We’ve touched on the snowball method of paying off your debt in previous blogs, but today we’re going to compare the snowball method with the avalanche method of debt repayment so you can determine which of these plans is the better debt payoff option for you.

With the snowball method, you simply take your smallest debt, regardless of the interest rate, and pay it off first by making as much over the minimum required payment as possible and making minimum payments on all other debt in the meantime. Once the smallest debt is paid, take that monthly payment and add it to the monthly payment for the next smallest debt, paying it off faster. Once that debt is paid, take the equivalent of the two monthly payments from the first two debts you paid off, and apply them both to the next debt and so on, until all debt is paid. As you keep the momentum up, the amount you have available to put toward each new debt grows, and your motivation will grow along with it. Every time you pay off a debt, it will motivate you to pay the next one off faster. The feeling of these small victories that build toward larger ones is the main reason the snowball method is effective. Paying off debts, no matter how small, is encouraging, empowering, and inspires us to keep the (snow)ball rolling by continuing to pay off larger and larger debts until all debt is a thing of the past.

The avalanche method of paying off your debt is also an accelerated way to pay debt off, but it does not follow the smallest to largest path when it comes to paying off debts. The debt avalanche takes the approach of paying off the debt with the highest interest rate first, thereby saving you money in interest charges. It is similar to the debt snowball in that all other debts are to receive just the minimum monthly payments until the large, high interest debt is paid. This makes sense mathematically, however the problem that often arises is that it can feel like it’s taking forever to get this debt paid off, especially if the debt with the highest interest rate is also the largest debt. If you choose this method, you’ll need to apply a lot of discipline to get your debt paid off without continuing to add to your smaller balances. If you can stay motivated, this can be the best choice for you.

There are pros and cons to both methods, but the truth is you can choose whichever method works best for your situation or use a combination of the two. If you have a series of small debts, the debt snowball will build within you the confidence that yes, you can pay off your debt. If you have one or more large, high interest debt, you can always begin with the debt snowball, pay off your smaller debts, and switch to the avalanche method for the high interest debts. Both methods have a positive effect – they both accelerate the process of getting out of debt, and that’s the goal.