If you have several debts, the order you pay them off in matters. The two best-known strategies are the debt snowball and the debt avalanche. Both work; they just optimize for different things.
How both methods start
Pay the minimum on every debt, and decide on an extra amount you can pay each month. The methods differ only in which debt gets that extra money. When a debt is paid off, its minimum payment isn't spent; it's added to the extra money for the next debt. That growing payment is the “snowball”.
- Snowball: extra money goes to the smallest balance first.
- Avalanche: extra money goes to the highest interest rate first.
A worked comparison
Take three debts with $200 a month extra on top of the minimums:
| Debt | Balance | APR | Minimum |
|---|---|---|---|
| Medical bill | $800 | 0% | $50 |
| Personal loan | $5,000 | 11% | $160 |
| Credit card | $6,000 | 24% | $150 |
- Avalanche (credit card first): debt-free in 25 months, about $2,190 in interest.
- Snowball (smallest balance first): debt-free in 27 months, about $2,850 in interest.
Here the avalanche saves about $660 and two months, because the snowball leaves the 24% credit card until last. Run your own debts through the debt payoff calculator to see the difference for you.
Which one should you choose?
- Choose the avalanche if you're motivated by the numbers and your rates differ a lot.
- Choose the snowball if you need quick wins to stay on track. Clearing a debt in the first few months is a real boost.
- When balances and rates line up (the smallest debt also has the highest rate), both methods are identical.
The best method is the one you'll stick with. The difference between them is usually far smaller than the difference between either method and paying only minimums.