If you loved this post, please share!















Hey there! Did you know that the average American household carries more than $137,000 in debt? On top of that, the median household income was only about $59,000. This means that for the average American, it would take about 2 years and 4 months to pay off all of their debt if they used every penny they made to pay off debt. Obviously, we have other expenses like food that we have to pay for, so this is not feasible. What is feasible is developing a plan to get your debt paid off as quickly as possible. This way, you are no longer paying interest rates to banks, but instead, have cash available to invest and grow your retirement. There are two incredibly popular strategies for paying off debt; the Debt Snowball or Debt Avalanche Methods.

What is the Debt Snowball Method?

The Debt Snowball Method was made famous by Dave Ramsey, who is a pioneer in helping people get out of debt. The Debt Snowball Method consists of listing all of your debts from smallest to largest. Once you have this list, make the minimum payments on every debt except the smallest one. Put all of the extra money you have available toward the smallest debt. Then, once that debt is paid off, you can apply that payment to the next smallest debt, while continuing to make minimum payments on the rest of the debts. Repeat the process until all of your debts are paid off and you’ll be debt-free!

What is the Debt Avalanche Method?

The Debt Avalanche Method is similar to the Debt Snowball Method in that you need to list out your debts. However, with the Debt Avalanche Method, you’ll need to list debts in order from the highest interest rate to the lowest interest rate. From here, you’ll make the minimum payment on all debts except the one with the highest interest rate. For your highest interest debt, you’ll pay as much as possible toward that debt until it’s paid off. Then, you’ll apply that payment to the next highest interest rate debt while continuing to make the minimum payments on all other debt. Repeat this until all of your debts are paid off!

Debt Snowball or Debt Avalanche?

Now that we know how both of these methods work, which one is better? I love to be real with you, and the truth is that both of these methods are great ways to pay off debt. When used as they are written, you’ll be paying off your debts quickly with both methods and getting yourself on a path to financial success! The key to which of these methods will work better boils down to which one works best for you as an individual. Below, I’ll outline why you should choose either method.

Using the below debts, I’ll outline how each method will handle the debts. we’ll assume you can pay the minimum balance on each debt and $50 a month additional.

$250 Medical Bill with 1% interest and $25 minimum payment

$900 Credit Card with 15% interest and $60 minimum payment

$3,000 Student Loan with 7% interest and $200 minimum payment

$700 Credit Card with 24% interest and $50 minimum payment

Why Choose Debt Snowball?

The Debt Snowball Method gives you the ability to make small wins really quickly. This method is fantastic for individuals who need extra motivation to keep paying off their debts. As you pay off each of your smaller debts, you’ll continue to gain confidence that you can and will pay off the larger debts over time. A tip to stay motivated is to give yourself a small reward every time you pay off a new debt! Celebrate those small victories!

Here is an example of what you can expect using the Debt Snowball Method.

$250 Medical Bill with 1% interest and $25 minimum payment $700 Credit Card with 24% interest and $50 minimum payment $900 Credit Card with 15% interest and $60 minimum payment $3,000 Student Loan with 7% interest and $200 minimum payment

When using this method, you’ll have your medical bill paid off first in only 4 months, and you’ll be completely debt free after only 14 months! You’ll pay a total of $306 in interest when using this method!

Why Choose Debt Avalanche?

The Debt Avalanche Methods targets the debts that have the highest interest rate first. Typically, using this method to pay off your debts will lead to less interest paid and a quicker payoff of your debts. However, you won’t target the smallest balances, which leads to a longer time period before you pay off your first debt. This could hurt your motivation. This method is best for people who have more patience and are able to see the cost benefits of paying off the highest interest debts first.

Here is an example of what to expect using the Debt Avalanche Method.

$700 Credit Card with 24% interest and $50 minimum payment $900 Credit Card with 15% interest and $60 minimum payment $3,000 Student Loan with 7% interest and $200 minimum payment $250 Medical Bill with 1% interest and $25 minimum payment

When using this method, you’ll have your first credit card paid first off in 8 months, and you’ll be completely debt free after only 14 months. You’ll pay a total of $289 in interest when using this method.

Choosing Debt Snowball or Debt Avalanche

In the example above, both payoffs will occur after 14 months. However, using the Debt Snowball Method, you’ll see your first debt paid off after only 4 months, while you’ll have to wait 8 months to see your first debt paid off entirely using the Debt Avalanche Method. With the Debt Avalanche method, you’ll save $17 in interest. From a pure dollar standpoint, the Debt Avalanche Method is the best route. However, if you need extra motivation, that $17 may be worth it for you to get the quick win. This is only a small scenario, but the results will typically follow this same pattern.

You can use this free calculator to determine which method works best for your individual situation.

What if Neither Option Would Work for Me?

There are other methods available to pay off debt if the Debt Snowball or Debt Avalanche doesn’t sound like it will work for you. However, I will caution that if you are just beginning your personal finance journey and do not yet have a budget, you should stick to the Debt Snowball or Debt Avalanche. Other methods can be a little bit more complex and if you are a beginner, the key to a successful debt payoff will be to keep it simple.

One of the many options to utilize in paying off debt is the equity in your home. Home Equity Lines of Credit (HELOC), often offer much lower interest rates than what you’ll be paying for other types of debt, such as credit cards or student loans. This can allow you to free up more cash to attack your debt even more quickly. For a more in-depth look at this method, see how my friend Josh over at Money Life Wax was able to use this method effectively to pay off debt!

Final Thoughts

The choice is yours. You can shoot for the quick win with paying off smaller debts first. Or, you can shoot for the interest savings and quicker payoff with paying the higher interest rates first. Whichever you choose, stick to your plan and you’ll be debt-free before you know it!

What will your choice be? Debt Snowball or Debt Avalanche? Or something different altogether?

-Real Money Robert