Snowball vs. Avalanche: Which one is better for you? Not, which one is best?

I haven’t written much about debt issues but browsing the web on Personal Finance I have seen many articles on the Snowball vs. Avalanche method applied to paying off debt. Both strategies have their proponents and opponents (some of them fierce). What I will try to show you in this post along with the simulator below it is, the question is not: Why one is better than the other? but rather: Why one might be better than the other for you.

A quick guide to the different strategies:
Both strategies apply to paying of multiple sources of debt and assume you pay an extra amount above the total minimum required. If you have 5 different kinds of debt with minimum payments totaling up to $500, you need to apply more than $500 (preferably a lot more) to your debt each month.

With the Snowball method you order your debt from lowest balance to highest and take everything over that total minimum and pay it towards to the lowest balance while paying the minimum on all others. Once that lowest balance card is paid off you move on to the next lowest balance debt and apply all extra money toward that card (all the while paying minimum required payments on the rest of the cards).

With the Avalanche method you do the same but instead of looking at balance you look at interest. You order all your debt from highest interest rate to lowest and direct all extra payments to the debt with the highest interest rate while applying minimum payments to all others. Once the debt with the highest interest rate is paid off you direct all extra money towards the next debt with the highest interest rate. This one can get a little trickier as debts that start out with an introductory 0% Apr can suddenly jump to the highest interest rate you pay.

So why one over the other?

By tackling the highest interest first, the avalanche method ends up costing less money (you pay less interest on top of the principal you owe).

By far, the most sited reason for using the Snowball method is the psychological boost. I’m certainly not one to dispute that, psychology can be a powerful thing. For some, psychology is what got them in debt in the first place so why not use it to get out as well? Motivation can go a long way and might be worth the price.

What really peaked my interest in these two strategies was that some articles are Snowballvs Avalancheclaiming that the cost (or savings) of one method over the other really isn’t that much and therefor you should always go with Snowball. That blanket statement that didn’t sit right.

I have one blog putting forward a scenario in which the difference between avalanche and snowball is a “mere” $985 over 5 years which, one could argue (or against) is a good price to pay if it means succeeding vs failing.

Another blog on the other hand sites a sample of only 3 debts but where the difference in interest ends up getting over $3,400 plus all debt paid off 2 months earlier.

I’m all for motivation but at the cost of $3,400 I’m not so sure. So who is right? Why does one scenario over 5 years have only so “little” difference in interest where as another example saves over $3400 in only 18 months?

Wouldn’t it all depend on the combination of debt along with the different interest rates on those different debt(s)? It does. It all boils down to the number of different interest rates of debt, size of debt and the monthly amount you are willing to pay towards that debt.

The question of which is best, Avalanche or Snowball? should really be: Which method is best for your situation, Avalanche or Snowball

How do you know? Well try it out. The simulator below allows you to put in your debt along with interest rates and methods of minimum payment and it will show what it takes using the snowball method and what it takes using the avalanche method. The savings truly are all over the place depending on how your debt is spread over different interest rates.

I personally can’t put a price on a psychological boost but I wouldn’t dismiss it either. See for yourself what the Snowball method would cost you over the Avalanche method and you make that determination.

btw, like I mentioned I don’t write much about debt in general. Should you want to learn more about beating debt I recommend to go check out the Debt Free Divas or read all about “creating A Debt Destruction Plan” over at Power Over Life.

If you’re not sure what to enter feel free to click on one of three simulations I’ve added. Two of these are close to scenarios I’ve found on opposing blogs.

Current set of debts
Enter the information about each of your debts.
Debt Balance ($) Minimum Payment Interest (%)
Debt 1

Now that we have all the debts entered, we need to know how much you can pay towards your credit Debt each month. Depending on the strategy (snowball/avalange) minimum payments will be applied all debts, all remaining money will
be applied to the single selected Debt (Snowball, the Debt with the lowest balance, Avalanche, the Debt with the highest interest).

Enter how much money you will be paying towards your debt each month
Amount ($)

Now that you have entered all the relevant information you can simulate paying off debt using the Snowball method or the Avalange method

if you liked this one check out some of my other calculators below in the “You may also like…” section or check out my calculator page.

Good luck reaching your financial goals

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About Maarten van Lier

Maarten came to this country with a suitcase and a diploma. He created a financial plan and goal to become a millionaire in 10 years. He successfully turned his financial goals into reality, wrote a book about it and now blogs actively in hope of inspiring other to do the same.