Avalanche vs. Snowball

Two orderings, one decision

When you owe several balances, you always pay every minimum. The question is where the extra money goes.

Avalanche — extra goes to the highest interest rate first. Mathematically optimal. Costs the least in total interest.

Snowball — extra goes to the smallest balance first. Costs slightly more, but clears whole debts sooner, which is motivating.

A worked comparison

Three debts, with 500 per month available:

Avalanche targets the store card at 26%, then the credit card at 22%, then the car loan. Snowball also starts with the store card here — it happens to be both the smallest and the most expensive — then moves to the credit card.

The two orderings overlap more often than people expect. When they do, the debate is moot: just start.

Which to choose

Avalanche saves more money. Snowball is easier to stick with. Since the failure mode for debt repayment is stopping, not choosing the wrong order, the honest recommendation is:

• If spreadsheets and optimisation motivate you, use avalanche.
• If you need visible wins to keep going, use snowball.

The difference between them is usually modest. The difference between doing either one and doing nothing is enormous.