Credit Card Debt

Debt Avalanche vs. Debt Snowball

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When it comes to resolving debt, there isn’t a one-size-fits-all solution. Some people may be able to reduce debt on their own, and others may need professional help. If you are looking to pay down debt on your own, you may have heard about two popular approaches: the snowball and avalanche methods.

If not, you’re probably wondering what winter fun has to do with resolving debt. These are two common terms that people use to describe techniques for tackling debt. Whether you choose the snowball or avalanche method should really depend on your personality, your goals, and what motivates you. What works for one person doesn’t work across the board for everyone else.

Debt Avalanche 

If your foremost goal is to save money and resolve your debt in as short a time as possible, you will want to tackle the highest interest rate card first. It’s like working from hardest to easiest. You start from the top and work your way down, like an avalanche falling from a mountain. The aim is to pay as much as possible on debts with the highest interest rates while making at least minimum payments on the rest.

After you succeed in paying off the debt with the highest interest, you proceed with the next one. Keep doing this until your debts are resolved! It’s a more aggressive repayment strategy, but you will probably reduce your debt load more quickly this way. It’s sometimes easier said than done though, because everyone wants to save money, but will you be disciplined enough to stick with the plan…even when money gets tight?

Debt Snowball

On the other hand, the snowball method plays off of emotion. The idea is that getting quick wins, like paying off your smallest debt first, will motivate you to keep moving forward toward your end goal. You start off small, and one by one, you pay off each debt until it is finally gone. The term snowball comes from the idea that you gain momentum, building from the smallest to the largest debt.

When using the snowball approach, make sure you are making at least minimum payments on all of your other accounts. This is a good method to use if you need to see results quickly and want a debt reduction plan that is simple to follow.

So, which method is right for you – debt snowball or debt avalanche?

Mathematically speaking, the avalanche approach is often cheaper and faster overall. You get rid of the more damaging debts first because higher interest means you’ll have to pay back more over time. However, the snowball method can help you build confidence, assuming that early success will motivate you to pay off the rest of your debts.

Regardless of which strategy you choose, make sure to develop a sound financial plan and stay disciplined. The longer you stick with it, the more likely you are to succeed. Remember that getting out of debt is possible!

Which debt relief option is right for you?

Download our free guide to find out.

Tammi Huang is a Marketing Manager at Freedom Financial Network. Her goal is to help people adopt better money habits and improve their financial health. She wholeheartedly believes that spending less doesn’t mean living less. When she’s not writing, Tammi fills her free time working on home design projects, trying new restaurants, and exploring dog-friendly spots with her rescue pup.