The two methods
Both start the same way: pay the minimum on every debt, and put every extra dollar toward one debt at a time. When that debt is paid off, its minimum joins the extra for the next one, so the amount you put toward debt each month never shrinks.
- Debt snowball: extra money goes to the smallest balance first, regardless of interest rate.
- Debt avalanche: extra money goes to the highest interest rate first, regardless of balance.
The same debts, both ways
Four debts, $955 a month toward them: the minimums plus $300 extra.
| Debt | Balance | Rate | Minimum |
|---|---|---|---|
| Store card | $1,200 | 26.99% | $40 |
| Credit card | $6,500 | 22.99% | $195 |
| Personal loan | $4,000 | 11.5% | $130 |
| Car loan | $9,800 | 6.9% | $290 |
Snowball: smallest balance first
| Paid off in order | Paid off after |
|---|---|
| 1. Store card | 4 months |
| 2. Personal loan | 1 year |
| 3. Credit card | 1 year, 10 months |
| 4. Car loan | 2 years, 2 months |
| Total interest | $3,277 |
Avalanche: highest rate first
| Paid off in order | Paid off after |
|---|---|
| 1. Store card | 4 months |
| 2. Credit card | 1 year, 6 months |
| 3. Personal loan | 1 year, 9 months |
| 4. Car loan | 2 years, 2 months |
| Total interest | $2,947 |
Which one to choose
Choose avalanche if your rates are far apart, especially with a high-rate card balance, and you’re confident you’ll stick with it even if the first payoff takes a while. It’s the cheapest plan.
Choose snowball if you’ve started and stopped before, or you have several small balances you could clear quickly. Paying off whole debts frees up minimums sooner and keeps you going, and finishing matters more than the interest difference.
When your smallest balance also has your highest rate, as with the store card above, the two methods start the same way anyway.
What matters more than the method
- The extra amount. Each extra dollar a month shortens the timeline far more than the choice of method does. Try a few amounts in the debt payoff calculator.
- Stopping new debt. Neither method works if the cards keep filling up. A budget that covers spending before it happens is what keeps balances from coming back.
- Keeping the total steady. When a debt is gone, roll its whole payment into the next one rather than spending it.
Doing it in Bow
Give each debt payment its own envelope and fund it every month, along with an envelope for the extra amount, so the money is set aside before anything else gets it.
- Credit card spending moves money into the card’s payment envelope automatically, so new purchases don’t add to the debt.
- For a card balance you’re paying down, Set a Payoff Goal by a date or a monthly amount, and the card’s payment envelope shows what to fund.
- The debt snowball and debt avalanche calculators run each method on your own debts.
Questions
Which saves more money, snowball or avalanche?
The avalanche method always costs the same or less in interest, because it pays the most expensive debt first. How much it saves depends on how far apart your interest rates are.
Which is faster?
Both usually finish within a month or two of each other, because you pay the same total each month either way. Snowball pays off individual debts sooner; avalanche often finishes slightly sooner overall.
Should I include my mortgage?
Usually not. These methods are for consumer debts like cards, personal loans, car loans and medical bills. A mortgage is typically a low rate over a long term and is handled separately.
Can I switch methods partway?
Yes. Nothing locks you in. Many people start with snowball to get a quick win, then switch to avalanche once the small balances are gone.