Debt snowball vs debt avalanche: which one should you use?
Short answer: the avalanche (highest interest rate first) usually costs the least interest. The snowball (smallest balance first) gives you a paid-off debt sooner, which keeps many people going. If you are not sure you will stick with a plan, start with the snowball.
How both methods work
In both methods you pay the minimum on every debt. Whatever money is left goes to one focus debt. When that debt is paid off, its minimum payment joins the extra money and rolls into the next debt, so the amount you throw at debt grows over time.
- Snowball: focus on the smallest balance first.
- Avalanche: focus on the highest interest rate first.
A quick example
A $500 store card at 5% APR and a $3,000 credit card at 25% APR, with $300 a month for both. The snowball clears the store card in a couple of months, then attacks the credit card. The avalanche goes after the 25% card first, so less interest builds up there. The avalanche finishes with less total interest; the snowball gives you your first win much sooner.
How to choose
- If your rates are close together, use the snowball. The interest difference is small and the quick win helps.
- If one debt has a much higher rate, the avalanche saves real money.
- If you have quit plans before, pick the one you'll keep doing.
Compare both with your own numbers
In Owlow you enter your balances, APRs and minimums once, then switch between snowball, avalanche and your own order. The Timeline tab shows the payoff month and total interest for each choice, so you can see the real difference for your debts.
FAQ
Does the snowball method cost more?
Usually a little, because high-interest debt waits longer. How much depends on your rates and balances; with similar rates the difference is small.
Can I switch methods halfway?
Yes. Keep paying all minimums and send the extra money to a different debt. The order is the only thing that changes.
What if two debts have the same rate?
Pay the smaller balance first. You finish one sooner and its minimum rolls into the next.