Debt Avalanche vs. Debt Snowball: Get Out of Debt Faster

For most Americans, debt is simply a part of everyday life: 

• Six in ten adults carry a mortgage. 

• Half of Americans have medical debt. 

• Thirteen percent have outstanding student loan debt. 

• Fifty-four percent carry a credit card balance from one month to the next. 

Whatever debt you might have, you can manage it responsibly while building your credit by paying your monthly minimums on time each month. 

But what if you want to get out of debt faster? You can accelerate your journey out of debt and save money on interest in the process. 

Fortunately, two expert-approved methods for accelerated debt repayment offer exactly that. Each blueprint offers a powerful, step-by-step approach to reaching that debt-free goal as soon as possible. 

Here’s how they work: 

Two proven strategies for getting out of debt 

Accelerated debt repayment is a straightforward idea. Ordinarily, you might pay just the monthly minimum you owe for each of your credit accounts — your loans, credit cards, lines of credit, etc. But with the accelerated approach, you take a predetermined amount of additional cash each month and add that to your debt payments. 

Strategically speaking, where’s the best place to start paying that extra money? Is it one of your credit cards? Your personal loan? Your mortgage? The debt avalanche method and the debt snowball method both answer that question for you. 

The debt avalanche strategy focuses on getting you out of debt as quickly as is mathematically possible. And, as a bonus, you’ll minimize the interest you pay with this plan. 

The debt snowball strategy might not provide the speediest path, but it does offer a unique psychological benefit. With this approach, you enjoy quick wins and a motivational boost to keep going strong. 

Both strategies begin with the same three steps: 

1. Decide how much extra money you can put toward your debt — beyond the amount you’re already paying toward your minimums — each and every month. Whether that’s a few hundred dollars or just $20, jot that figure down. 

2. Create a simple table with all your debts. For each loan or form of revolving credit, note your current balance, your minimum monthly payment owed, and your interest rate. 

3. Check to ensure there’s no prepayment penalty for any of the debts you’ve listed. If the penalty is significant, it may not be worthwhile to pay it off early. In that case, remove that loan or credit line from your table, and simply continue paying the minimums on that debt. 

How the debt avalanche method works 

If you want the express path to debt-free living, look no further than the debt avalanche method. 

To get started with this approach, review the debt table you created. Put the number one next to the loan or line of credit with the highest interest rate. Write a two alongside the debt with the second-highest interest rate and continue until you’ve numbered each row of your table. 

Remember the extra payment amount you determined above? Add that value to the minimum payment owed for your highest-interest debt (labeled debt #1). 

Here’s an example: Let’s say your credit card has a greater interest rate than all your other loans and lines of credit. Now suppose your monthly payment is $1000, and you’ve committed to paying $100 toward your debt each month. Going forward, you’ll put that $100 toward your credit card, so you’ll pay $1100 each month until that card’s balance goes to zero. Meanwhile, keep paying the minimums on your other debts. 

Once your highest-interest debt is paid off, turn your attention to your debt with the second-highest interest rate. Suppose that’s a car loan with a $500 monthly payment. Add the $100 to that amount, so you pay $600 each month until the car loan goes to zero. 

At that point, tackle debt number three, then four, and so on until your debt has been eliminated! 

Tip: Use an online calculator to see how the debt avalanche would work for you. 

How the debt snowball method works 

If you’re looking for the quickest way to pay off at least one of your loans or lines of credit, consider the debt snowball method. 

To begin, look at the debt table you created. Put the number one next to the loan or line of credit with the lowest balance. Write a two alongside the debt with the second smallest balance and continue until you’ve numbered each row of your table. 

Review the extra payment amount you committed to paying each month toward your debt and add that value to the minimum payment owed for debt #1. 

Let’s look at an example: Suppose you have a personal loan with a current balance of $900 and a monthly payment of $200. And, as before, assume you’ve decided to put $100 extra toward your debt payments each month. 

Using the debt snowball, you’ll direct that $100 toward your $900 loan, so you’ll pay $300 each month until that loan is closed. Meanwhile, keep paying the minimums on your other debts. 

Once your debt with the lowest balance is paid off, turn your attention to your debt with the second lowest. Add the $100 to that debt’s monthly payment amount and continue to do so until that loan or line of credit goes to zero. 

Continue the process with your third debt and so on until you’re completely debt-free. 

Tip: Use an online calculator to see how the debt avalanche would work for you. 

Debt avalanche vs. debt snowball  

Both the debt avalanche and the debt snowball methods involve a straightforward process that takes you from where you are now to a debt-free life in your future. But which strategy is right for you? 

To answer the question, it helps to know how you yourself are motivated. 

The debt avalanche is the most efficient path out of debt, but it may not lead to your first zero balance for months or even years. If you think you’d be frustrated enough by that scenario to give up entirely, the debt snowball might be your best bet. 

After all, the snowball plots the quickest win for you in taking you to a zero balance on one of your accounts. And, while the snowball may not lead to a debt-free life as fast as the avalanche, the strategy you’ll actually follow is always better than the one you won’t! 

However, maybe you know that you’ll stick with the process, no matter what. In that case, consider the debt avalanche. It will pull you out of debt more rapidly than any other approach and ensure you pay as little interest as possible along the way. 

Protect yourself going forward 

Once you successfully eliminate all your debts, congratulate yourself! Then, follow these simple steps to minimize the odds you’ll wind up deeply in debt in the future: 

• Live within your means. If you spend more than you earn, you’ll wind up increasing your credit balance each and every month. 

• Create a livable budget. A realistic plan for your money is the key to ensuring your expenses don’t exceed your income. 

• Save with an emergency fund. Avoid turning to financing when the unexpected happens. Instead, build and maintain a healthy cash reserve for emergencies. 

• Use credit only for necessities. If your emergency fund is depleted, use credit as needed for the must-haves. But save your money for buying the nice-to-haves down the road. 

• Pay your balances in full. Whenever possible, pay off your credit cards and lines of credit each month. You’ll avoid accruing costly interest that can turn into significant debt. 

• Work with a financial professional. If you need help managing your money or digging of debt, consider hiring a financial advisor or working with a credit counselor. 

Whittling down your debt doesn’t have to be a daunting process. With the right strategy working for you, you can move steadily toward a future free of debt.