Two ways to order your debts
Both methods start the same way: pay the minimum on every debt, then put every spare dollar toward one target debt. When that debt is gone, its minimum payment rolls onto the next target, so the amount attacking your debt keeps growing. The only difference is the order. The snowball method targets the smallest balance first. The avalanche method targets the highest interest rate first.
Mathematically, the avalanche always costs the same or less in interest, because it removes the most expensive debt first. With the example debts (a $6,500 card at 24%, a $2,200 card at 19% and a $12,000 loan at 7%) plus $300 extra a month, avalanche saves a modest amount of interest, while snowball wipes out the $2,200 card months earlier.
Which should you choose?
The snowball's quick wins are not just a feeling. Research published in the Journal of Consumer Research and the Journal of Marketing Research has found that people who close individual accounts early are more likely to stick with a debt plan. If motivation is your main risk, the snowball can be worth its small extra cost.
If the interest difference is large, such as a big balance on a high-rate card, the avalanche is the better choice. Run your own numbers above: when the savings are only a few dollars, pick whichever method you will actually stick with.
Common questions
Is the snowball or avalanche method better?
Avalanche saves more interest. Snowball gives faster early wins, which helps many people stay on track.
Should I include my mortgage?
Most people leave the mortgage out and focus on consumer debt such as cards, personal loans and car loans.
What happens when a debt is paid off?
Its minimum payment is added to the payment on the next target debt, which is the "snowball" effect.
This calculator gives estimates for planning. Real returns, rates and prices change, so treat the result as a guide rather than a promise. Read how we build and check our calculators.