When it comes to paying off debt, people often wonder, which debt repayment method is better avalanche or snowball? Whether you know them by there names or not, these two methods are the most popular methodologies someone in debt can implement to pay off debt whether by settling the one with the high interest rates first (avalanche) or one with the highest balance (snowball). Regardless which method you choose, in this post we aim to answer your question – which debt repayment method is better avalanche or snowball?
Recently I shared a post on how I paid of £12,000 using the Snowball Method within 18-months on a small salary without getting another job to supplement my income. Debt is a debilitating disease that can suck the life out of you if you don’t take control of it or better yet if you don’t pay it off when you should. Having experienced the hardships associated with debt, apart from my mortgage which I am repaying off slowly, I don’t want to incur any other debts ever again. I live by this simple motto, if you don’t have it, don’t spend it which I think many people should adhere to as well.
Disclaimer: I am not a qualified financial advisor, there are many debt charities that you can contact if you are struggling with debt. This post aims to share tips and tricks on how you can pay off your debt fast using either of the methods.
Which Debt Repayment Method is Better Avalanche or Snowball?
Personal finance is something I wish was taught in our schools because most young adults are ill equipped to venture out into the world. Unless you are taught it at home, it often comes as a shock too many about how quickly one can get into debt and how hard it is to get out of the debt cycle once you are in it. I mentioned in this post that I struggled to get out of the payday loan cycle for many months, it took getting control of my finances before I could break the cycle.
Over the last few years, I have been educating myself on personal finance management as well saving and investing in the stock market. Once I got out of debt I knew its a place I never want to return to and 5+ years debt free and I love it. When you don’t know where to start with debt management, the best place is to write down a budget of ALL your incomings and outgoings including the Starbucks lattes, MacD and monthly manicure appointments. Only when you understand your incomings and outgoings can you have a clear picture on that status of your finances.
Now that you have a clear picture of your personal finance health, the next question is – which debt repayment method is better avalanche or snowball based on my current financial health? To help you decide, here is how each of these methods work.
The Avalanche Method
This debt repayment method implores a simple strategy where by you pay off the debt with the highest interest rate and paying minimum required amounts to your other debt. For example, if your debts had the following interest rates, you would pay off the one with the highest i.e. credit card – £2,000 APR 32%, loan – £10,000 APR 19% and store card – £500, APR 23%, you would start paying off the credit card first because it has the highest interest rates.
This method is simple enough and had a potential to save you the extra charges that credit/store card and loan companies often add to your balance every single month. The biggest issue I see with this method is whilst you are saving money on interests, you won’t immediately see the change in your finances, I mean in 3-months time your balance won’t have decreased that much and when people don’t see an ‘immediate’ change, they feel defeated.
The Snowball Method
This debt repayment method is the method of my choice and it is what I used to pay off my debt – granted it doesn’t save you money on interests but it also depends on how you play it out. The snowball method is another simple strategy whereby you pay off the largest amount first regardless of the interest rates. So, in our example above – you would pay off the store card first, then the credit card and then the loan last. This way you wee see a change in your store card debt within 3 months.
Both the avalanche and snowball methods work in a similar manner whereby, you pay more for one debt (high interest or low balance). Once that is paid off, you use the amount you used to allocate to the paid off debt and move it to the next debt. So, if you had allocated £60 a month towards paying off the store card, once its paid off you would move the £60 and combine with the £75 (as an example allocated to the credit card) to the credit card meaning now you pay £135 towards your credit card monthly instead of £75.
I think for most people, using the snowball method is much better than the avalanche because even though you are not saving in high interest rate debts you can still see progress on your other debts. I adapted the snowball method slightly when I was paying off my debt by splitting the allocated amount between my savings pot and the next big debt and then at the end of the year I would use the money in the savings pot to make a large repayment to the next big debt.
Whilst these two debt repayment methods will help you get your finances on track, you need to do more to get rid of your debt. You will need to
- Tighten the belt and find other ways to save money whether on bills or on your weekly/monthly shop
- Don’t incur more debt as you are struggling to get out of another
- Cut the credit cards up and debt them from your iPhone wallets so you don’t use them
- Have a budget – write everything down, I use spreadsheets and they do wonders.
