Debt Snowball vs Debt Avalanche - Which One Melts Your Debts Fastest?

Let’s be real - many among us are chasing the next big investment tip. But here’s the truth: your wealth can’t grow if debt is eating away at it. Until you deal with that, your journey towards financial goals will always feel a little stuck.

The good news? Two tried-and-tested strategies - debt snowball and debt avalanche - can help you kick out debt for good. However, they go about it quite differently. So let’s cut straight to what matters - how these two stack up and which one you should choose.

Quick Recap of the Strategies

Debt Snowball

You use any extra money (bonus, increment at workplace, and so on) to pay off the smallest debt first. Don’t look at the interest rate, just the amount. Once this debt is cleared, move on to the next smallest one. 

Of course, you cannot ignore the remaining debts. Rather, pay the minimum amount due for them.

Debt Avalanche

This time, you switch focus to the interest rate. You target the debt with the highest interest rate. Once cleared, move to the one with the next highest rate. 

The other part remains the same as the snowball method. For the non-priority debts, make payments only for the minimum due amount.

Debt Snowball vs Debt Avalanche - Which One to Choose?

Let’s take a look at a few factors -

Motivation vs Math

• Debt snowball is the best for motivation. When you pay off that first debt, you get a motivational boost. You can actually keep rolling the payments into bigger snowballs!
• Debt avalanche is good from a math perspective. Since it tells you to tackle the highest-interest debt first, you save money in the long run. However, the psychological boost of clearing the first debt may come later. 

Personality Fit

• For some, especially beginners, periodic motivation is needed. In this case, the debt snowball is your go-to method. It keeps you pumped, which makes you less likely to quit.
• For others, motivation is not a problem. They would rather crunch numbers and love to see them work in their favour. In this case, the debt avalanche is your mode. It may feel slow, but if you focus on numbers, this will be a better deal.

Money Factor

• In some cases, the focus is only on the amount. This is especially true if none of your debts are high-interest. If this is the case and your priority is just to clear off the loans, you can go for the snowball.
• On the flip side is someone who has loans at very high interest rates. In this case, the goal is to save as much on interest as possible. The answer - the avalanche method.

Avalanche vs Snowball - At a Glance

Wrapping Up

At the end of the day, both strategies melt your debt. The best choice for your case depends on how you wish to tackle the challenge. Snowball is all about building momentum and celebrating small wins. Avalanche, meanwhile, is about being smart with money and slashing out interest.

Coming to the choice between the two, there’s no right or wrong answer. Just like everything in investment and finance, it all depends on your personality, financial situation, and other factors. In fact, these two strategies are not set in stone either. You can, for instance, try out your hand at ‘hybrid’. Here, you start with the snowball. However, after getting a boost to your motivation, move to the highest interest debt to save the outgoing interest.

Ultimately, the best method is the one that you actually stick with!