Quick answer: The debt snowball and the debt avalanche are two ways to pay off debt. With both, you make the minimum payment on every debt and put any extra money toward one target debt. With the snowball, you target the smallest balance first, which gives you quick wins. With the avalanche, you target the highest interest rate first, which usually saves the most interest. The best plan is the one you will stick with.
Paying off debt frees up cash flow every month. Here is how the two most common plans compare.
How the Debt Snowball Works
- List your debts from smallest balance to largest.
- Pay the minimum on all of them.
- Put every extra dollar toward the smallest one.
- When it is paid off, roll that payment into the next smallest.
- Keep going until all debts are gone.
The payment grows like a snowball rolling downhill.
How the Debt Avalanche Works
- List your debts from highest interest rate to lowest.
- Pay the minimum on all of them.
- Put every extra dollar toward the highest rate debt.
- When it is paid off, roll that payment into the next highest rate.
- Keep going until all debts are gone.
Side by Side
| Debt Snowball | Debt Avalanche | |
|---|---|---|
| Order | Smallest balance first | Highest interest rate first |
| Main benefit | Quick wins and motivation | Usually less total interest |
| Main drawback | May cost more interest | First win can take longer |
| Good for | People who need early wins | People who are very disciplined |
A Simple Example
Say you have three debts:
- A store card with a small balance and a medium rate.
- A credit card with a large balance and a high rate.
- A car loan with a medium balance and a low rate.
With the snowball, you would attack the store card first because it is the smallest. With the avalanche, you would attack the credit card first because it has the highest rate. Both plans pay the minimums on everything else.
Which One Should You Pick?
Ask yourself two questions:
- Do I need quick wins to stay motivated? If yes, the snowball may help.
- Will I stick with it even if the first win takes a while? If yes, the avalanche may save more.
Some people mix the two. They knock out one tiny balance first for a quick win, then switch to the avalanche.
Steps Before You Start
- Make a budget. Our post on how to make a monthly budget shows how to find extra money each month.
- Build a small cushion. Without one, a surprise bill can push you back into debt. See our post on how to build an emergency fund.
- Stop adding new debt while you pay off the old.
Ways to Speed Up Either Plan
- Put windfalls like tax refunds toward your target debt.
- Cut one or two big costs and redirect the savings.
- Ask your card companies whether a lower rate is possible.
- Track progress on paper so you can see it shrink.
After the Debt Is Gone
Once your debts are paid, keep making the same payment, but pay yourself. That money can build savings, a house fund, or a long term plan. Some people look at tools like whole life insurance for long term cash value. Our page on what cash value life insurance is explains the basics. Nothing here is a promise of any result.
You can also join our free Cash Flow Association community on Skool at skool.com/cashflowassociation to learn more about cash flow and money basics with other members.
The Bottom Line
In debt snowball vs debt avalanche, the snowball pays the smallest balance first for quick wins, and the avalanche pays the highest rate first to save interest. Both work if you keep going. Make a budget, build a small cushion, stop adding debt, and pick the plan you will stick with.
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Frequently Asked Questions
What is the difference between the debt snowball and debt avalanche?
The snowball pays the smallest balance first. The avalanche pays the highest interest rate first.
Which saves more money, snowball or avalanche?
The avalanche usually saves more interest, since it targets the highest rate first.
Why do people choose the debt snowball?
Paying off small balances quickly gives early wins that help many people stay motivated.
Can I combine the two methods?
Yes. Some people pay off one tiny balance first and then switch to the avalanche.