Debt snowball or avalanche: which payoff order to use

Both methods do the same thing: pay the minimum on every debt, then put every spare dollar against one of them until it is gone, and roll that payment onto the next. They differ on one decision only, which debt goes first.

The snowball: smallest balance first

Order your debts by what is owed, smallest first, whatever the interest rate. The first one clears quickly, its payment joins the attack on the next, and the pace picks up. The argument for it is momentum: a debt that is gone is gone, and people who see one disappear tend to keep going.

The avalanche: highest interest rate first

Order your debts by interest rate, highest first. This is the cheaper route: you kill the most expensive debt before it can charge you for another month, so you pay less interest overall and, for the same monthly payment, finish sooner. The argument against it is patience, because the first debt may be the biggest and take months to shift.

Which costs less, and which gets finished

The arithmetic is not in doubt: the avalanche pays less interest, and the bigger the gap between your highest and lowest rates, the bigger that saving. The snowball's case is behavioural, and it is a real one, since a plan abandoned in month three saves nothing at all. A fair way to choose: work out both orders once. If the extra interest on the snowball is small, take the momentum. If it is large, take the avalanche.

Setting it up

1. 1List every debt with its balance, its interest rate and its minimum payment. This page alone is worth the afternoon.
2. 2Pick the order: smallest balance, or highest rate.
3. 3Pay every minimum, every month. Falling behind on one to attack another costs fees and credit standing.
4. 4Put everything spare on the first debt in your order, and nothing on the others beyond the minimum.
5. 5When one clears, add its whole payment to the next. This roll-up is what makes either method accelerate.
6. 6Check the list monthly and write the new balances down, so the shrinking is something you can see.

Where to write it

The Complete Budget Planner has nine debt pages, including a debt snowball and a debt avalanche, credit cards and loans, beside a budget and a review for every month. Money Map Debt Payoff is a payoff ladder climbed a rung a debt, with the snowball and avalanche side by side and a roll-up as each rung clears. Both are on the digital budget planner page.

This is a guide to planning, not financial advice. For debts in default, or where a debt is beyond what a plan can fix, a free budgeting or financial mentoring service in your country will do more than any planner.