Snowball v. Avalanche Method: Which is Better for Paying Off Debt?

By Sara Lindberg Updated on April 25, 2019

When it comes to paying off your student loans, there are all kinds of ways to go about tackling your debt. Two methods that seem to come up often are the snowball and avalanche strategies.

The debt snowball method involves paying off your smallest balances first to create momentum. On the flip side, the debt avalanche method involves paying off your balances with the highest interest rates first. There are pros and cons to both. 

Now you’re probably asking yourself “Would I rather take a snowball to the face or deal with an avalanche?” (Or maybe you're not asking that ... ) In any case, let's take a closer look at both methods.

Pros and cons of the debt snowball method

If you’re looking for an immediate confidence boost, the debt snowball method is the way to go. When you pay off your debts in order of smallest to largest, you gain momentum as each balance is paid off.

Start by listing all of your student loan debts from smallest balance to the largest. While continuing to pay on all of your debts, focus on paying off your smallest balance first. Put extra money toward the loan every month, making large payments whenever possible, such as when you receive a bonus at work or when you get a tax return. 

Once you’ve paid off the first debt, move to the second-smallest balance. Since your first debt has already been wiped out, you'll take everything you were putting toward the first loan and add it to the minimum monthly payment of the second balance.

And repeat until your student loans are paid off.

The success of this method seems to come from the progress you see as you pay off your debts quicker. This can motivate you to stay focused and stick to the strategy.

In fact, financial expert Dave Ramsey recommends this method of debt management.

See also: Is it Better to Pay Off Student Loans or Credit Card Debt First?

But what are the cons? 

You could also end up paying more interest over time. When you choose the debt snowball method, you make a commitment to paying the smaller loans first, which leaves the larger debts to get paid off later, even if they have higher interest rates. This means you could accrue more interest over time.

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Pros and cons of the debt avalanche method

If saving money is your main motivation, you might want to take a look at the debt avalanche method. With this strategy, you'll target the student loan with the highest interest rate first — regardless of the size of the loan balance.

The reasoning behind this strategy is simple: paying the loan with the highest interest rate first saves you the most money.

Instead of listing your debts in order with the smallest balance first, like the debt snowball method, you start your list with the debt that has the highest interest rate and move down from there.

Once you’ve paid off the debt with the highest interest rate, you move on to the next-highest rate. Like with the snowball method, you take what you would've paid on the first loan and add it to what you're paying on the second. 

The success of this method is all about saving money on the interest and paying off your loans faster.

This is a good strategy if you're more motivated by overall savings rather than the immediate gratification of watching a balance shrink quickly. 

One additional strategy to consider

Another way to save money on your student loans and pay them off faster is to refinance to a lower interest rate. Lowering your APR by even 1% can save you thousands of dollars over the life of your loan.

Use our 10-second ReFi Ready tool to find out how much you could save by refinancing.

Published in: Financial Freedom, Paying Off

About the Author
Sara Lindberg

Sara Lindberg, B.S., M.Ed., is a freelance writer specializing in business, finance, health, and wellness. She holds a Bachelor's of Science degree in Exercise Science and a Master's Degree in Counseling. When she’s not writing, Sara can be found at the gym lifting weights, running the back roads to train for her next half-marathon, and spending time with her husband and two children. Read more by Sara Lindberg