Licensed Insolvency Trustee can review additional debt relief options that might work better for your situation, including:

• Your eligibility for debt consolidation at a reasonable rate
• Repaying debt through a debt management plan with a credit counselling agency
• Settling debts for less than you owe through a consumer proposal
• Filing bankruptcy to eliminate problem debt

Contact Hoyes Michalos today for a free consultation to review all your debt relief options. We’ll help you understand which solution best fits your situation and guide you toward becoming debt-free.