Whether it’s personal loans, student loans, car payments, or credit card debt, people owe more money today than they ever have. If you’re one of the millions of people struggling to pay back loans and debts, you’ve come to the right place.

This article explores two of the most common methods of debt repayment — the debt avalanche and the debt snowball. We help you decide which debt repayment plan is right for you and how to get on the road to financial freedom.

What is the Debt Snowball Method?

The debt snowball method is one of the most popular and practical ways to pay off debt. It was first popularized by Dave Ramsey, an expert in the world of personal finances and debt repayment. You can apply this method to all your debts, with the exception of your mortgage, as it’s in a class of its own.

The premise of the debt snowball method is that you start by paying off debts that are small and manageable. This means starting with the smallest debt on your record and putting most of your money toward paying it off. While doing this, you’ll make minimum payments on your other debts so as not to accrue additional penalties.

Once your smallest balance is paid off, you move on to the next smallest debt. In addition to the minimum payments you were already making, you take the funds you had allocated for the smallest debt and apply it to the next smallest one as well. You continue using this method, paying off one debt after another until you are debt free.

How the Debt Snowball Method Works

The key to using the debt snowball method is to focus on small victories that accumulate and get bigger over time, similar to a snowball. By starting with your smallest debt and getting it out of the way, you can create momentum toward reaching your end goal — paying off all your debts.

However, the only way that the debt snowball method will work is if you continue to make minimum payments on your larger debts as you pay off your smallest one. Otherwise, you’ll fall behind, get overwhelmed, and your debt cycle will continue.

Here are some suggestions that can help get you started with the snowball method.

Continue to Make On-Time Payments

Because all debts have penalties for late payments, it’s essential to make payments on time on all your debts.

Make a List of Debts

Next, make a list of your debts and their amount, and put them in order from least to greatest.

Focus on Paying Off the Smallest Debt

Start paying off small debts first, beginning with the smallest and proceeding to the largest.

Repeat Until Completed

As you eliminate each debt, cross it off the list and repeat the process until you’re debt-free.

Pros and Cons of the Snowball Method


Quick Wins

The biggest advantage of the snowball method is that you’ll receive instant gratification through quick wins. These wins are important for building motivation and momentum as you proceed to larger debts.

Helps Build Momentum

As you pay off one debt after another, you’ll build momentum that propels you forward in your quest to be debt-free.

Improve Money-Management Skills

In addition to paying off more debt than you ever thought possible, the snowball method teaches you important money and debt management skills to use in the future.


Ignore Interest Costs

The biggest downside of the snowball method is that it ignores interest rates and prioritizes small debts first. As a result, you may end up paying more interest because you’re only making the minimum payment on high-interest debt.

Wipes Out Cash Reserves

Because you’re putting all your extra income toward paying off your debt, you may wipe out your cash reserves and savings.

Extended Repayment Period

It may take longer to get out of debt using the snowball method because of the additional interest you will accrue.

What is the Debt Avalanche Method?

The second popular debt repayment plan is to use the debt avalanche method. Rather than starting with the smallest balance, the debt avalanche method starts with the debt that has the highest interest rate.

Using the debt avalanche method, you would likely start with your credit card balance because it will usually be a higher-interest debt. After that, you would tackle each proceeding debt in order of interest rate until all your debts are paid off. While this method offers the allure of paying the least amount of interest, it doesn’t always save people money.

How Does the Debt Avalanche Work?

Because the debt avalanche method can be more complicated than the snowball method, let’s look at a practical, real-life example of how it works.

Debt Avalanche Example

Let’s say that you have accrued the following debts.

  • $10,000 credit card debt at an 18.99% annual percentage rate (APR)
  • $9,000 car loan at 3.00% interest rate
  • $15,000 student loan at 4.50% interest rate

Now, let’s imagine that you have $3,000 in extra money each month to put toward repaying your debts. Starting with the highest interest debt, you would first pay off your credit card balance. By putting every cent of the extra $3,000 towards the debt, you could have it paid off in 11 months, having paid $1,011.60 in total interest.

Next, you would proceed to your student loans, which have the second-highest interest rate, and so on. If you used the debt snowball method instead, you would first pay off the car loans since it’s the smallest balance and finish with your student loans.

Debt Avalanche Pros and Cons

The biggest advantage of the debt avalanche repayment method is that it reduces the total amount of interest you will pay when all your debts are resolved, which could save you money.

