Best Way to Pay Off Debt: Snowball vs. Avalanche Repayment Methods

Paying off debt can feel overwhelming, but deciding on the right strategy for you can help ease the burden. The debt snowball vs. avalanche is a common debate, but is either the best way to pay off debt? That really depends on the user. There are several hybrid methods that pull from elements of the debt snowball and debt avalanche methods to better fit users’ motivations and goals.

What is the debt snowball method?

Before really going to work on the debt snowball method, experts suggest starting an emergency savings of at least $1,000 before diving into repaying your debt.

From there, the debt snowball method starts by listing your debts in order from the smallest balance to the largest balance. This method prioritizes paying off the smallest balance first, regardless of the interest rate. Once that debt has been repaid, you start to work toward paying off your next smallest balance.

The idea is to pay as much as possible toward your smallest balance while making minimum payments on all other debts. Once the first debt is paid, use the money you would have paid for that debt toward your next highest debt, repeating the process until you’re out of debt. While you likely won’t save as much on interest fees with this approach, you may experience positive psychological effects from small victories.

Related: Debt Snowball Checklist 2021

What is the debt avalanche method?

Unlike the debt snowball method, the debt avalanche method puts repaying the debt with the highest interest rate first. The idea here is to put as much money as possible toward the debt with the highest interest rate. Like with the snowball method, you continue to make the minimum payment on all other debts.

Once you pay off the debt with the highest interest, you start repaying the debt with the next highest interest rate, continuing with this approach until you’ve repaid all your debts.

Plug your numbers into our debt repayment calculator to see how the debt snowball and avalanche methods will work for you.

Snowball vs. avalanche

Deciding which approach to debt repayment is best for you can be difficult. With either method, the top priority is eliminating debt. But ultimately the decision will depend on your goals and priorities.

If you are motivated by math, i.e., saving money on interest, the debt avalanche approach may be the better fit. But how much you save will depend on several factors, including the difference between your highest and lowest interest rates.

But most consumers find that the debt snowball method is the best way to stay on track.

When to use the debt snowball method

If you’re eager to see progress sooner rather than later, then the debt snowball method may be the way to go, especially if this approach will keep you motivated and on track to paying off your debt. A debt snowball calculator can help you determine how quickly you’ll be able to do just that.

Related: How to Start a Debt Snowball

When to use the debt avalanche method

If you’re patient and don’t mind waiting a bit longer to reach your first “victory,” the debt avalanche method is a solid choice. You’ll also be better positioned to look toward the future as you’ll ultimately save money on interest.

Debt snowball vs. avalanche alternatives: Hybrid debt payoff methods

If neither the debt snowball or debt avalanche approach feel right for you, there are some alternative repayment methods that combine factors of each strategy.

Treat small and large debts differently

One way to combine the debt snowball and debt avalanche approaches is to separate your small and large debts.

If you have smaller debts, say below $1,000, start with those using the snowball approach. For example, if you have a credit card balance of $900 with an 11% APR and a personal loan of $500 with an 18% interest rate, focus on paying off the $500 balance then the $900 balance.

Once you’ve paid off the smaller debts, switch to the avalanche approach for larger debts to tackle higher interest rates. Say you have an $8,500 auto loan and 6% interest rate and a $15,000 student loan with a 7% interest rate. Start with the student loan then move to the auto loan.

You’d still make minimum payments on all accounts, but throw as much as you can at the particular balance you’re focusing on. Say you’re able to put an additional $300 toward the account you’re focusing on. You will have paid off your original balance of $24,700 in 38 months.

This approach gives you a balance between early victories (you’d pay off your first two debts in five months) and interest savings ($2,642.61 in total interest).

Recommended: Real-Life Debt Snowball Examples and Success Stories

Change your strategy based on type of debt

Another way to use the snowball and avalanche approaches together is to change your approach based on the type of debt you’re paying down. The idea would be to start off by paying down revolving debt like credit card debt, which is generally unplanned, with the snowball method.

Once you’ve paid off those debts, switch to the avalanche method to pay down installment debts, like student loans and auto loans.

Using the same example as above, you’d start with the credit card instead of the personal loan.

This approach would offer a similar balance between quick wins and savings on interest. While you’d pay off your debt in the same amount of time as the first alternative, you’d pay slightly more in interest ($2,651 total).

Be flexible with sizeable extra income

If you manage to earn a nice chunk of extra income, like a big bonus at work, you’ll likely want to use that to pay down your debt. Depending on the amount of each of your debts and the amount of your bonus, you’ll likely want to start by using the snowball method. But if you have particularly high-interest debts with high balances, you may want to consider a hybrid approach.

Take the same example from above and say you earn a $2,000 bonus at work that you’re planning to put completely toward paying down debt. You’ll be able to pay off your credit card ($900) and personal loan ($500) in full before moving on to your auto loan.

By using your bonus to pay down your debt, you’d be debt free in 36 months and pay a total of $2,419.15 in interest. So you’d pay off your debt two months quicker and save at least $223.46 in interest.

Use the debt-to-interest ratio strategy

This strategy may be a bit complex, but it can be a good way to get the best of both worlds out of the debt snowball and avalanche methods.

This hybrid method—initially coined the “debt spiral” method by blogger Frugal Fan in 20151—uses the debt-to-interest ratio to determine the order you’ll pay off the balances.

Calculate debt-to-interest ratio by dividing your account balance by your current interest rate for each of your accounts. From there, you would start by paying off the balance with the lowest debt-to-interest rate and work toward the balance with the highest debt-to-interest ratio until you’ve paid off all your debt.

While the repayment order for the debt snowball and debt avalanche approach are straightforward, the hybrid method involves some math. Using the same debt examples from the snowball and avalanche approaches, here’s how that breaks down:

• Auto loan: 8,500/6 = 1417 (third)
• Credit card: 6,194/18 = 344 (first)
• Personal loan: 12,000/19 = 632 (second)
• Student loan: 15,000/7 = 2142 (fourth)

As with the debt snowball method, you’re still starting with the credit card balance, so you’re still earning a fairly quick “win” that will likely help you stay motivated. But you’re paying significantly less interest, saving $1,069.81 compared to the snowball method. The debt avalanche approach would still save you slightly more and take a little bit less time, but the difference is only $136.22 and one month, respectively.

If it’s important for you to get a victory quickly while also saving money in interest, this hybrid method could be a good approach for you.

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