Which is best: Debt Snowball or Debt Avalanche Method?

The differences between the Debt Snowball and Debt Avalanche.

Are you looking for the best way to pay off debt?  You are not alone!  One of the most important things to do when paying off debt is to develop a plan.  This plan should give you motivation and direction for your debt payments.  Two of the easiest ways to pay off debt is by using the debt snowball or debt avalanche methods.

Neither of these methods are superior to the other.  They both have great qualities and offer excellent motivation for getting rid of debt.  I’ll explain all of the pros and cons to these two methods in this article.

How to Pay Off Debt With The Debt Snowball

The Debt Snowball is the method Dave Ramsey recommends, and probably the most popular of the two.  The Debt Snowball was designed as a way to help you gain confidence with paying off debt.  The idea is that as you pay off your smaller debts first you will become more excited to pay off the larger ones.

• Related:  Why I Disagree With Dave Ramsey

To use the Debt Snowball method you will first list all of your debts in order from the smallest debt to the largest.  Do not pay attention to the interest rates, instead focus on the amount owed.

While continuing to make minimum payments on all debts, begin actively trying to pay off your SMALLEST debt FIRST by paying more than the minimum payment each month.

For Example:

• $800 Credit Card with 5% interest
• $5,000 Car Loan with 7% interest
• $25,000 Student Loan with 15% interest

Pay off the credit card first, while continuing to make minimal payments on the other two debts.  Next you will pay off the car loan, and then lastly you will tackle the student loan.

This will mean that you will use ANY extra money that comes your way to paying off this one debt.  Try to cut out any unnecessary expenses and use that extra money to tackle each debt.

As you pay off those small debts you will have more practice and motivation to be able to tackle the larger debts.

Debt Snowball Pros

There are many pros to using the Debt Snowball to get rid of your debt.  A few of these include:

• Builds Confidence
• Keeps you motivated
• It’s simple to follow

Debt Snowball Cons

The biggest con to using the Debt Snowball is that there is a possibility you will spend more money because you aren’t paying off the highest interest first.

If you choose to pay off a debt with only 2% interest and wait to pay off the debt with 15% interest, you are having to pay that extra interest rate longer, making it cost more in the long run.

This is where the Debt Snowball and Debt Avalanche methods differ.  Next, I’ll explain all about the Debt Avalanche.

How To Pay Off Debt With The Debt Avalanche

The biggest difference between the Debt Snowball and the Debt Avalanche is that in the Debt Avalanche you will list your debts in order from the highest INTEREST to the lowest interest.  You will then continue to make all minimum payments for all debt while focusing all extra cash to paying off your debt with the highest interest rate.

For Example:

• $25,000 Student Loan with 15% interest
• $5,000 Car Loan with 7% interest
• $800 Credit Card with 5% interest

In this example you will pay off your student loan first because that is the debt with the highest interest.  The point of the Debt Avalanche is that by getting rid of the debts that charger higher interest you will be able to pay off the debt quicker.

• Related:  Extreme Ways to Cut Your Budget

Debt Avalanche Pros

A few pros to the Debt Avalanche method are:

• Possibly become debt free quicker
• Saves you money in the long run

Debt Avalanche Cons

• It takes longer to see results
• Requires more patience

Which Debt Payoff Method is Best For You?

So, what does this all mean for you???

The answer to that question will be personal.  It will be different for everyone.  There is no right or wrong debt payoff method.

If you are feeling overwhelmed, unsure of yourself and needs some help to get going with your debt, than the Debt Snowball will probably work best for you.

If you are already feeling super motivated and you want to get rid of that debt ASAP, then you might prefer the Debt Avalanche.  This method will get you aggressively paying off that debt and will cut out some of those interest costs.

What do I recommend?

I personally recommend you research, research and more research.  Study everything you can about both methods.  Once you have studied everything you can, make your decision.  You will naturally feel more comfortable and be drawn to a certain method.

Once you make the decision best for you, GO WITH IT, own it.  Do everything in your power to get rid of that debt.

I promise paying off debt WILL be hard…..but I also promise that your future self will THANK YOU for being willing to put in the work.

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I hope this article helped you understand the differences between the debt snowball and debt avalanche methods.