Debt Avalanche Vs. Debt Snowball: Which is The Best Way to Pay Off Debt?

Debt Avalanche vs. Debt Snowball. Which method is best?

If you’re wondering which is better, the Debt Snowball or the Debt Avalanche, you’ve come to the right place. But you might be surprised by our answer: The best method is a combination of the two. Yes, we mean to say that you can have your cake and eat it too. How can you combine these methods to get out of debt? Read on to find out.

Let’s make sure we understand exactly how these two methods differ.

The Debt Snowball and the Debt Avalanche are the two main strategies for paying down your debt. The Debt Snowball method says you should start by paying off the credit cards or loans with the lowest balances first, while the Debt Avalanche method tells you to pay off the accounts with the highest interest rates first.


First, a metaphor

Imagine you’re a firefighter and are called to save a burning house. You enter the house, and see two main areas of fire: two burning logs in one corner, and five burning fuel tanks in another. The logs are bad, but the fuel tanks are wreaking havoc. Which do you put out first?

Most people’s gut reaction is obvious: put out the tanks. Those things are going to blow up.

However, if these two groups of burning objects were your debts, the snowball method would tell you to put out the logs first, because there are fewer of them (only two!) Then, after an early victory, you move on to the fuel tanks.

The avalanche method would tell you to put out the fuel tanks first, because they are more flammable and spreading fire faster. Here’s the reality: Your high interest debts are like those fuel tanks, burning down your financial house. Due to compound interest, they cause much more damage than low interest debt, no matter what size the debts are.


The current debate

Most people will tell you that your strategy is a choice, depending on what you value most while paying off debt: (1) overall speed & savings or (2) sustained motivation. (But you can’t have both).

Internet and radio personality Dave Ramsey has made the Debt Snowball famous and has championed it for years. He says it’s the best way because it helps you build up momentum by paying off the accounts with lowest balances first. You get quick wins by paying off accounts, and this makes you more likely to stick with your plan. After all, saving money is great, but it’s not gonna happen if you can’t stick with a plan long-term. However, proponents of the Debt Avalanche point out that you can lose thousands of dollars by choosing not to tackle your highest interest accounts first.


How big is the difference, really?

Say you have the following debts:

Student Loan:  $15,000 balance, 4.5% interest rate
Credit Card 1:  $5,000 balance, 12.99% interest rate
Credit Card 2:  $25,000 balance, 29.99% interest rate

If we assume you can pay $3,000 per month to get out of debt, your debt payoff timeline using the Snowball method would look like this:

Debt Snowball. Total interest paid: $9,416.16

So you would be entirely debt free by May 2013, and you would pay a total of $9,416 in interest. Ouch.

Now let’s look at what your timeline would be with the Avalanche:

Debt Avalanche: Total interest paid: $5,979.26

Using the avalanche, you would be debt free by March 2013, a whole two months earlier, and you would save $3,436 in interest!

Let’s say that again:  just paying your debts in the wrong order in this situation would have cost you over three thousand dollars. (You can run the numbers on your own finances here:

The difference may be larger or smaller, but the Debt Avalanche always wins in terms of time and money saved. Clearly, it’s the more financially logical way to pay off your debts.

So assuming you stick with your plan, the Avalanche method is superior. However, we can’t forget about the emotional aspect of paying down your debts. As Dave Ramsey says when recommending the Snowball, “the math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely.” In other words, the plan you choose doesn’t matter if you give it up after three months.


And the winner is…

And that brings us to our conclusion: We think you should have the best of both worlds. You should save as much time and money as possible and be rewarded, motivated, and congratulated every step of the way. Why choose between saving money, and feeling good about it?

We’ve built a tool that helps you do both of these things. It automatically directs you to pay off your high interest accounts first, but it also gives you emotional encouragement along the way. Made your payments this month? We display that visually so you can see your progress and get excited. Paid off 25% of one account? We’ll take notice, and email you about how awesome that is. We’re there with the perfect plan, helping you save money and feel good about it.

That’s ReadyForZero‘s method – you get the speed and savings of the avalanche, and the emotional motivation of the snowball. In the war against debt, every little bit helps, and you should use every tool you have to get it done. We’ll help.

This article is part of our Credit Card Debt Resource Center.  If you’re looking for additional information about credit card debt, be sure to pay a visit!

Give ReadyForZero a try and let us know what you think!

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    Are there any studies comparing the two?

