Debt snowball vs debt avalanche

The avalanche method

Pay extra on the debt with the highest interest rate first. When it is cleared, move its payment to the debt with the next-highest rate.

• Cost: usually the least total interest.
• Downside: if the highest-rate debt is also large, the first win may take a long time.

The snowball method

Pay extra on the smallest balance first, whatever the rate. When it is cleared, roll that payment into the next-smallest balance.

• Benefit: quick early wins, which help some people stay motivated.
• Downside: you may pay more interest overall.

How much does the choice matter?

It depends on how different your rates are and how much extra you can pay. If your rates are similar the two methods finish close together. If one debt has a much higher rate, avalanche can save real money. Enter your own numbers in the calculator below to see the gap rather than guessing.

Choosing

• If you are disciplined and the savings are large, avalanche is the safe pick.
• If you have given up on plans before, the motivation from snowball may be worth some extra interest.
• You can also start with snowball to clear a small debt, then switch to avalanche.

Things to check first

• Does any debt charge a penalty for paying early?
• Is there a 0% offer that ends soon? That may change the order.
• Do you have a small emergency cushion, so a surprise bill does not go on a card?