Snowball vs avalanche: two honest ways to pay off debt

If you have more than one debt — a couple of credit cards, a car loan, a personal loan — the question isn't only how much to pay, but in what order. Two well-known methods answer that question differently: the debt snowball and the debt avalanche.

The ground rules both share

• Always pay at least the minimum on every debt, so nothing falls behind.
• Choose one extra amount you can put toward debt each month.
• Send all of that extra amount to one "target" debt. When it's paid off, roll its whole payment onto the next target.

The only difference between the two methods is which debt becomes the target.

Snowball: smallest balance first

With the snowball, you target the debt with the smallest balance, regardless of its interest rate. You clear your first debt quickly, and each payoff frees up more money for the next one — the snowball grows as it rolls.

Its strength is motivation. Seeing a debt disappear in the first few months makes it easier to stick with the plan, and sticking with the plan is what gets you to the end.

Avalanche: highest interest rate first

With the avalanche, you target the debt with the highest APR. Because the most expensive debt shrinks first, you pay less interest overall and are usually debt-free sooner.

Its weakness is that if your highest-rate debt also has a large balance, it can be many months before you see the first one paid off.

So which one should you pick?

If your debts have similar interest rates, the difference in cost is often small, and the snowball's quick wins may be worth more to you than the savings. If one debt has a much higher rate than the others, the avalanche can save a meaningful amount. The best method is the one you will keep following — so it's worth seeing both laid out against your own numbers before you decide.

How FinSight helps

FinSight's Debt Planner runs both methods side by side against your real balances, APRs and minimum payments. You can see the payoff date and total interest for each, try different extra monthly amounts, and choose the plan that suits you.

This article is general education, not financial advice. For decisions about consolidation, refinancing or anything else that changes the terms of a debt, please talk to a qualified professional.