Avalanche Vs Snowball Methods Of Clearing Debt
Paying off debt is no easy task, but clearing your debt will help give you financial freedom. Regardless of how much debt you have clearing it off can be a satisfying process. And think of how much spare money you’ll have after paying off your debt.
There are two different ways to pay off debt; the avalanche and snowball methods. Each method has its own merits and making the right choice can have a big impact on your debt repayment. This post is all about avalanche vs snowball methods of clearing debts thinking about the differences and which one may be best for you.
Avalanche vs snowball methods
For both methods of debt pay off you’ll want to list down all of the debts you have to clear off, how much you owe and what the interest rates are for these debts. Once you have done this you can make a decision of which debt repayment method works best for you.
What is the avalanche debt method?
The avalanche debt method focus’ on paying down the debt with the highest interest rate first. It works by you making the minimum monthly payments on all debts, but extra off the debt with the highest interest rate until it’s paid off. Once that debt is paid off you pay more off the next highest interest rate debt. This carries on until you’ve paid off all of your debt.
The avalanche method has the potential to save you the most money as you’ll be paying less interest. Loans and credit cards generally charge the most interest, but you’ll want to look at your debt interest rates.
How to clear debt with the snowball method?
With the snowball method of debt repayment, you focus on paying down your smallest debt before moving onto the larger ones. With this method, you build momentum as you pay off debt. Much like the avalanche method you make minimum payments on all debts and put any extra you have towards the smallest debt in a bid to pay it off quickly. Then once that one is paid off you move to the next smallest. This repeats until all of your debt is repaid.
While you may end up paying a bit more interest in the long run, this method is good for a psychological boost. When you see debts disappearing it can increase your motivation to continue paying them off. I know if I ticked off a few smaller debts and saw the number reducing it would motivate me.
This method may be most suitable if you have lots of small debts, the interest rates of your debts are very similar, or you know you’ll struggle to continue paying if you don’t see quick progress.
Avalanche vs snowball methods
When considering the avalanche vs snowball methods of debt repaying, a negative of avalanche is that the debt with the highest interest may be a larger debt and feel overwhelming to eliminate. You may feel like you’re paying things off quicker if you go for the snowball method. In this way, you may tick one or two smaller debts off quicker and reduce your list of debts down. And the boost of paying a few off may spur you on to push more money into paying off debt.
But ultimately you have to pick the method that suits you and your debts best. There’s no ‘one size fits all’ process to eliminating debt. But the fact that you’re trying to get out of debt is a great starting point.
Avalanche vs snowball methods- Have you used either to get out of debt?
14 responses to “Avalanche Vs Snowball Methods Of Clearing Debt”
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Rhian Westbury
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Great ideas for clearing debt! The snowball approach sounds like it can help make it feel more positive rather than one huge sum!
I’d not heard of these approaches. The snowball method sounds good though, clearing off little bits can probably feel more positive!
Yeah and I think clearing off some will help you feel like you’re making headway, at least it would for x
The snowball approach is what I have used to get myself closer to being out of debt. I had to stop for a while to stay afloat during the past year at times but will be continuing with it. I understand why people may use the avalanche method however.
That’s good that the snowball method worked for you, I think it’s what I’d go for if I needed it x
I only recently learned of both of these methods and I think the snowball method is such a great idea.
I think you’re right, seeing debt clearing is a huge motivator x
I’ve used the avalanche method to clear a small amount of credit card debt and it worked well for me.
Thanks for explaning these two types of debt repayment. I think it’s refreshing to see something like this explained clearing. There is so much jargon around money management
This is a very insightful and great article. I think the snowball method sounds very good and its definetely something I will try 🙂
This was such an interesting read especially as me and my husband are trying to clear off bits of debt before we can look at buying our first home. I think maybe the snowball method would work best for us as paying off the smaller debts with less interest would then give us extra money to pay off the larger debts quicker too!
If all of the interest rates for your debt are fairly similar then there’s not much in it between the two, it’s just doing what works for you x
The avalanche mehod sounds best to me. I also make sure to pay of the debts that have the most interest first. My debts did get out of control and I ended up taking out an IVA. Best thing I ever did.
I’ve never heard of these methods being labelled as avalanche and snowball, makes perfect sense though! Clearing a debt really does give you a boost for sure!
Yeah I know as soon as we pay off something it feels so nice and a relief x