Debt Snowball vs Debt Avalanche

Pay the minimum on every debt, every month, without exception. Then take whatever extra money you can find — and, as each debt disappears, the minimum payment that is freed up — and aim it all at one target debt. The only difference is which debt you target.

Target the debt with the highest APR. This minimises total interest and, mathematically, is the cheapest order. The downside is that your first target may be a large balance that takes a long time to clear, which can feel slow.

Target the smallest balance. You clear whole debts quickly, which builds momentum, and every cleared debt frees up its minimum payment for the next one. The cost can be extra interest if a small debt has a low rate.

Debts: a $4,000 card at 24.99%, a $9,000 loan at 7.5%, an $800 store card at 29.99% and a $12,000 car loan at 5%, with $150 extra a month. Avalanche finishes in 3 y 0 m · interest $3,331.36, snowball in 3 y 0 m · interest $3,331.36, and minimums alone take 4 y 10 m · interest $5,975.83. Here the store card is both the smallest balance and the highest rate, so the methods nearly tie. Change the debts and the answer changes: with a $6,000 card at 19.99%, a $3,000 loan at 4% and a $500 card at 22% and $100 extra, avalanche saves $346.64 compared with snowball.

• If you are disciplined and want the lowest cost, choose avalanche.
• If you need quick wins to stay motivated, choose snowball — a plan you stick to beats a perfect plan you abandon.
• If your small balances also carry high rates, the two methods coincide.

Run your own numbers in the debt snowball vs avalanche calculator, and see how one loan works with the EMI calculator or loan calculator. This guide is educational, not financial advice.