If you're trying to get out of debt, you've probably heard of two main strategies: the Debt Snowball and the Debt Avalanche. Both work, but they use completely different psychology and math.
Here is a quick breakdown of how they work.
1. The Debt Snowball Method
With the Snowball method, you list your debts from smallest balance to largest. You pay the minimum on everything, and throw all your extra money at the smallest debt.
- Pros: Quick psychological wins. You see accounts close fast, which keeps you motivated.
- Cons: You might pay more in interest if your smallest debt has a high interest rate.
2. The Debt Avalanche Method
With the Avalanche method, you list your debts from highest interest rate to lowest. You pay the minimum on everything, and throw all your extra money at the highest-interest debt.
- Pros: Mathematically, this saves you the most money on interest. You pay less overall.
- Cons: It can take longer to close your first account, which can be demotivating.
Which one should you choose?
If you have a lot of small debts and need motivation, go with the Snowball.
If your highest-interest debt is massive (like a credit card at 25%), and you want to save money, go with the Avalanche.
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Top comments (1)
Thanks for reading!
Personally, I went with the Avalanche method because my highest interest rate was killing me. But I know a lot of people who swear by the Snowball for the motivation boost.
Which one worked for you in real life? Curious to hear your stories 👇