Debt snowball vs Debt avalanche

The debt snowball and debt avalanche are two strategies when trying to repay all your debts.

The debt snowball

With the debt snowball you make the minimum payment on all your debts and pay everything left over towards the debt with the smallest balance. This means you overpay on your monthly requirement on that debt if possible. Once the smallest debt has been paid off you then do the same for the next smallest debt.

This method of paying off debt is a popular choice in the personal finance community because it helps borrowers see results right away and get a boost of motivation as they pay off their debt accounts.

The major downside to this strategy is that it often takes longer to eliminate all your debt using this method versus the debt avalanche.

Pros of debt snowballing.

  • Quick wins and sense of accomplishment increases motivation
  • known debt repayment method.
  • As you eliminate your smaller balances, you can free up extra funds to focus on the next balance.

Cons of debt snowballing

  • takes longer to pay off your debt.
  • You could pay more in interest over time.

The debt avalanche

With the debt avalanche method you focus on the debt with the highest interest rate.Yu pay the minimum payments on all your debts and pay everything left towards your highest interest debt. This means you ultimately save much more in interest repayments than you would have done if you had used the debt snowball method.

Pros of the debt avalanche

  • You save money on interest (win)!
  • You’ll pay off your loans faster.

Cons of the debt avalanche

  • It can be hard to sustain motivation as debts take longer to pay off.
  • It may feel like it takes forever to pay off the high-interest debt.

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