The downside, however, is that it requires more discipline than the snowball method, and you won’t see instant results. It will also take longer to pay off each individual debt, which could cause you to lose motivation and stop the strategy before you’re debt free.

Debt Snowball Vs. Debt Avalanche: Which is Better?

While both the snowball and avalanche methods focus on paying off debt as quickly as possible, they go about it in different ways. Depending on your financial situation, the snowball method might be preferable, even though you risk accruing more interest. The momentum you pick up from tiny victories is enough to motivate most people to get out of debt as quickly as possible.

The avalanche method, on the other hand, focuses on paying less interest by eliminating debts with high interest rates first. While this could save you money in the end, sticking to this plan is tough and takes a ton of discipline because you won’t see instant results.

Regardless of which method you choose, it’s essential to continue making minimum payments on your other debts so you don’t fall behind on them.

Cost of Debt Snowball vs. Debt Avalanche Method

To help you determine which repayment method is right for you, let’s look at the overall cost of using the debt avalanche method versus the debt snowball. Let’s say you have the following debts.

  • A $10,000 loan balance with a 15% interest rate and $225 minimum monthly payments.
  • A $5,000 loan balance with an 8% interest rate and $85 minimum monthly payments.
  • A $1,000 loan balance with a 4% interest rate and $20 minimum monthly payments.

Using the snowball method, you would be out of debt in 38 months, having paid a total of $19,621. Using the avalanche method, you would be out of debt at a similar time and would have paid slightly less interest. However, there’s a higher likelihood that you wouldn’t have stuck with your repayment plan using the avalanche method because it takes longer to see initial results.

Which Method is Faster and Cheaper?

Sticking with the example above, you could pay off your debts in roughly the same amount of time. However, you would pay off your first debt in six months or less using the snowball method, whereas it would take over a year with the avalanche method because you’re starting with the highest interest rate debt.

Therefore, if small, quick victories will motivate you to pay off your debt faster, the snowball method is better. However, if you want to eliminate high interest debt first and potentially pay less in the long run, the avalanche method is preferable.

Which Debt Payoff Method is Right For You?

Ultimately, the method you choose to repay your debts depends on your personal circumstances and your personal preference. If your goal is to get out of debt while paying the least amount of interest possible, the avalanche method is right for you. Be advised, however, that this method takes more discipline and determination because you won’t see results as quickly.

If you need small victories to gain traction, the snowball method is the better option. There’s also a chance that the snowball method will save you money in the end, even though you risk accruing more interest.

Many people become more motivated as they see debts erased from their accounts and end up putting even more money toward their debts. As a result, they end up paying it off faster and with less interest than with the avalanche method. It’s also easier to stay on track with the snowball method, which could result in additional savings.

Alternatives to the Debt Snowball vs. Debt Avalanche

While the debt snowball and avalanche methods are two of the most effective ways to get out of debt, they aren’t the only ones. You can also opt to take out a debt consolidation loan, which is where you compile most, or all, of your existing debt into a single lump sum.

Because you’re focusing on paying off a single debt rather than three, four, or even more, some people have success with the debt consolidation method. However, debt consolidation can result in a higher interest rate and higher monthly payments, leading to a longer repayment period.

Debt consolidation loans also have additional risk, depending on who your lender is. You could potentially fall for a scam when you sign up for a debt consolidation loan if you don’t do enough research. Debt consolidation lenders may also be more aggressive than other lenders, leading to unwanted calls and harassment.

It’s essential to use a reputable organization such as Credit & Debt for guidance when it comes to debt consolidation. Credit & Debt provides financial coaches who can help guide you in making the right decision for debt management.


What Are the Three Biggest Strategies for Paying Down Debt?

In addition to the debt avalanche and snowball methods, debt consolidation is the third main strategy for paying off debt.

How Can I Pay Off $50,000 in Debt in One Year?

To pay off $50,000 in debt in one year, you will need to be disciplined and motivated. You will also need to dedicate as much money as possible toward your debt and eliminate most non-essential expenses.

Did Dave Ramsey Invent the Debt Snowball Method?

Dave Ramsey invented the debt snowball method as part of his finance class at Financial Peace University.

Bottom Line

Whether you prefer the debt avalanche or debt snowball method, the ultimate goal should be to get out of debt as quickly as possible. You should utilize whichever method works best for you to achieve this outcome so that you can experience a life free of debt.

To make sure you’re staying on track, use IdentityIQ credit monitoring services for 24/7 monitoring with real-time notifications.