If you’re trying to get out of debt, you’ve likely heard of two powerful strategies: the debt snowball and the debt avalanche method. Both can help you become debt-free, but they work in different ways.
In this step-by-step guide, we’ll break down how each method works, its pros and cons, and how to choose the right strategy for your financial goals.
Table of Contents
What Is the Debt Snowball Method?
Step 1: List Your Debts From Smallest to Largest
With the debt snowball, you focus on paying off your smallest debt first, regardless of the interest rate. This method is all about building quick wins and momentum.
Example:
- Credit card A: $500 (19%)
- Medical bill: $1,000 (0%)
- Student loan: $5,000 (6%)
You’d start with Credit Card A, even though it has a higher interest rate than your medical bill.
Step 2: Make Minimum Payments on All Other Debts
Keep paying the minimum on every other debt while throwing any extra money at the smallest one.
Step 3: Pay Off the Smallest Debt First
Once that smallest debt is gone, celebrate! Then, move all the money you were using for that debt to the next smallest one—this is the snowball effect.
What Is the Debt Avalanche Method?
Step 1: List Your Debts by Interest Rate (Highest to Lowest)
The debt avalanche focuses on saving money on interest. You start with the debt that has the highest interest rate, not the smallest balance.
Example:
- Credit card B: $3,000 (22%)
- Car loan: $10,000 (6%)
- Personal loan: $2,000 (12%)
You’d begin with Credit Card B, even if other debts are smaller.
Step 2: Make Minimum Payments on All Other Debts
Just like with the snowball, you continue to pay minimums on all other debts while attacking the highest-interest debt first.
Step 3: Pay Off the Highest-Interest Debt First
When your most expensive debt is gone, move to the next-highest interest rate. Over time, this method saves you more in total interest.
Debt Snowball vs. Debt Avalanche: Key Differences
| Feature | Debt Snowball | Debt Avalanche |
|---|---|---|
| Strategy | Smallest balance first | Highest interest rate first |
| Motivation Boost | Fast wins build momentum | Progress feels slower initially |
| Interest Savings | May pay more over time | Saves more in interest overall |
| Simplicity | Easier to follow | Requires more discipline |
| Best for | Emotional motivation | Financial optimization |
Which Method Should You Choose?
Choose Debt Snowball If:
- You need quick wins to stay motivated.
- You’re overwhelmed and want to feel progress fast.
- You value simplicity over long-term savings.
Choose Debt Avalanche If:
- You want to pay the least amount of interest.
- You’re disciplined and can stay motivated without early results.
- Your highest-interest debts are also your largest balances.
Pro Tip: Combine Both Methods
Some people use a hybrid method: start with the snowball for motivation, then switch to the avalanche to save on interest.
Real-Life Example: Sarah’s Story
Sarah had:
- $700 credit card (22%)
- $3,000 student loan (5%)
- $1,200 medical bill (0%)
She used the debt snowball, paying off her credit card first. It motivated her to keep going. After that, she switched to the avalanche method to save money on interest.
This mix helped her stay motivated and financially smart.
Tools to Help You Choose
- Debt payoff calculators (like Undebt.it)
- Spreadsheets for tracking balances
- Budgeting apps like YNAB or Mint
Final Thoughts
Whether you go with the debt snowball or the debt avalanche, the most important thing is that you start. Both methods can work—consistency is key.
Pick the method that suits your personality and financial goals. If staying motivated is tough, snowball might be best. If you’re laser-focused on saving money, an avalanche is smarter.