Paying off debt can feel overwhelming, but having a structured strategy makes it easier. Two popular repayment methods—the Debt Snowball and the Debt Avalanche—offer different approaches to eliminating debt. Understanding how each works can help you choose the best strategy for your financial situation.
What Is the Debt Snowball Method?
The Debt Snowball method focuses on paying off debts from smallest to largest, regardless of interest rates. You make minimum payments on all debts while putting extra money toward the smallest balance. Once that debt is paid off, you roll the amount you were paying into the next smallest debt, creating a “snowball” effect.
Pros:
- Provides quick wins by eliminating small debts first
- Builds motivation and momentum
- Encourages consistent progress
Cons:
- May result in paying more interest over time
- Doesn’t prioritize high-interest debt
What Is the Debt Avalanche Method?
The Debt Avalanche method prioritizes debts with the highest interest rates first. You make minimum payments on all debts while putting extra money toward the highest-interest debt. Once that debt is paid off, you move to the next highest-interest debt.
Pros:
- Saves more money on interest over time
- Helps pay off debt faster
- More mathematically efficient
Cons:
- May take longer to see initial progress
- Requires discipline to stay motivated
Which Method Works Best?
The best debt repayment method depends on your financial situation and personality:
- Choose the Debt Snowball if: You need motivation from quick wins and small victories keep you engaged.
- Choose the Debt Avalanche if: You want to save the most money on interest and can stay disciplined without needing early successes.
Both the Debt Snowball and Debt Avalanche methods can help you become debt-free. The key is to stay committed and consistently make extra payments. Whether you prioritize quick wins or long-term savings, choosing a structured approach will put you on the path to financial freedom.
