Debt Snowball vs Debt Avalanche Method

When you add up all of the debt you owe, it can look daunting. Like you’ll never be able to pay it – at least not in the foreseeable future. But the best way to eat an elephant is one bite at a time. There are typically two methods to choose from when it comes to debt repayment. There is the debt snowball method and the debt avalanche method. Each one has it’s own pros and cons. Keep reading to see which method would work best for you. ⠀

Debt Snowball Method

In the debt snowball method, you list your debts from the smallest dollar amount to the largest dollar amount, regardless of the interest rate. You then pay each one off in that order. You would pay the minimum payment on all debts except the smallest and then let those payments snowball to the next debt on the list once that is paid off.

This method makes sense from a psychological standpoint because you stay motivated by the wins of paying off the smaller debts. If you feel you would become overwhelmed and easily discouraged during your debt free journey, then this method would be for you.

Debt Avalanche Method

The debt avalanche method (also known as the debt stacking method) involves listing your debts by interest rate. You then pay each one off starting with the largest interest rate. Just like in the snowball method, you would pay the minimum payment on all of the other debts on the list. Once you pay off the highest interest debt, you would turn all of your focus and extra money to the debt with the next highest interest rate.

This method makes the most sense financially as you end up paying less in the long run. If you are more of a numbers person, this will be the best method for you. Just seeing the total amount you owe lessen over time and the money you are saving will be enough motivation for you to keep going.⠀

Which Method Is Right For You?

Both methods work, the choice of which comes down to personal preference. Some people are motivated by how much money they are saving and some need those small wins to stay in the game.

My husband and I used both methods to get out of debt. We started with the snowball method and then evolved to the avalanche method once we became motivated enough to finish the journey. Both methods end in the same result – you become debt free. The most important thing is that you get started and knock out the debt!