    • Some studies have showed the debt snowball working better for people in terms of keeping their motivation strong. On the other hand, it takes longer and costs more to use the snowball method, because you end up paying more interest (how much depends on your unique situation). If you find a method that works for you, that’s all that matters!

      • JamesMcGill

        People who are successful with the snowball method usually change to a much more aggressive approach before it’s done.The idea of the debt snowball is psychological — behavior modification and instilling a sense of austerity as an obsession. More important than the debt payoff approach is how seriously you take stuff like selling the car and driving a beater, not eating a single bite of food that came from a restaurant, keeping your meal prices below $1 per meal per serving. A whole spectrum of stuff like that. It’s *radical*, and a lot of people either miss the point, or are unwilling to practice extreme austerity.

  • jksigmon

    You didn’t do dave’s debt snowball correctly in your calculations. It doesn’t start with the lowest interest rate but the lowest debt amount. So the $5000 debt would be the first to go in only the first three months. Also, studies have been done that prove the snowball is much more effective because you see and feel the progress sooner and more often. People give up much much easier when they aren’t seeing any progress when trying to pay off a massive debt as your first debt.

    • Thanks for the comment. In the first graph above, the $5,000 debt is the first one to be paid off, just like you said. The second graph shows what would happen with the debt avalanche method. Ultimately, you need to do whatever works best for you. But we believe ReadyForZero provides the motivation necessary to succeed with the debt avalanche, which means you will get out of debt faster! Have you tried using ReadyForZero?

  • insipid

    This story has the study. I can see the point though. I’ve been doing the snowball to get my debts paid off. Even though it looks like the avalanche would save me money in the long run, I can’t see using it mainly because the snowball will let me lower my monthly minimum I need to make faster. In these times when jobs are evaporating left and right, the faster I get my minimum amount due down the more secure I’ll feel as my savings will stretch further if I lose my job. While still employed, I’ll continue to slam as much as I can against my bills though. Almost there too, I have two land payments and one house mortgage to go before I’m debt-free and I’ll be selling the house this year. Luckily houses in my area are starting to sell again. We’ll be building a retirement place on one of the pieces of land we have and by then the other piece of land should be paid off. We should be down to just a mortgage on the retirement house by this time next year and will have it paid off within 5 years unless the job goes away.

    • That’s an interesting point about the minimum payments. I appreciate the thoughtful and insightful comment. Sounds like you’re on your way to being debt free!

    • JamesMcGill

      The snowball method is about *anything but* the long run. It’s a “baby step” for a reason. That reason is psychological. It’s part of a behavior modification program that transcends debt relief. Dave Ramsey’s program calls for *radical* lifestyle adjustments.

  • Allison

    I chose the snowball because it’s what works for me. I like having one less bill to pay each time I pay a card off. It really gives me momentum.

    • That makes sense. I’m glad to hear you’re making progress and getting closer to debt free!

  • tnt management

    There is a better way, and that is what I coach. Everyone has an opinion, and, someone always thinks their way is better. If someone can prove me wrong, I would gladly utilize their process. I have been working in this field (financial services) for 30 years, and have fine tuned my concept along the way. My process gets people (individuals, families, or businesses), out of debt in 10 years or less, including mortagages, and most of the time gives them a positive cash balance in the six figure area. Obviously, the results are determined by how serious someone takes my coaching.

    • JamesMcGill

      You didn’t mention one single thing about “your program” other than the suggestion that “it works most of the time”.

  • Yesspaz

    I agree with the Avalanche being superior for the obvious reason that it’s mathematically superior. However, Loren’s treatment of the issue leaves out one massive consideration: monthly liability.

    Liability is the amount of money owed each month. The Snowball method has a major advantage over the Avalanche, and that is potentially lowering the monthly liability owed month to month. Here’s an example.

    Say Bill has two debts. The first is $5,000 and high interest, and the second is $25,000 and low interest. The Snowball and the Avalanche are the same here: pay all extra money on the first. Bill will pay off the higher interest debt first and the lower balance debt first – they’re the same debt.

    However, if the first $5,000 is low interest and the second $25,000 is high interest, the math (Avalanche) says pay all extra on the $25,000 debt. The $5,000 debt hangs around longer, but Bill will save on his total amount paid.

    Let’s scale this up to, say, ten different debts. Using the Avalanche causes more of them to hang around longer, and therefore keeps monthly liability for Bill high.

