Debt Snowball vs Debt Avalanche: Which is Best to Pay Off Debt?

Evaluating the debt snowball vs debt avalanche methods is a topic of much discussion. When it comes to tackling debt, there’s no one-size-fits-all approach. If you want to know how to pay off debt fast, you need a strategy. But choosing between the best strategies for paying off debt can be just one more decision that gets added to your to-do list. To help, we discuss the pros and cons of the Debt Snowball vs Debt Avalanche methods. Which one is the best method of paying off debt often sparks debates among financial experts. However, the best way for you is the one that aligns with your financial situation and mindset and the one you can stick with!

Debt Snowball vs Debt Avalanche Method: What exactly are they?

Debt Snowball Method

Think of a snowball rolling down a hill. It may start small, but it picks up momentum and begins flying down the mountain, getting bigger and bigger. This is how you approach your debts with the Debt Snowball method. The Debt Snowball method of paying off debts prioritizes your debts, regardless of interest rates, from the smallest to the largest balance. While minimum payments are made across all debts owing, any extra money gets put on the smallest debt first until it is eliminated. Then next is the 2nd smallest, and so forth, until you have paid off all your debts.

Debt Avalanche Method

When we imagine an avalanche, significant movement happens at the top, and by the end of the avalanche at the bottom, there may just be a bit of snow left. In the context of debt repayment strategies, Debt Avalanche requires you to organize your debts by interest rate—focusing on the highest interest rate debt first, regardless of the balance.

Why Each Of These Strategies for Paying Off Debt Work

Snowball Method: The Emotional Victory

The Snowball Method is a debt repayment strategy that offers quick emotional wins. By clearing smaller debts first, you create a psychological boost and motivation to tackle larger ones. This method may work wonders for those seeking a sense of accomplishment with each paid-off debt.

Avalanche Method: The Interest-Saving Strategy

On the other hand, the Avalanche Method focuses on paying off debts with the highest interest rates first. Mathematically, it minimizes interest payments. It saves you money in the long run and helps you pay off debt fast. It’s a strategic approach ideal for those keen on reducing overall interest costs.

Personal Experience: Snowball Success

Speaking from personal experience, the emotional satisfaction I gained by checking my debts off my list fueled my success with the Snowball method. While the math might favour the Avalanche method, I was motivated by the psychological boost of seeing progress toward my savings goals. Money does not often come down to pure math. The emotional impact of seeing yourself accomplish goals repeatedly builds confidence and helps your motivation in the debt repayment process.

Your Best Approach: Tailored to Fit

The truth is, the choosing between debt snowball vs debt avalanche is a personal decision. The best strategies for paying off debt may work for some, while a totally different approach works for others. Money is personal, so choose the debt payoff method that resonates with you. Some prefer the momentum gained from quick wins, while others prioritize saving on interest. Evaluating your financial goals, mindset, and motivations before choosing a strategy is crucial.

Ultimately, the path to debt freedom is a personal journey. Experiment with both methods, or even a hybrid approach, and discover what keeps you motivated on your debt-free quest. Find other opportunities to increase your income or use points for expenses to help you become debt-free faster! The key is progress – whatever helps you make consistent strides toward financial freedom is the one that works for you. If you need help, download our FREE debt payoff spreadsheet to start today.