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Using Debt Avalanche or Debt Snowball Method - Paying Down Your Debts

Debt Avalanche vs. Snowball Method: Which Way is Right For You?

Last Updated: May 16, 2016

To be successful at paying off debt, you need more than desire and determination. You need a plan. As you may know, two of the most popular plans are the debt avalanche and snowball methods. The question is, which one is right for you?

Both methods employ the same principle – focus on paying off one debt while making minimum payments on the rest. Where the two differ is in which debt you focus on first.

Debt Avalanche – Focus on the Highest Interest Rate

When you pay off debt with the avalanche method, you start with the debt that has the highest interest rate first. So whatever amount of extra money you have to put toward paying off debt every month, that’s the debt that gets it. Meanwhile, the rest of your debts only get minimum payments.

Then, once the highest interest debt is paid off, you move on to the next highest interest rate, working your way down through your debt, from most to least expensive.

Pros

debt avalanche debt snowball methods

You’ll save more money. If you focus on your highest interest rate first, you’re cutting the time it has to rack up interest charges. You can let your other, lower interest rate debts do that, potentially saving you hundreds, if not thousands, of dollars by the time your debts are paid off.

You’ll pay off all of your debts faster. By knocking off your highest interest rate first, you’re eliminating your most expensive debt. It can’t hang around, charging you high interest and, in turn, tacking extra months’ payments onto your debt.

Cons

It can take longer to pay off multiple debts. Your highest interest rate balance might be a doozy, which could mean it takes a long while before you’re able to pay it off and move on to the next.

Many people find it hard to stay motivated. They need to see all their hard work making an immediate difference (i.e., debts being paid off fast).

Debt Snowball – Focus on the Lowest Balance

When you pay off debt with the snowball method, you start with the debt that has the smallest balance. Again, whatever extra money you’ve set aside for paying down debt goes toward the one with the lowest balance. In this way, you work your way up with the debt snowball, from least to most expensive.

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Pros

You’ll pay off more of your debts faster. Just how fast depends on how many small debts you have hanging around, some of which may be so small that you can knock them off with one payment.

You won’t have as many bills to manage. Balances and interest rates aside, the sheer number of debts you have can be anxiety-inducing. Picking them off one by one with the snowball method can help reduce some of that worry.

It can be easier to stay motivated. When you go with the debt avalanche, it may take a while to pay off that highest interest debt, during which time you have no sense of certainty that you are actually capable of paying off a debt. With the snowball method, you succeed at paying off a debt much faster, which can give you the confidence you need to keep pushing forward.

Cons

It will cost you more than the avalanche method. If you’re just chipping away at your smallest balances, you may not get to your highest interest rate debt until last. Meanwhile, it’s had all that time to rack up interest charges.

It takes longer to pay off all of your debts. If that highest interest rate debt sticks around to the end, those interest charges will tack more months onto your overall debt payoff.

Which Way Is Right for You?

Obviously, the debt avalanche is going to save you the most time and money. Plus, if it’s immediate results you need to see, you can always track the decline of that highest interest rate balance. Watching that diminish is a big deal!

But if you don’t foresee yourself following through with a plan that takes so long to pay off just one debt then, by all means, go with the debt snowball. It may cost you more and take longer, but at least there is far less chance of you getting discouraged and giving up your payoff plan altogether.

Or, try the debt avalanche and, if you don’t like it, switch to the snowball instead.

Both ways work for different people and for different reasons. Just go with your gut, get to work, and give yourself permission to revise as you go.

Want to Get that Highest Interest Rate Down?

First, ask for it. Worst-case scenario, they say no. If that doesn’t work, you might consider a balance transfer, either to an existing credit card with a lower balance or a new one. If you do apply for a new lower-interest credit card, read the fine print and do the math to be sure it is a money-saving move. 

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