    If a financial emergency happened, like the loss of a job or surgery, if Bill is using the Snowball, he’d have been paying the amount he was paying toward his smaller debts on his larger debts, but could stop doing that, resort to the minimum, handle the financial emergency, and the resume his debt payments later. If Bill is using the Avanlanche at the time of the financial emergency, he may very well be unable to pay anything!

    When I set up debt plans for friends and clients, each one is unique, but I start them with Snowball to kill the little debts and eliminate as much monthly liability as possible. Once the larger debts are all that’s left, I use Avalanche on the rest.

    • This is a very interesting point you’ve brought up. I can see how it would be beneficial to reduce the number of monthly payments one has. What I’m wondering is whether the monthly payments can be assumed to be around 2% of your remaining balances. If so, then would it matter whether you had several monthly payments left or just one? Wouldn’t the amount of the monthly payment(s) and the effect on your budget be the same?

    • Skyler

      I am going to go with snow ball method myself for this same reason. My car loan is already halfway completed, but it has a fairly low interest rate. If I attack this debt before my higher interest student loan it will free up 200 dollars a month in case of an emergency situation about 1.5 years early. (obviously I wouldn’t stop paying that amount towards my other debts) I used and saw that I would save approximately 150 dollars using avalanche over snowball, so for me the peace of mind over a year and a half is well worth the 150 dollars.

      • JamesMcGill

        If you have a “car loan” you’ve missed the point of Ramsey’s program.

  • Shane Rowley

    The analogy about the burning house is somewhat inaccurate. It suggests that the interest rates are what is causing the fire to spread, when it is actually the act of borrowing money. Getting out of debt isn’t a math problem, it’s an emotional problem. Math tells us we shouldn’t get into debt to begin with, yet people still do it. The Debt Snowball focuses on building mental strength, which is the main ingredient to get out of debt.

    • That’s an interesting point, Shane. You’re definitely right that for some people the emotional effect of the snowball will be more powerful than anything else could be. Hopefully with ReadyForZero you can get the best of both worlds, though. Thanks for your comment.

  • JamesMcGill

    Dave Ramsey is very up-front about the basis of the debt snowball being psychological and confidence building. When you are dealing with personal debt recovery, emotional aspects of the first steps of recovery are far more important than the numbers game. What looks good on paper doesn’t work as well as the emotional rush when you basically make a game out of recovery. Dave Ramsey would agree that the avalanche method is more effective in theory, but in practice it doesn’t “prime the pump” in the manner required by his program which is driven by engendering a sense of obsession into the person practicing the program. If you have the discipline to run a more effective, but less immediately rewarding program, you probably aren’t in the kind of desperate debt addressed by Ramsey’s program. Ramsey talks about this, he’s not a fool.

  • I’ve never had to utilize either method but I was intrigued with these methods. I created a calculator on my own blog that works out the exact numbers. There is no doubt that the majority of the time Avalanche is cheaper. What you have to figure out is how much the psychological boost from Snowball is worth.

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  • Aaron

    You’re graphs are no longer shown. Care to update the article?

  • nick haz

    Personally with the situation you presented it would make more sense to pay off your college loans and then file for bankruptcy.
    If you are not going to be buying anything big in the next 7 years trashing your credit score won’t be a big deal.

  • Chelsea Gagné

    This article completely skips over a key part of the Debt Snowball. Yes, the emotional aspect is important, but the idea is to pay off the lowest debt first so that you are free of that monthly payment /so that you can apply the extra money to the debt with the next lowest balance/, and continue from there. The snowball method is geared toward people who don’t have the money to make “extra” payments. Getting rid of a few monthly payments in succession frees up lot of money that can then be used to really eat away at the big loans.

  • Clint Beastwood

    I get what you’re saying and I agree with that the avalanche is far more advantageous, but I feel like your solution is trying to fix the sink when the actual problem is the well. Yes, the confidence gained from small victories helps, but that pat on the back isn’t why the snowball is effective. The snowball is effective because it allowed you to start building financial discipline at the level you’re at. Starting when you payoff that first, smallest account, you’ve conquered something that you never have to return to. The account is zero and you have a trophy to show for it (a statement with no balance due).

    DR actually addresses this in one of his videos. He admits the avalanche method (I don’t think he calls it that specifically) is the option that makes more sense, but he also makes the good point that you aren’t likely to stick with it at that point because it requires discipline and if you were already disciplined, you probably wouldn’t be in this situation in the first place. If anyone in this situation can do the debt avalanche successfully, then by all means they should. However, if they try that method and they can’t stick with it, they need to switch to snowballing. No one starts off training for a 5K by running a 5K.