- Read up and how to become debt free and educate yourself
- Find a side hustle (even selling old clothes) or homemade items online
I hope you find these tips handy and for those in debt, perseverance and discipline pays off in the end, hang in there it will get better.
Mellissa Williams says
Thanks for the explanation. Good tips at the end too how not to get into debit. As my mum says don’t buy what you don’t need. Obviously this doesn’t always work though
Rhian Westbury says
Very interesting, I’ve never been in debt so didn’t know much about the avalanch method. But I guess it depends on the type of debt you have. If you have lots of small-medium sized ones the snowball method will feel like you’re making progress quicker as you’ll be able to clear more of them in a shorter period of time x
Natasha Mairs - Serenity You says
I have never heard of either a snowball or avalanche when repaying debt. I got into debt and took out an IVA, it was the best thing I ever did
Yeah Foodie says
Two great methods of paying the debts, both would work well depending on the individual, I was an avalanche sort of person in my younger days
Catalina says
I am glad to find out more on these methods! I think I prefer the snowball method too!
Ghanashyam K says
I had no idea what the avalanche method was before this, now I do. Thank you for the well written article!
Nile Flores says
I usually go by not spending what I don’t have. One of my friends was in finance for years and I’ve learned a lot about this, as well as building credit. Thanks for sharing this. I think a lot of people don’t realize what options they have.
Rebecca Smith says
The snowball method has definitely been working out best for me. Since starting, I’ve managed to get rid of one credit card, one debt to tax credits and 3/4 of another credit card. It really does work.
Marysa says
I wasn’t familiar with these types of repayment methods. It is good to learn about these and the best way to go about paying off debt. We still have a ton of school debt!
Bolupe says
I am all for the snowball method, I don’t like debts and I like to pay off the largest amounts first. it works out better for me. I find the avalanche method interesting too.
Kathy says
It’s great to know more about this. I honestly never knew much about the two of these. I’m always looking to learn more when it comes to financial stuff too.
catherine santiago jose says
First of all thanks for sharing this amazing post that everybody can relate. I admired the way you accomplish your debt, it’s very encouraging.
Lynndee says
Thank you for the tips. We’re actually doing the snowball method and so far it’s okay.
Rose Ann Sales says
These methods are both great, I will share this to my social media. So helpful.
Nikki Wayne says
I haven’t heard of these terms until I read this. It’s great to know such methods.
Chef Dennis says
Both method sounds good but I think I would prefer Snowball method if you ask me. Thank you for sharing this helpful information.
Miranda says
You are most welcome and thanks for the comment
Sheryl of SHE.ph says
Mathematically, the avalanche method will be more beneficial when it comes to saving on interest. However, Dave Ramsey, the financial “guru” that I love advocates the snow ball method because it works in the psychological level. When one has a high mountain to climb (large debt), making little wins matters.
Miranda says
Exactly and our financial guru hit this nail on the heard.
MELANIE EDJOURIAN says
It’s awful when you have debt to worry about. Interesting post I’m not used to hearing these terms.
Katie Kinsley says
I’ve used the snowball method before when i was starting out for repaying my debt after getting out of college. Either one is a great method, but it really depends on the individual for how easy one is over the other.
Miranda says
I agree it truly depends on the person personally seeing it decrease is better than the interest rate that I actually don’t see decreasing fast enough
Amber Myers says
These sound like some great methods. I’d probably go with the snowball one. At the moment, our house is the only debt and we hope to pay it off earlier.
Miranda says
That’s good to only have one debt which is also beneficial to you
bbaker8611 says
My husband is in business banking and he is our financial guru. We do something more similar to the snowball method too with our student loans. We pay extra on all of them but knock out the little ones first and keep going.
Miranda says
That’s so good to hear, the snowball method for me is better as I can see the debt decrease
Tammy says
When 2008 hit and we lost all of our investment rental real estate, we also lost our capital we had in the business. Thank goodness we had Mr. G’s pension to live on but we paid off all our debt in 5 years. We struggled, saved and really tightened our belts. But we did it. We learned a lot from it too.
Miranda says
Gosh I can only imagine the struggle but glad you did what you had to do and got out of debt and learned from it
melissa chapman says
I am lucky my husband takes care of our financial issues and is doing a great job. That does not mean I should not learn as m important task so this was helpful.
Miranda says
It’s good to have someone who is financial savvy but yes both of you should know