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Budgeting

The Snowball vs. Avalanche Method: Which Pays Off Debt Faster

Compare the snowball and avalanche debt payoff methods with a side-by-side example showing how much time and interest each one saves.

Educational only. Not financial, tax or legal advice, and not a recommendation to buy or sell anything. Any dollar amounts or tax rules here are tied to the year they were written and change annually — verify current figures and talk to a qualified professional about your own situation.

Paying off debt is like running a long race. The best method is the one you stay with until you cross the finish line. Two approaches lead the pack: Snowball and Avalanche.

The Snowball Method

With Snowball you attack the smallest balance first while making minimum payments on the rest. The early wins build momentum.

Example: Start with the $5,000 personal loan at 8 percent interest before tackling the $20,000 credit card at 28 percent interest.

The Avalanche Method

Avalanche targets the highest interest rate first while making minimum payments on the rest. It saves more interest and often finishes sooner.

Example: Start with the $20,000 credit card at 28 percent interest before moving to the $5,000 personal loan at 8 percent interest.

Quick Math to Compare

Let's say you have $1,500 each month to put toward these two debts:

  • Personal loan: $5,000 at 8 percent interest
  • Credit card: $20,000 at 28 percent interest
SnowballAvalanche
Time to debt free22 months20 months
Total interest paidabout $6,735about $4,894

What this shows

In this example Avalanche gets you debt free 2 months sooner and saves you roughly $1,841 in interest. The bigger and higher the interest rate on the debt, the more Avalanche pulls ahead.

Which Should You Choose

If you need quick motivation, Snowball can help you stick with the plan. If your goal is to save the most money and often finish sooner, Avalanche is your best bet. Many people start with one small Snowball win and then switch to Avalanche to maximize savings.

The Bottom Line

Pick a method you can follow every month. Stay consistent. Keep paying until the last balance is gone.

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